Klarna remains upbeat despite impending increased regulation, sustained high interest rates and a first quarter loss of SEK1.28bn ($119m). That is however a sharp reduction from a net loss of SEK2.6bn in the first quarter last year.
Klarna says that it is positioned “firmly on track to achieve our goal of profitability on a monthly basis in the second half of the year.”
In the US, it continues to see double digit GMV growth with credit loss rates improving 64%. New partnerships with Samsung, Uniqlo and Boden, and expanded partnerships with existing partners such as Nike, Etsy, and Tod’s continues to drive US growth.
Global GMV increases by 13% y-o-y in Q1 2023.
Total net operating income increases by 22% to SEK 4.4bn. Retailer revenue in Q1 2023 outpaces GMV, increasing by 17% compared to the previous year. Klarna’s fastest-growing revenue stream, marketing revenue, increases by 276% compared to the same quarter two years ago. Klarna says that indicates its successful diversification beyond BNPL.
In 2021, the head of Klarna UK told RBI that the firm had grand, global ambitions. He said: “We’re actively targeting the traditional incumbent banks. In the next five or 10 years Klarna’s goal is to become one of the top five big retail global banks”. Since then, interest rates have risen. BNPL is in the sights of the regulators around the world and VC inflows are no longer booming. But meantime, Klarna does report progress and a number of first quarter highlights.
Klarna Q1 2023 highlights
- New collaboration with Airbnb. This supports flexible, interest-free payments for its 300 million expected guests and marks a significant milestone for Klarna in the travel and experiences sector
- Klarna is the first European bank powered by artificial intelligence (AI) and was the first European company to create a ChatGPT plug-in integration, supporting the best shopping and payments experience for consumers
- Investment grade credit rating highlights strong progress on path to profitability. Credit losses improve by 35% y-o-y and adjusted operating losses improve by 78% y-o-y.
BNPL sector woes
Last year, Klarna’s valuation was marked down to $6.7bn from $46bn. Its smaller peers have ensured a traumatic year. Block announced in August 2021 that it would acquire BNPL provider Afterpay in an all-stock deal. At the time, Block’s share price valued Afterpay at $29bn. Once the deal closed in January 2022, the Block share price had declined sharply. The deal ultimately valued Afterpay at $13.9bn.
In the past year, Block’s share price is down by 29%. For the year to date, the share price is down by 9%. Sezzle’s share price is down by 95% since peaking in August 2020. Struggling BNPL outfit Payright is under new management. The Payright share price is down by 89% in the past year.
The Splitit share price remains in the doldrums, down 62% in the past year. Meantime, the Humm share price is down by 41% in the past year. Humm has also exited the UK and New Zealand markets.
Zebit raised A$35m in an IPO in November 2020. It subsequently delisted from ASX last February, its share price having collapsed. Southeast Asian fintech IOUpay placed its parent company IOUpay Limited into voluntary administration with PwC Australia in April 2023.
IOUpay reported the discovery of a significant fraud. It added that it had a “number of outstanding debts” with “no reasonable prospect” of being able to repay them.
In January 2023, Laybuy was delisted from the ASX after its share price dropped to only A$0.026. And in February, Openpay entered administration.
US-headquartered Affirm exited the Australian BNPL market in February 2023. Affirm’s operating losses almost doubled year-on-year for the three months to end December 2022 to $360m. Affirm is now only operating in the US and Canada.
And finally, there is the costly failure of Latitude Group’s venture into BNPL. Latitude announced the closure of its BNPL operation in Australia and New Zealand in February 2023.