Is Klarna Fintech's Main Character? An IPO Breakdown.

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Here's this week's Brainfood in summary

📣 Rant: Is Klarna Fintech’s Main Character now?

💸 4 Fintech Companies:

1. Lama AI - The origination engine for banks lending to SMBs

2. Piere - PFM with AI inside

3. SaySo - Clearance inventory pricing for merchants

4. Cino - The bill splitting card that just works

👀 Things to Know:

1. OCC To Cease Examinations for "Reputational Risk"

2. XRP Surges after Ripple Says SEC Dropping Appeal

📚 Good Read: Is the DoJ shaking down Capital One over Discover?

Weekly Rant 📣

Is Klarna the new main character for Fintech?

This week, Klarna scooped Walmart as a client from Affirm. They also signed DoorDash and filled out their F1 to become publicly listed.

In recent months, their CEO has gone viral talking about adopting crypto, ripping out SaaS products, or even how they displaced and then re-hired human call center agents.

Klarna is unlike the other BNPL players.

They have an AI story. They have a cost-efficiency story. They're profitable. They're a bank. And they're perhaps the most outspoken consumer brand there is.

But the IPO is an inflection point. Public markets want results not just headlines.

Both Klarna and Affirm are trying to become more than the BNPL button. From a checkout feature to the core of consumer finance.

The public markets are competitive. Can Klarna deliver?

Are they a footnote in a bigger story? 

Or are they the whole story?

Are they Fintech’s main character or just another NPC?

Lets find out 👇

Quick recap, what is BNPL?

As I wrote in BNPL is good; I will die on this hill. 

Big-name providers include Affirm, Klarna, Block and PayPal. 

Did I mention? Merchants love BNPL.

Despite the higher variable costs, merchants will always want a solution that is more likely to get consumers to click "buy" and spend more when they do.

The magic that makes all of this work is made of three things

1. The merchant discount: Merchants pay the BNPL provider 3 to 6% of the inventory value. This is revenue for BNPL, but for the merchant its more sales. Win/win.

2. Lower barrier to entry: BNPL for one or two items is a lower barrier to entry than a revolving credit card and gives a sense of control.

3. The app ecosystem: Klarna and Affirm are fully featured shopping apps that offer discounts, rewards, and more to bring consumers new products and merchants new customers.

Once viewed as a ZIRP and pandemic-era phenomenon, the BNPL providers have proved enduring. Perhaps none more so than Affirm, which has been the public face of the industry every earnings season.

BNPL is now actively competing with credit cards as a main checkout option. It’s available for merchants from Stripe, Adyen, and even in Apple Pay. 

BNPL has three types of competitor

1. Niche BNPL providers: Sezzle and Zip are much smaller scale but growing fast. They’re strong, niche players, but they’re not the mainstream brands that Klarna and Affirm are.

2. Fintech Brands that do BNPL: PayPal and AfterPay are hard to judge because they’re a wider business and their brand is much broader.

3. BNPL as a wedge to become finance brands: Affirm and Klarna dominate in mindshare and marketshare as pure-play BNPL providers. 

YoY revenue growth range is in the mid 20s to high 70s.

(Note Klarna's reported $21m profit is misleading - excluding their one-time $171m checkout business sale, they actually posted a $121m loss)

Both Klarna and Affirm have announced that they are on track for profitability. The market is watching both of them as Klarna prepares to go public.

Klarna and Affirm are contenders for BNPL’s main character status.

Klarna and Affirm have very different Gross Merchandise Values (GMV), but their overall implied valuations are similar. That point is key to understanding the wider BNPL industry. 

Affirm vs Klarna: Mind the GMV Gap

Both Klarna and Affirm are in the $14.4bn to ~$15bn market cap range yet look very different in Gross Merchandise Value (GMV).

Jevgenijs explains this gap:

Why this difference in pricing? Look at the bit in bold. Affirm has been much more effective at getting long-duration loans for higher ticket items. Those terms are much more profitable.

(Note Expectthis mix to change somewhat. Klarna will benefit from the longer-term loans in its Walmart partnership, with One handling the shorter duration split payments).

When we think of BNPL, we think of pay in 4, but the reality is that is just the wedge to hopefully do more with consumers.

Is it working?

Is this an industry built on paying in 4 installments for low ticket items at checkout, or is it more than that?

Affirm and Klarna are much more than Pay in 4

In many ways, it has to be to fulfil its growth ambitions. 

While Affirm has proven capable of longer term lending, it did not stop there.

Klarna and Affirm both do card products, they offer loyalty, rewards, and Klarna is getting into savings accounts as a bank. In many ways these two companies are driving the wider financial services industry forward with product offerings.

Both offer

A debit card

• The Affirm Card issued by Evolve 👀, was the first “flex credential” card where users can choose to pay in full or over time. 

