Banking on a global retail finance future, but don't mention the 'SaaSpocalypse' - Klarna sets out its stall

Given the ongoing hoo-hah about the so-called ‘SaaSpocalypse’, Sebastian Siemiatkowski, co-Founder and CEO of Klarna might be forgiven for thinking, ‘Told ya so!’. While the current fuss has been triggered by the likes of OpenAI’s Sam Altman and some analyst commentary, Siemiatkowski was first out the gate when he declared that he’d be ousting Workday and Salesforce from his organization, replacing them with AI-developed alternatives.

Now of course he didn’t actually do so and his boasts should be filed more under ‘PR faux pas’ than industry trend-setting, but what he was claiming back in 2024 was no more ludicrous than some of the last rites being served on the software industry by those who, frankly, ought to know better!

But in fact Siemiatkowski made no mention of his previous comments when talking late last week, preferring it seems to focus on pitching Klarna’s pretension to be regarded as a global bank rather than a ‘living on the never never’ payment credit enabler. Can he back this up more credibly than serving notice on SaaS providers running core mission-critical business processes within his own company?

Well, he’s giving it a good go, pitching:

We are a bank with an exceptional network that is growing at 38% revenue year-over-year. In '25, we did over $127 billion worth of volume across 26 markets and across three continents. And we're growing exceptionally well on every top line metric, cementing our US as well as our global leadership position.

Active card users grew to 4.2 million, up 288% year-over-year. Consumer deposits reached $13 billion, up 37%. And our most engaged consumers, the Klarna banking customers, reached 15.8 million, growing at 101% year-over-year. 

Network

Things are also going well when it comes to merchant partnerships, he adds:

Over the year, we added 285,000 merchants, up 42% year-over-year. We continued to scale our default relationship with Stripe. We began the default-on rollout with Nexi through Paytrail, and we expanded Apple Pay and Google Pay into additional markets. We also launched new partnerships with Emirates, LEGO, Vinted and StockX, while further deepening our relationship with large global merchants such as Walmart, Lufthansa and Etsy.

Having logos like Walmart on your website is clearly impressive, but it’s only one part of a wider strategy, Siemiatkowski says:

Walmart is obviously one great accomplishment, and it's looking really well when you look at the rollout, but I think that what excites me the most is the strategy that we set up that we're executing on, which is to become a truly third-party network and rely even stronger on the distribution of our partners, be it JPMorgan Chase, be it Stripe, be it Adyen and so forth. That’s why you're seeing these acceptance points and merchant numbers coming up so much.

This is also why you're seeing Fair Financing growth [Klarna’s long-term, interest-carrying loan product] because not all of our merchants historically have that. And the way we now work with our distributors is we try to make sure that they offer all of our payment methods. So not only is it about number of merchants that accept us, it's also about making sure that ‘pay now’, ‘pay later’, as well as Fair Financing is available at every checkout, so there's always a relevant payment option independently of what the retailer might be selling, everything from furniture to games.

Having a network claiming close to one million merchants across 26 sectors,  online and offline, has another important benefit. According to  Siemiatkowski, it means:

We’ve already captured the hardest thing to win, the consumers everyday spend. The checkout moments where trust is built, and that is the foundation. And now we're leveraging. Once you have the everyday spending relationship, once the consumer is using Klarna 10, 15, 20 times a year at checkout, the step into a banking relationship is natural, low friction and extraordinarily cost effective. There is no cold start. We already know these customers, and they already trust us.

He expands on his thesis:

We prefer starting with ‘buy now, pay later’ and ‘pay now’ with small value transactions, $50, $100, build a big audience of customers that we get to know that we've underwritten, [where] we've seen their payments performance, then we're scaling like we're doing now for financing, where a large proportion of those Fair Financing volumes are existing customers that we already have relationships and doing underwriting for a few years.

That’s a critical part of our thesis, which we think is very special to Klarna - that it's important for us to be in those daily transactions, both because it grows a stronger relationship with the customer, but also means that we understand them better. We follow them for a longer period of time.

So Siemiatkowski is confident that he knows his consumers and what they want:

What we're seeing is that, again, the audience that uses our product is an audience that is what we call the self-aware avoiders. These are financially-conscious, both American consumers and European consumers who are actively keeping away from credit cards, who are borrowing much less. Their average balance may be on a credit card, people would have $4,000, $5,000. What we call a Klarna paying customer has $100. A Klarna banking [customer] may have $400 or $500…These are financially-conscious customers. They enjoy the fact that our products are zero interest, fixed instalments. They find them a healthier alternative, and they're also keeping the economy in better shape. We see good performance. We see that they are shopping as they used to, they're spending as they used to, and they are also borrowing responsibly, which we appreciate and find is important.

The agentic commerce angle

When it comes to spending, Klarna inevitably has an agentic commerce tale to tell. Siemiatkowski stakes a claim for being ahead of the hype cycle here:

We have believed that this is the evolution of e-commerce for a long period of time. That's been part of our thinking. As a consequence of that, we have thought it was very important to have the partnerships and distribution of people like Stripe and Adyen since those are often the companies that people go to to implement agentic commerce. And so by making ourselves the default and always available in all these points, that makes us like always available in those points as well.

In addition to that, things like we launched with Apple Pay and Google Pay makes us again available everywhere where those are being used, which again then gives us additional coverage in this. But then obviously, we also court the big AI companies, and I can't promise anything there.

But he is looking to the AI firms to provide a form of validation it seems: 

The additional thing that I find very promising is that the conviction that we have which is that ‘buy now, pay later’ is a healthier form of credit than credit cards. The fact that it's interest-free, fixed instalments and so forth. This is truth. Sometimes people write different things in the media…but the truth is if you go and ask even the big AI companies, ‘Which form of credit should I be using, which is the one that's most healthy?’, [they] will recognize the benefits that ‘buy now, pay later’ provides.

My take

Given that most of the AI headline grabbers are living on promises of ‘profits tomorrow’ and revenue projections/commitments seemingly compose on the back of an envelope, their having a view on the best form of credit makes a kind of sense.

But what about Klarna’s own finances? The firm’s revenues are on the rise - topping the $1 billion mark in its most recent quarter, but for 2025 as a whole it turned in a pre-tax loss of $241 million. And its provisions for loan losses - an inevitable critical element of its operating model - came in at $250 million in Q4, up a hefty 59% from a year ago. Siemiatkowski is unfazed, arguing:

Every additional $1 billion in loans that we add in a single quarter will reduce TMD (Transaction Margin Dollars) by something like $25 million that same quarter, but it will increase transaction margin dollars by $60 million in the upcoming quarters. So the more we grow in these books especially, the more profit we're generating for the future.

Is that enough to calm the short termist ‘show us the money’ paranoia on Wall Street right now, a paranoia fueled by tech firms pouring more and more cash into AI development and infrastructure expansion? Again Siemiatkowski is phlegmatic:

The real question is simply, do we want to make more money even if it means slightly less today to make significantly more tomorrow?

He cites JPMorgan Chase CEO Jamie Dimon:

[He] famously said of the Sapphire [credit] card that he wished he’d taken twice the losses. This was 2017, slightly different rules, but the same concept. 

Well, I suppose if you’re setting out to stake a claim to be “one of the major retail banks in the world”, you might as well go for broke and align yourself with possibly the most famous banker in the world as well! Will Wall Street buy it? Or will there be a price to pay sooner or later?