Swedish fintech Klarna continues to grow in one of the most competitive markets in the world, detailed in its half year financials for 2024.
Total revenue for the first half of the year stood at SEK 13.2bn (€1.16bn), a 27% year-over-year increase from the SEK 10.4bn (€924m) accumulated from H1 2023.
Gross profit in transaction costs was one of the largest growth areas for Klarna compared to the year prior, rising by 22% to SEK 5.16bn (€455m). This is due to increases in processing and servicing, consumer credit losses and funding costs.
Competing in the most competitive market
Much of Klarna’s early success this year has been credited to its focus on the US market, replicating much of its strategies and services to its US consumers.
The fintech revealed it is the partner of choice for one in four of the top 100 US merchants and has expanded its presence in multiple verticals through various partnerships, such as Uber, Airbnb and Expedia.
Revenue growth in the US specifically grew by 38% YoY for H1 2024, as well as a 93% increase in gross profitability across the Atlantic. Klarna states that its investments from its strategic expansion in the country have been fully returned.
Sebastian Siemiatkowski, CEO of Klarna, said: “Klarna’s massive global network continues to expand rapidly, with millions of new consumers joining and 68k new merchant partners. As our merchant partners grow, so do we, evidenced by 38% YoY growth in US revenues.
“By focusing on sustainable, profitable growth and leveraging AI to lower costs, we achieved adjusted operating income of SEK 673m as we build the commerce network of the next generation.”
A leading choice for merchants
Much of the success of Klarna’s Buy Now, Pay Later (BNPL) service has been its growing acceptance amongst merchants. The company cited a “powerful, mutually beneficial relationship” with its pre-existing and new merchant partners.
Across five years, Klarna stated that merchants have seen a 2.5x increase in volume H1 2024 compared to H1 2020.
Commenting on its merchant success, the company stated: “Merchants choose Klarna because they reach new consumers, achieve 40% higher average order values, and typically see a 20% increase in conversion rates.
“Their consumers love us, awarding us an NPS score of 75, far outpacing our legacy peers. In the most recent year, we’ve exceeded a net revenue retention rate of 129%, showcasing how we continuously add value to these relationships as they embed more of their business within our network.”
AI ambitions
Like many leading financial institutions, Klarna has doubled-down on its artificial intelligence (AI) adoption over the past several years.
The company launched a landmark partnership with OpenAI’s ChatGPT to be embedded in its shopping app for a more streamlined and tailored shopping experience last year. The emerging technology also continues to be a focus for Klarna this year.
Within its H1 2024 report, Klarna’s average revenue per employee over the last 12 months increased by 73%, whilst at company level, it also increased by 27% and adjusted expenses remained flat.
With AI firmly embedded into the company’s long-term plans and used as a primary revenue growth driver, the technology will no doubt play an integral role in how Klarna evolves more in the financial sector.
The next great challenger bank?
The Swedish fintech has been preparing for months now on a new IPO in the US that will look to transform the company’s plans to become a neobank along the lines of Revolut and Monzo.
Firmly consolidating its position as the leading BNPL provider across the globe – only enhanced further through its acquisition of Laybuy – Klarna has recently been rolling out retail banking services to test the waters of its latest ambition.
The company announced the balance and cashback features, adding two traditional retail banking services to its existing product range.
Klarna balance allows users to store money in their account, with funds added directly from a customer’s bank account. The cashback feature will see Klarna shoppers at participating retailers earn percentage points, with the money stored in their balance.
With the range of new banking services being launched, along with its continued momentum in the US, it will come as no surprise if Klarna has its sights set on becoming a fully-fledged retail bank in the future.