• Klarna recorded a loss of $60.6 million in the first half of 2020 – seven times higher than in the first half of 2019.
  • Global demand for the Swedish firm’s interest-free “buy now, pay later” scheme has soared over the pandemic, but its rapid international expansion has bumped up expenditure.
  • Total sales through its platform have risen by 44% since 2019.
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Klarna, the Swedish fintech giant that lets customers delay payment for online purchases, has reported first half losses seven times higher than in 2019.

The company, valued at $5.5 billion, recorded a net loss of 522 million Swedish krona ($60.6 million) between January and June 2020, despite rising sales. It lost 73 million krona ($8.5 million) in the same period last year.

Klarna is known for its “buy now, pay later” scheme: Users make purchases on online stores using the Klarna platform, and Klarna pays the merchant. Customers then pay Klarna in interest-free installments. The company makes money by charging fees to partner merchants and to customers for late payments.

The faltering financials were partly caused by its credit losses almost doubling to 1.2 billion krona ($139 million) because of customers not paying back loans, its interim report for January to June shows. To prevent this, Klarna launched a loyalty program, Vibe, in the US in June. It rewards customers for timely repayments, and is the first loyalty scheme of its kind in the buy now, pay later industry.

But these credit losses only account for 0.6% of the 215 billion krona ($24.9 billion) total sales made through the Klarna platform between January and June.

These sales are 44% higher than in the same period in 2019. The higher sales meant Klarna saw a total net operating income of 4.6 billion krona ($530 million) – a 37% rise from the year before.

Klarna’s heavy investment in international expansion has caused most of the losses, but it seems to be paying off. Daily downloads of its app have quadrupled in the past year, to almost 20,000 for the first half of 2020, and in recent weeks this has skyrocketed to 45,000. The company says 1 million new customers from the US alone joined between May and August, bringing its total user base in the country to almost 9 million.

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Klarna’s popularity is also growing across western Europe and Australia – it credits this rise to its transparency and the financial flexibility it gives users.

Klarna partnered with more than 35,000 retailers globally during the first half of 2020, including Sephora, Vans, The North Face, and ModCloth. It now works with more than 200,000 brands.

Since its launch in 2005, 85 million people have used Klarna, and it currently processes around 1 million transactions per day. Klarna claims to be Europe’s most valuable fintech company – although challenger bank Revolut also has a $5.5 billion valuation.

Klarna counts Snoop Dogg and Jack Ma’s Ant Group among its investors. Klarna also launched a campaign with Lady Gaga in February.