Klarna, a BNPL provider, is preparing to launch its IPO. Here are five things you should know about it.

Takeaways

• In its IPO prospectus, Klarna, a provider of buy now, pay later, stated that it had been profitable for several years but earnings were under pressure after it expanded into the US.
• In Sweden, the company’s most mature market, a majority (70%) of adults will pay with Klarna by 2024.
• Klarna wants to boost its advertising and retail banking businesses, according to its paperwork.

Klarna – which popularized the buy now, pay later plan – filed a prospectus for an initial public offer earlier this month. The prospectus included details of its growth over the last two decades.

The company's buy now, pay later plans caught on with Swedish consumers, who could take home their purchases, while paying a portion of their bill and agreeing to have further installments deducted from their account in the coming weeks.

Klarna is now available in 25 other countries. It has partnered up with 675,000 merchants, and received payments from over 93 million customers. The company said it handled an average of 2.9 million transactions daily in 2024, with underwriting decisions on short-term loans made in seconds using a "fully automated process."

The filing didn't include details about how many shares Klarna intends to sell, or at what price. Here's a look at what the company did have to say.

US Growth Has Squeezed Recent Profits

Klarna’s profits were under pressure after it launched in the US, but they were still profitable for its first 14-year period.

It calls 2023 an inflection point because that's when it achieved the scale needed in America to generate positive margins. Klarna made a $21-million profit in 2024 following two years of losses. Klarna’s revenues have grown by nearly 48% in the last three years, going from $1.9 billion to $2.8 billion.

Klarna Has Several Revenue Streams

Merchants accounted for nearly 64% of the revenue generated last year. Klarna charges retailers a fee for transactions when their customers pay using the service. Several major names offer Klarna as a payment option at checkout, including Uber, Apple (AAPL), Macy’s, Wayfair, and Macy’s. The company reported that Klarna recently signed up with Walmart (WMT), DoorDash (DASH), and Apple (AAPL).

Merchants also pay to advertise on Klarna's website and app, and to have their products prominently displayed in users' search results.

The company stated that another 12% was generated by consumer payments such as “reminders” for late payments. Consumer payments also include money from Klarna Plus. This is a roughly $8 per month subscription plan that includes deals and waived services fees, according to the company.

The remaining 24% related to interest—both interest paid by borrowers and interest Klarna earned on investments.

Klarna’s Basic Payment Processing Plays a Smaller Rolle

Klarna can handle three types transactions, including basic transaction processing, in which funds are transferred instantly.

About 26% of gross merchandise value—or the total cost of items sold via Klarna—in 2022 were paid for outright, but that fell to 16% in 2024, the company said. Klarna reported that during this period, Klarna’s “Pay Later” product, which allows consumers to delay or divide payments into installments, grew from 70% in 2022, to 79% in 2020.

During the three-year period, the share paid by short-term loan, which can be charged interest, has increased.

Klarna is used by Swedes for a range of purchases

In its filing, the firm compared its operations in Sweden with those in the U.S. to show the role it could play in a matured market.

The company stated that 82% of Swedish adults used Klarna in the past year and had an average of 32 transactions. The company said that their spending was evenly distributed among categories such as apparel and accessories, health, beauty, home, electronics, food, beverage, and leisure.

In the US, nearly 10% of adults paid with Klarna in 2024—about five years after the company launched in the States. The company reported that Americans spent 69% of their money on apparel and accessories.

Klarna Says It Has Room to Grow

Klarna wants to grow by working with new merchants, expanding into new regions, and attracting more consumers.

The company wants to develop two revenue streams. Klarna is a Swedish bank with a banking licence. It wants to grow its retail banking business. At the end of 2024, it held $9.5 billion worth of deposits for consumers.

Klarna wants to expand its advertising business as well, which generated $180 million last year, or more than 6 percent of total revenue.