• The Klarna Debit Card is issued by WebBank and applies a 28.99% APR to all moved or split transactions. 

Savings accounts 

• Affirm Money, a partnership with Cross River is available in the US 

• Klarna doesn’t offer its in the U.S yet but it is available in Europe where Klarna is a licenced bank (and deposits are a key source of funding)

Personal shopping assistants / app ecosystem

• Affirm adds offers and targetted products to its users in addition to helping them manage each BNPL purchase.

• Klarna does account aggregation, lets users set budgets, and compare prices for items online. More of a Neobank-lite experience.

As they expand beyond basic BNPL functionality, both companies are gradually positioning themselves within the broader digital wallet ecosystem

Becoming wallets?

• Wallets are becoming the consumer center of gravity, for identity, payments and shopping. The BNPL providers are in that conversation. 

• Affirm and Klarna have a shopping app, and accelerated payments / checkout capabilities to pay in full. Affirm still describes itself as a payments company.

From Wallet Wars:

So who gets to be main? 

Main Character battle: Klarna vs Affirm

It’s a two horse race between Affirm and Klarna for who gets to be the main character for BNPL. I thought it would be fun to think of way to compare them. (This is my hot take).

PR Game (Klarna): 

• You have to hand this to Klarna. Whether its talk of ripping out SaaS tools, or adding stablecoins they have been the gift that keeps on giving. The Walmart coup and DoorDash announcement is a perfect example—announced just as they filed their F1 created a one-two punch of positive momentum.

• Affirm is no slouch in the PR arena. Founder Max Levchin delivers on mainstream media and on social. But if we’re talking pure style then you have to hand it to Klarna 

Longer term loans (Affirm):

• 72% of loans are interest bearing. If you’re buying an 8 Sleep mattress or a Peleton in the U.S. chances are its with Affirm. 

• Whereas Klarna really wins for the fast fashion and lower ticket items.

Cost of funding (Tie)

• Klarna has an edge here as a Swedish bank, paying 3.8% on average but as it expands in the US its moving to more of a private credit funding model

• Affirm has secured several large private credit deals, which Klarna is now copying, this could be a tie in 6 months time. Especially as the US becomes a bigger market for Klarna.

Product innovation (Tie)

• Affirm says it has 1.7m debit card holders but is US only

• Klarna doesn’t say how many cards it has, but in Europe offers far more products (like savings, loyalty etc).

Its this last category of product innovation that appears to be the key to their long term growth. This chart from Affirm shows where the GMV volume growth is coming from

Overall: It’s a tie. Which is why I’m fascinated to see who becomes the main character. It’s rare two so very different but strong companies are so evenly matched. 

In a way they both resemble their founders. 

• The cost efficient showman: Klarna is a master at getting attention, getting headlines, and delivering staggeringly simple UX. They cut their teeth in Europe which is a cost sensitive market and they’re continuing to become more efficient. 

• The Fintech pioneer: Max Levchin is PayPal mafia. Affirm keeps finding new ways to drive revenue and value from the market and innovating on longer term underwriting models.

Two very different strategies, executing flawlessly.

With their remarkably different yet equally effective strategies, Klarna now faces its biggest test yet as it approaches the public markets.

Klarna’s IPO prospects

This is the biggest Fintech IPO in recent memory. 

The industry needs exits and good news stories, and Klarna is a big name. 

• The $15bn IPO target is punchy, At $15B, Klarna would be valued at 5.3x times revenue, compared to Affirm's current 5x multiple. They did do a secondary at $14.4bn not long ago, suggesting their is investor appetite at that level. 

• Klarna benchmarks well against Affirm.. Similar revenue, more users, lower revenue growth but winning large merchants like Walmart might help that picture. 

• Macro is more nervous especially for Tech. Nvidia who could do no wrong, saw their share price drop after their recent GTC conference. Tariffs, falling consumer confidence all create a possible headwind in consumer GMV growth.

• Will it pop or drop? Investors and the market will be looking at this listing as a signal for the broader sector. I bet Chime and Plaid have their fingers crossed for a strong IPO from Klarna.

My take is that this is a category and company that you can never bet against. They’re the masters of hype and lots of adjusted figures, but if you scratch a layer deeper theres a lot of happy merchants, strong partners and consumers who love the product.

 Let’s not forget Klarna had a downround from a peak of $46bn down to $6bn. $15bn is a solid outcome and comeback story 

A lot will depend on their ability to keep delivering over the next 6 to 12 months. The major IPOs and SPACs from the 2020 / 21 era have proven doubters wrong and consistently grown. 

As with all these things. Zoom out. Do consumers prefer BNPL over credit cards? Are these companies growing? Is that growth consistent? 

Increasingly the answer to all of those questions is yes. 

