Investors bullish on buy now, pay later plays such as Affirm Holdings could soon have another option — Sweden-based Klarna is expected launch an initial public offering in 2025. Affirm stock has climbed 32% in 2024.
Consumer lending firms like Affirm and Klarna compete with credit card issuers by offering installment payment plans.
Klarna's last funding round in 2022 valued the financial technology company at $6.7 billion. The Klarna IPO could value the fintech company at around $15 billion to $20 billion.
The company has hired Goldman Sachs, JPMorgan and Morgan Stanley to lead the listing.
Affirm operates mainly in the U.S. while Klarna's biggest market is Europe. In a recent report, Mizuho Securities analyst Dan Dolev compared the financials of Affirm stock and Klarna.
Klarna Vs. Affirm Financials
"Klarna is three to four times bigger in terms of gross merchandise volume but revenue is more or less equal, with Affirm closing the gap," Dolev said. He added: "Affirm is over two times more profitable."
However, Klarna has been investing in artificial intelligence tools for customer support, TD Cowen analyst Derrick Wood said in a report.
The AI chatbots have enabled Klarna to reduce its workforce. Klarna's workforce has been lowered by over 20% to around 3,500 because of AI-related productivity, the company recently said.
Klarna "is planning to cut roughly 50% of its workforce over time and is ending its Salesforce and Workday partnerships amid its plans to leverage AI for various business application software needs," Wood said.
In October, Klarna signed a nonexclusive deal with Apple. Klarna BNPL will be integrated into Apple Pay as a payment option. Affirm also has a deal with Apple.
Started in 2005, Klarna says it has over 150 million global active users and handles 2 million transactions per day.
Klarna's other retail partners include H&M, Saks, Sephora, Macy's, Ikea, Expedia Group, Nike and Airbnb.
Affirm Stock: IPO Launched In 2021
Mizuho's Dolev said: "In 2023 Klarna's U.S. gross profit was about $130 million or 10% to 15% of total gross profit."
Meanwhile, Affirm launched its IPO in January 2021 during the Covid emergency. Shares hit an all-time high of 176.65 in November 2021. Affirm is expanding into new areas, such as a consumer debit card. And, Affirm is taking on Klarna in the United Kingdom.
Aside from San Francisco-based Affirm, Klarna also competes versus Block's Afterpay, PayPal Holdings, Sezzle and many other BNPL providers. Many top credit card issuers, such as Chase, now offer their own version of BNPL, creating more competition.
While buy now, pay later remains its core business, Klarna also offers an instant payment method and has held its banking license since 2017. It offers various fintech services through its mobile app.
Follow Reinhardt Krause on Twitter @reinhardtk_tech for updates on artificial intelligence, cybersecurity and cloud computing.
