Klarna has big plans for the U.S. Will the CFPB’s buy now, pay later probe get in the way?

Klarna has its eyes on the U.S. for its next big move.

The Stockholm-based buy now, pay later (BNPL) company, which has raised nearly $4 billion in funding and has been contemplating an IPO, is planning a debut for its new credit card (or Klarna card as it prefers it be called) for the U.S. It recently added a Chrome extension to browsers in the U.S., U.K., France, and Germany, so that shoppers can buy items, and pay for them later, from non-Klarna affiliates. The extension automatically tracks and applies cashback offers at purchase.

“We see, of course, fantastic growth in the U.S. That’s the market we’re the most excited about,” David Fock, Klarna’s Chief Product Officer, tells me.

Indeed, U.S. shoppers can’t seem to get enough of putting off payments for their items. A recent poll of 1,500 consumers from insurtech company Breeze found that 74% of consumers had used a BNPL service. Venture capitalists are throwing billions into payments companies like Affirm or Afterpay. Klarna hit a massive $45.6 billion valuation last June. Take a look at the funding activity from 2021 that CB Insights shared with me at the end of December: 

The premise is simple: Buy a product, see if you like it first, then pay for it. For higher-ticket items, an individual can take a few months to pay for it, interest-free. (The average order size at Klarna is around $150, according to the company)

But this has all drawn debt and data concerns from U.S. regulators. The Consumer Financial Protection Bureau (CFPB) announced a probe into Affirm, Afterpay, Klarna, PayPal, and Zip, last month. 

For one, customers appear to overspend when they make a purchase in this fashion—particularly if they are using more than one BNPL company. In the Breeze poll, 57% of consumers said the service had caused them to spend above their means. A Credit Karma study from last year showed that some one-third of BNPL users had fallen behind on payments; many of them had seen their credit scores decline.

Late payments can be profitable for BNPL firms. Afterpay, for example, made nearly a quarter of its total income from late fees in its 2018 fiscal year, although it has emphasized other lines of revenue and has lowered that metric each year (It was at 14% in fiscal year 2020.)

For Klarna’s part, Fock says the company hopes to avoid late fees altogether, and only uses them to incentivize customers to pay. “It’s not a revenue stream that we’re interested in,” Fock says. “It’s what we call internally ‘negative revenue,’ We do whatever we can to only issue credit to customers who can really afford it and pay for it.”

The revenue Klarna generates from late fees is “very marginal,” though Fock declined to provide a specific figure (A spokeswoman later told me that 98% of Klarna’s payments are interest-free and that a “vast majority of Klarna’s customers pay on time and in full”). The company instead relies on payments from its merchant affiliates. For its new Chrome extension, it takes advertising revenue for delivering traffic to a merchant’s website, as well as interchange fees if a one-time card is used. The company declined to share any of its advertising partners. 

Fock emphasized that Klarna won’t allow customers to rack up debt: If they miss a payment, they won’t be able to use the service until it’s paid up. Klarna uses any available data it can pull, including soft credit checks and payment history within its own app, to gauge a customer’s credit on a per-transaction basis, making a bet on whether the customer will make good on every payment. “We use whatever data that can be made available to assess that,” Fock says, noting that it will depend on what’s regulatorily allowed within each market. 

When I asked for Fock to discuss the CFPB probe, he emphasized that “proportionate regulation is a good thing.” Since Klarna is a bank, they are “used to working closely with regulators” to try to achieve good outcomes for the end customer. “We think, through this process, they will see the benefits of this product,” Fock says.

Klarna has a big incentive to expand in the U.S., uninhibited. The BNPL market is growing faster than any other unsecured lending alternative, per McKinsey. Banks have already lost $8 to $10 billion in annual revenue to these fintechs.

Klarna is moving quickly in countries like Sweden, Poland, Norway, Germany, Austria, The Netherlands, U.K., and the U.S. It has 90 million users worldwide—and no plans to slow down.

‘Mr. Foley Should Be Fired as CEO, Immediately:’ Blackwells Capital wants Peloton up for sale—and CEO John Foley out of the picture. The private equity firm, which owns a stake in the exercise bike company, sent a rather damning letter to Peleton’s Board, and published it publicly this morning:

Here’s an excerpt: 

“Remarkably, the Company is on worse footing today than it was prior to the pandemic, with high fixed costs, excessive inventory, a listless strategy, dispirited employees, and thousands of disgruntled shareholders. And no wonder, the latter, given that Peloton underperformed every other company in the Nasdaq 100 over the last twelve months.”

Blackwells cites that Foley has misled investors, was initially reluctant to work with the Consumer Product Safety Commission after reported injuries of children, and has allegedly failed to have effective internal controls regarding its financial reporting. (Blackwells also decided to mention Foley’s new $55 million home in the Hampton’s in the letter)

All this comes after the company said it was weighing layoffs amid lower equipment sales.

Staying active… Activist investors have been on a rampage in recent weeks. Macellum Advisors, which owns an approximately 5% stake in Kohl’s, told the company in a letter it should consider a sale. (Kohl’s has since reportedly received a $9 billion offer, per the New York Times) And it looks like Trian Partners, known for forcing change at companies it backs, has secured an unidentified stake in Unilever, according to Reuters.