Six critical questions for Klarna’s future

Klarna has a tough balancing act. It has to keep growth, at least in the mid-20s, while becoming more efficient in what is now an incredibly competitive market. 
Their European playbook is to get deposits, by becoming more of a consumer wallet, so they can get to profitability. 

Will that work in the US?

1. Will Klarna get a U.S. charter? With 40% of European deposits brokered through Raisin, this model proved crucial to European profitability. They could be a branch, acquire a bank, or get a de-novo charter. Adyen initially came to the US as a branch, while UK bank Oaknorth just acquired Community Unity Bank. The OCC's changing stance on Lenovo charters might create a timely opportunity.

2. Can Klarna become a wallet or remain just the BNPL button? Affirm's growth now comes primarily from its card. Klarna has 100 million users but hasn't nailed the wallet strategy outside Europe (I’m guessing partly for regulatory reasons).

3. Can they nail GAAP profitability? Can they achieve GAAP profitability? Affirm promises it by Q4 2025. Both companies show strong revenue growth (24% and 46%, respectively), but competing on price while consumer spending potentially softens means efficiency must become the priority

4. Will Walmart make a difference? Based on ~1.5bn to $2bn GMV last year (per Affirm disclosure), and assuming Walmart One will handle Pay in 4. Assume Walmart pays a 2% merchant fee, and you get to $30-$40m net revenue and $12-$16m gross profit. It’s a partnership with high signaling value but it doesn’t move the financial needle. My pure speculation is that Walmart is very price-sensitive, and Klarna is more willing to compete on price than Affirm, which is focused on more affluent users and segments.

5. Can they grow fee revenue? In 2024, Klarna generated $128m of “snooze fees,” up from $95m in 2023. Growth came from increased volumes of Fair Financing and Pay Later transactions. So the answer is yes, but its not driving their topline.

6. Can BNPL gradually displace credit cards? I think the answer here is yes. Gen Z prefers the BNPL model. The debit but kinda credit cards they both offer is convenient and growing. People think the Doordash partnership with Klarna is silly because they think “Pay in 4” they should think “credit card competitor.”

Whichever way you look at these questions, BNPL is here to stay.

For me, the jury is out on who gets to be main character.

The future of BNPL is the future of consumer finance

BNPL has reached a critical inflection point. What began as a simple checkout button has evolved into something far more ambitious – a genuine alternative to traditional banking relationships.

At $15 billion – 67% below its peak but 134% above its downround – Klarna's valuation represents a market consensus that BNPL has staying power but faces meaningful competitive pressure.

The most telling signal is in how traditional finance is responding. 

Amex now attributes its loan growth primarily to BNPL-style products, not traditional revolving credit. And, Gen Z/Millennials is the fastest growing segment for them.

PayPal and Block are originating comparable loan volumes. 

For all the innovation, hype and criticism what’s actually driving this trend is shifting consumer preference.

This is why Klarna's evolution matters so much. If BNPL is destined to become just another feature absorbed by traditional financial institutions, then Klarna a $15 billion company, but one of many. 

But if Klarna can become a comprehensive financial platform – leveraging its 100 million users into deeper, more profitable relationships – then it's potential is unlimited

The main character battle between Klarna and Affirm is about who can execute this shift.

Affirm is betting on longer-duration loans and higher-income consumers. Klarna is betting on its banking capabilities and broader global reach.

Is BNPL a feature or a product?

For now, the jury remains out on who will be the main character in this story. But one thing is certain: consumers have voted with their wallets, and BNPL is here to stay

Public markets want growth. Public markets look closely at peers. 

Public markets are the end boss of Fintech.

Klarna's about to find out if it gets to be the protagonist or just another NPC.

ST.

4 Fintech Companies 💸

1. Lama AI - The origination engine for banks lending to SMBs

Lama helps banks complete more loans by building digital applications, which comes with pre-built data integrations, automated underwriting, and the ability to exchange lending deals with other institutions. The service also helps screen prospects by searching PDFs, spreadsheets, and the open web to reference check any data entered in the application process.

🧠 This is an application and origination engine that uses AI, not an AI platform. That's not to say its not valuable, for its segment I can see this being extremely valuable. Having a good, modern origination engine and platform that's ready to work with FIS, Fiserv, and the various data providers lenders need is substantial for this bank size.

2. Piere - PFM with AI inside

Through a mobile app, piere helps users create budgets, track spending, and identify potential savings. It asks users to prioritize spending categories, and then connect multiple bank accounts. It aggregates the data into a single view and gives push notifications whenever a user is stepping outside that budget.

🧠 A modern Mint. Mint stopped evolving after it moved to Credit Karma and those super-user budgeters needs were unmet. The PFM category gets looked down on sometimes, but for 10% of the market, these things are golden. Having a new player pushing the boundaries is a good thing. I do sort of wish there was an AI Agent in there actually moving the money around though.

