- The Free Toaster
- Posts
- F1 Breakdown - With 93 million users and profitable, Klarna's IPO might redefine fintech valuations.
F1 Breakdown - With 93 million users and profitable, Klarna's IPO might redefine fintech valuations.
Klarna's hybrid payment model, powered by a proprietary payment network and AI-driven underwriting, targets a $450B market, driving $105B GMV, 93M active users, and profitability ahead of its IPO.
Nick Madrid
March 18, 2025
Introduction
Klarna filed its F-1 late last week for its upcoming IPO, offering insights into one of the world's most recognizable fintech companies. This breakdown examines Klarna's business (with particular emphasis on the Klarna Card), market strategy, customer economics, financial performance, and future vision.
The Core Business
Key Numbers
93 million active consumers
675,000+ merchants across 26 countries
$105 billion in gross merchandise volume (GMV) in 2024
99% of transactions were interest-free
76% of 2024 revenue came from Transaction and Service revenue
24% of 2024 revenue came from Interest Income
“Our over 675,000 merchants include some of the largest global brands—on average, 44% of the top 100 merchants in each of the major markets we serve, which include the United States, the U.K., the Nordics, Germany, Austria, Belgium, Spain, France, Italy, the Netherlands and Switzerland (based on data from eCommDB and Digital Commerce 360) used Klarna in December 2024 to facilitate payments, while an even greater percentage (66%) advertised on our network in 2024.”
Business Model
Klarna operates a hybrid network combining features of both open and closed payment systems. Like Visa and Mastercard, it connects a broad ecosystem of consumers and merchants. However, it also maintains a proprietary closed-loop network where it issues, funds, processes, and settles payments while maintaining direct relationships with consumers and merchants.
No single merchant represents more than 10% of Klarna's GMV in any major market, demonstrating their diversified revenue stream. In Sweden, their most mature market, approximately 82% of adults used Klarna in 2024.
Payment Options
Klarna offers three main payment options:
Pay in Full: Settles transactions instantly
Pay Later: Allows consumers to defer payment to a later date or pay in installments
Fair Financing: Enables consumers to settle payments over longer periods
Market Opportunity
Klarna estimates its serviceable addressable market (SAM) at $450 billion in payment revenue opportunities from $18 trillion in annual consumer retail and travel spending across its current markets. Global retail and travel spending, excluding China, was $30 trillion in 2023, offering significant expansion potential.
The company grew its advertising revenue from $13 million in 2020 to $180 million in 2024, tapping into the approximately $475 billion global digital advertising market (excluding China).
Klarna, a licensed bank in the EEA since 2017, held $9.5 billion in consumer deposits as of December 2024. This position positions it well with highly stable and lower-cost funds relative to other non-bank funding strategies, such as asset-backed financing.