Buy now, pay later behemoth Klarna has revealed soaring losses for the second quarter as provisions for potential bad debts escalated.
The Swedish fintech unicorn recorded a 64% leap in provisions to $174m (£128m), rising from $106m for the equivalent period in 2024, as reported by .
This helped counterbalance revenue expansion of 20% to $824m, pushing losses for the three months ending June to $53m. This represented an increase from an $18m post-tax deficit for the second quarter of 2024 and follows net losses reaching $99m in the opening quarter of the year.
However, Klarna stated that credit losses for the period declined to 0.56% of gross merchandise volume (GMV) – which represents the total sales value of everything sold on a platform before any fees or costs are deducted. GMV surged 19% to $31.2bn.
"It's important to clarify that a rise in provision for credit losses in absolute terms does not mean more people are unable to pay us back."
"In fact, the opposite is true – Klarna's delinquency rates continue to fall," co-founder and chief executive Sebastian Siemiatkowski said.
The fintech boss attributed the spike in provisions to loans within the 'Fair Financing' division – which allows customers extended periods to settle higher-priced purchases.
Siemiatkowski explained that Klarna "immediately" allocates a "small amount of money (so called provision for credit losses" upon loan issuance "for the unlikely event that the consumer does not pay us back."
Volumes within the division surged 108 per cent whilst overdue payments declined to 2.23 per cent, down from 2.34 per cent in the previous year.
Klarna expands banking operations
The company is poised to restart its IPO bid in the latter half of this year after President Donald Trump's tariff offensive scuppered earlier plans.
The fintech is targeting a New York listing as soon as September, according to Sky News.
Klarna's GMV in the US grew 37 per cent during the quarter, driven by significant partnerships with Apple Pay, Google Pay and DoorDash.
This development comes as the business makes substantial moves to expand beyond its buy now, pay later roots towards becoming a comprehensive digital bank.
The fintech secured approval from the º£½ÇÊÓƵ's financial regulator to operate as an Electronic Money Institution (EMI) last month.
The new licence enables the company to provide savings accounts to its 11m º£½ÇÊÓƵ customers and sets the stage for a debit card rollout.
Klarna launched trials of "Klarna Card" earlier this year, utilising Visa technology to enable users to make instant purchases or spread payments through interest-free instalments.
During the second quarter, the company reached 111m active consumers worldwide and onboarded more than 200,000 retail partners.
Siemiatkowski stated: "The Klarna Card is becoming a preferred payment method across our most mature European markets, and we're now rolling out an enhanced version in the U.S."
"Strategic integrations with leading PSPs and our partnerships with some of the world's largest merchants are expanding Klarna's reach and accelerating our growth."
"At the same time, our growing consumer base remains healthy, with more customers paying on time than ever before."