See you tomorrow,

Jessica Mathews
Twitter: @jessicakmathews
Email: jessica.mathews@fortune.com


- Route, a Lehi, Utah-based product tracking software company, raised $200 million in series B from investors including Eldridge, Madrona Venture Group, Riot Ventures, FJ Labs, and Jaws Capital.

- Pavilion Data Systems, a San Jose, Calif.-based data analytics acceleration platform provider, raised $45 million in funding led by Kleiner Perkins and Artiman Ventures

- Spectrum Labs, a Miami, Fla.-based AI content moderation platform, raised $32 million in Series B funding led by Intel Capital and was joined by investors including Munich Re Ventures, Gaingels, Harris Barton, Wing Venture Capital, Greycroft, Ridge Ventures, Super{set}, and Global Founders Capital

- La Vie, a Paris, France-based plant-based meat company, raised €25 million ($28.3 million) in Series A funding led by Seventure, Oyster Bay, Capagro, Partech, Entrepreneur First, and Capital Blue.

- Mantra Health, a New York-based digital mental health clinic focused on young adults, raised $22 million in Series A funding led by VMG Partners and was joined by investors including New Market Venture Partners, Elements Health Ventures, 14W, Alumni Ventures, Canaan Partners, Global Founders Capital, Baleon Capital, Western Tech Investments, and City Light Capital.

- Vartana, a San Francisco-based managed checkout and BNPL provider for businesses, raised $7 million in seed funding led by Audacious Ventures and was joined by investors including Flex Capital, Shoaib Makani, Joe Kraus, and Bipul Sinha.

- Whoosh, a Mill Valley, Calif.-based golf operations software company for private golf clubs, raised $6 million in funding led by Craft Ventures and was joined by investors including Bienville Capital, Operator Partners, Human Ventures, and Alaris Capital.

- Bateau, a Seattle, Wash.-based business Intelligence solution for the senior living industry, raised $4 million in seed funding led by CRV


- KKR agreed to acquire Accell Group, a Netherlands-based bicycle developer, for $1.8 billion.

- Vista Equity Partners invested $200 million in Globalization Partners, a Boston, Mass.-based employment platform for remote team building.

- Insight Partners, General Atlantic, and Silver Lake invested $175 million in A Place for Mom, a Seattle, Wash.-based senior care services marketplace.

- Summit Partners led a $96 million investment in ConstructSecure, a Burlington, Mass.-based Partner Elevation Platform for capital projects and operations.

- Morgan Stanley invested $55 million in Fusion Connect, an Atlanta, Ga.-based managed security service provider of cloud communications and secure network solutions. Morgan Stanley now owns a majority stake in the firm.

- Apis Partners invested $50 million in Giift, a Singapore-based loyalty program management and development company. 

- Mainsail Partners invested $28 million in Inspect Point, a Troy, N.Y.-based cloud-based business management software company for the fire inspection industry. 

- Francisco Partners agreed to acquire Watson Health’s healthcare data and analytics assets from IBM. Financial terms were not disclosed.

- Gathr Outdoors, a Centre Partners portfolio company, acquired Cascadia Vehicle Tents, a Bend, Or.-based rooftop vehicle tent, awning, off-road trailer, and car camping equipment developer. Financial terms were not disclosed.

- Prime Global Medical Communications, a Levine Leichtman Capital Partners portfolio company, acquired HCD Economics, a U.K.-based high-growth health economics and outcomes research (HEOR) and real-world evidence (RWE) company. Financial terms were not disclosed.

- Probo Medical, a Varsity Healthcare Partners portfolio company, acquired REMETRONIX, a Port St. Lucie, Fla.-based medical equipment installation and deinstallation services provider. Financial terms were not disclosed.

- Saw Mill Capital Partners led a recapitalization of Rasa Floors, a Carrollton, Tex.-based flooring installation provider. Financial terms were not disclosed.


- Berkshire Partners acquired Specialized Elevator, a Calif.-based independent elevator service provider, from CIVC Partners. As part of the deal, Specialized Elevator will merge with 3Phase Elevator, a Berkshire Partners portfolio company. Financial terms were not disclosed.

- Fortescue agreed to acquire Williams Advanced Engineering, an Oxfordshire, U.K.-based  technology and engineering business, from EMK Capital and Williams F1. Financial terms were not disclosed.


- Unity acquired Ziva Dynamics, a Vancouver, Canada-based character development software company. Financial terms were not disclosed.


- PAG, a Hong Kong-based investment firm, is weighing an IPO in the city that could raise around $2 billion, per Bloomberg.

- Chime Financial, a San Francisco-based mobile banking company, has reportedly asked Goldman Sachs to help with an IPO, according to Reuters. Sequoia Capital backs the firm.

- Lucy Scientific Discovery, a British Columbia, Canada-based early-stage psychotropics contract manufacturing company for the psychotropics-based medicines industry, filed for an IPO. The company reported a net loss of $4.7 million in the year ending in June 2021 and has yet to post revenue.


- Eleven Ventures, a Bulgarian venture capital firm focused on pre-seed and seed investing in South Eastern Europe, raised €60 million ($67.8 million) for a third fund.


- J.C. Flowers & Co., a New York-based private equity firm, hired Louis Vachon as an operating partner. Formerly, he was with National Bank of Canada.

- Unusual Ventures, a Silicon Valley-based early-stage venture capital firm, hired Lars Albright as a general partner. 

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