3. SaySo - Clearance inventory pricing for merchants

SaySo combines a shopping marketplace with markdown optimization software to ensure merchants maximize the value of inventory they're trying to clear. Merchants can turn their clearance items into a shopping feature and build auctions for clearance items.

🧠 This is one of those unloved problems in e-commerce. Which makes it an opportunity. Clearance takes space from other items that could be sold for full price. Having a platform that just takes care of optimize it makes a ton of sense. You can configure platforms like Shopify or Woo to do this, but having a service that optimizes the pricing could be a strong niche.

4. Cino - The bill splitting card that just works

Cino lets users connect their existing bank accounts to a shared payment card. No pre-funding is required. Instead, users create a virtual card and add it to Apple or Google Pay. Then, the split is applied according to pre-defined rules whenever a transaction is made.

🧠 A shared virtual card with open banking at the back makes complete sense. Makes me wonder why Apple or Google doesn't offer this. Like, why is it hard to setup splits, recognize an MCC code then pull funding from underlying linked accounts. I bet there's some complex ledgering behind the scenes here.

Things to know 👀

1. OCC To Cease Examinations for "Reputational Risk"

The Office of the Comptroller of the Currency (OCC) will no longer examine regulated institutions for reputation risk and is removing references from its Comptroller's Handbook.

🧠 Reputational risk exists; it's just not something you can examine. Ask TD Bank or Wells Fargo if reputational risk is a problem. Being in the headlines for scandals impacts the share price. That in itself is a motivator. We don't need regulators for that.

🧠 Public opinion may vary - Regulation shouldn't. Reputational risks could include supplying bank accounts to oil companies. In the 2015 world, there's a real possibility climate protestors would break the windows of branches to do so. But is that the role of a regulator to examine and look for? Not for me

🧠 Almost everyone hated this risk. It's interesting to me that some of the more progressive finance folks aren't sad to see this go.

🧠 It's hard to do business in 4 year increments. Every time the administration changes, the regulatory pendulum swings wildly. The economy and the industry need some consistency.

Does the Comptroller's Handbook sound like a Margret Atwood novel to anyone else, or am I just drowning in dystopian vibes?

2. XRP Surges after Ripple Says SEC Dropping Appeal

Four years and three months after the original lawsuit by the SEC, the CEO of Ripple, Brad Garlinghouse, told the Blockworks DAS conference that the SEC would drop its appeal and case against Ripple. The SEC also closed cases against Coinbase, Robinhood, Gemini, and Uniswap. This week, the SEC will kick off a series of roundtables to determine the securities status of tokens.

🧠 XRP is designed to have some utility. XRP is a token that facilitates cross-border settlement without the dollar (a bridging currency).XRP runs on the Ripple ledger maintained by Ripple Labs.

🧠 Ripple Labs uniquely benefits from XRP. The total supply is worth $144bn, and Ripple controls an estimated 50%. With prices near all-time highs, Ripple Labs Inc. and its management benefit from selling their supply.

🧠 At first glance, securities lawyers saw a securities offering (go figure!). What's happened since is more complex. XRP and Ripple have become meaningful players in the APAC cross-border trade corridors. They've also maintained an arms-length separation.

🧠 Lawyers can always argue a case; arguing against staying power is harder. Ripple had the financial power to stay in court as long as it took and to build products with genuine utility.

🧠 Regulation by enforcement failed spectacularly. There has to be a lesson here for progressives. Consumer interests are not protected through enforcement actions alone. There needs to be a carrot for the good faith actors and for others to walk towards the light.

🧠 Consumer interests are best protected through the birth of onchain finance. As I wrote a couple of weeks ago.

Good Reads 📚

1. Is the DoJ shaking down Capital One over Discover?

The FT argues that Trump's lawsuit against Capital One for "debanking" is a pressure tactic to influence the bank's pending acquisition of Discover. The Trump Organization sued Capital One, claiming political discrimination when accounts were closed in 2021. Legal experts consider the lawsuit meritless, but Capital One needs federal approval for its Discover acquisition.

🧠 It is 2025, and there was a project with that name on it 👀

Tweets of the week 🕊

That's all, folks. 👋

Remember, if you're enjoying this content, please do tell all your fintech friends to check it out and hit the subscribe button :)

(1) All content and views expressed here are the authors' personal opinions and do not reflect the views of any of their employers or employees.

(2) All companies or assets mentioned by the author in which the author has a personal and/or financial interest are denoted with a *. None of the above constitutes investment advice, and you should seek independent advice before making any investment decisions.

(3) Any companies mentioned are top of mind and used for illustrative purposes only.

(4) A team of researchers has not rigorously fact-checked this. Please don't take it as gospel—strong opinions weakly held.

(5) Citations may be missing, and I've done my best to cite, but I will always aim to update and correct the live version where possible. If I cited you and got the referencing wrong, please reach out