Klarna has posted its first quarterly profit in four years amid a boom in shopper demand ahead of the Christmas period.
The Swedish buy now, pay later (BNPL) giant, once Europe’s most valuable startup, reported a £9.6 million profit for the third quarter of 2023, after previously making a loss from £156 million a year earlier.
Revenue rose 30 per cent to £445m as the 150 million shoppers using its services around the world increasingly looked to pay for their purchases online as the rising cost of living squeezes incomes.
The company also noted that credit losses – money set aside to cover customers who fail to pay their debts – fell 46 per cent year-on-year to around £59 million.
“Our growth has accelerated and we will build on this momentum with further investments to create value for both our consumers and our merchants,” said Klarna boss Sebastian Siemiatkowski.
Building momentum: Klarna, led by boss Sebastian Siemiatkowsk (pictured with wife Nina), reported a profit of £9.6m for the third quarter of 2023.
The company had several years of profitable business after its founding in 2005, but ran into difficulties in 2018 when consumer spending slowed.
Last year, the group’s valuation fell to £5.4bn from £37bn and it was forced to cut jobs and office space to cut costs.
But the return to profits provides a valuable boost for Klarna amid reports that it has set up a UK holding company in preparation for a listing on the London or New York stock market, which could value the group at up to £12 billion.
This followed comments by Siemiatkowski, 42, in August when he said the company’s three conditions for going public had been met. These had to be established in the US, have a sustainable business model and significant growth potential.
Klarna’s business model offers customers a way to spread purchases over multiple payments with leading retailers such as clothing firm Boden, takeaway firm Deliveroo and fashion retailer H&M.
But BNPL services have come under intense criticism from campaigners and MPs who express concerns that it is saddling consumers, especially younger ones, with unsustainable amounts of debt.
Last week, a report from the Financial Conduct Authority (FCA) revealed that more than a quarter of regular BNPL users have failed to pay a bill or debt in three of the last six months, making a total of 529,200 people.
And 48 percent (940,800) also had a high-cost credit product, such as a payday loan. More than half had increased their credit card debt in the past year, representing around 1 million consumers.
Despite growing pressure to crack down on BNPL, it was reported in July that the Treasury had shelved plans to bring firms such as Klarna under FCA supervision.