Klarna has recently raised $650 million in an equity funding round at a post-money valuation of $10.65 billion, becoming the highest-valued private fintech company in Europe and the 4th highest worldwide. IT Arena 2020, which starts already next week, will host Klarna’s principal engineer Joel Arvidsson. The speaker cordially shared with us his thoughts on Klarna’s spectacular success and confided what implications the COVID-19 crisis had on the company’s operations and his work, in particular.
Klarna is a Swedish online financial services provider that, with its “buy now, pay later” model, allows customers to pay for online orders later or over three or four installments with 0% interest. Avoiding charging shoppers’ interest, the company earns fees from the retailers. Klarna has also acquired a banking license in Europe and now offers debit cards and savings accounts in Sweden and Germany.
From failed competition idea to Europe's biggest fintech unicorn
Little did the three founders Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson know their startup idea, which failed in the students’ competition back in 2005, would eventually transform into a lucrative unicorn. Launched in Sweden with the aim to make online shopping payments safer and more straightforward, the company gradually expanded across Scandinavia and later to the core Europe – Germany and Netherlands. In September 2015, Klarna launched in the United States, becoming one of Sweden’s five unicorns attracting international investments along with Spotify, Mojang, Skype, and King.
The unicorn was last valued at $5.5bn in August 2019 after raising $460 million. The new 2020 investment by the US private equity firm Silver Lake, Singapore’s sovereign wealth fund GIC, BlackRock and HMI Capital will be used to power the company’s expansion to global markets, particularly the US, where it has more than 9 million consumers.
According to numerous sources, the Klarna app currently has more than 12 million monthly active users worldwide and 55,000 daily downloads. Klarna has seen accelerated growth after heavy investment in US expansion, and the pandemic has driven a major shift in the retail landscape and accelerated online penetration. “We are at a true inflection point in both retail and finance. The shift to online retail is now truly supercharged and there is a very tangible change in the behavior of consumers,” said Sebastian Siemiatkowski, co-founder and chief executive of Klarna. “I’m deeply sympathetic to the brick and mortar stores having a rough time right now, but the COVID situation only accelerated the long term trend towards online shopping and that’s something we benefit from. Initially, we had fears that the downturn would hurt our customers’ ability to pay or willingness to spend, but it’s not what we’re seeing so far,” shared with us our guest speaker.
On pandemic-induced challenges and future plans
Joel Arvidsson believes work-wise tech companies have a big advantage that their toolset and ways of working usually already encompass the remote scenario. “Prior to COVID-19, my team was already distributed, most of my meetings were over video, communication was async, etc, so for me personally, the biggest impact short term is that I don’t have to commute or run around finding meeting rooms. Granted there are downsides, like onboarding new team members being pretty difficult and the risk of losing the sense of connection to the overall organization, so we’re trying to find a safe way to slowly get back to the office,” elaborates Arvidsson.
Although the company’s success might seem inconceivable to many, Joel Arvidsson says that for a Swede, Klarna has had a solid and natural presence for as long as online shopping was a thing. “What amazes me is how we can keep growing at these high rates for 15 years straight, even in mature markets where our penetration is already high. I think a part of the secret is that we’re just relentless in iterating on our offering. We take pride in not always get the formula right from the beginning, but instead, ship early, listen to the feedback, look at the data, and refine or rethink until we get it right. After that, it’s just about putting it in as many hands as possible, and I think we’re at that step now with the success in the US and continuous rollout to new markets and it’s natural that the valuation follows that,” shared the expert.
The recent investment enables the company to double down on making online shopping as frictionless and exciting as possible with the Klarna app. Be it automating tedious tasks like checkout, providing the best deals, or getting inspiration from friends and tastemakers for customers’ next purchase, explained Joel Arvidsson.
While Klarna continues conquering the fintech world, we have a chance to listen to the company’s representative at IT Arena’s tech track. Joel Arvidsson will dwell on how to ensure quality and prevent regressions when working with UI, focusing on visual testing. Joel will talk about his philosophy, give tips on good practices, pitfalls to avoid, and how you can start testing using an open-source tool that he’s written and that Klarna uses at scale.Find out more about the speaker and the speech overview here.