Conference Transcript - KLAR 2026-05-28

Harshita Rawat, Analyst — Bernstein

Good morning, everyone. Welcome to the second session of our second day at Bernstein's 42nd Annual Strategic Decisions Conference. I'm Harshita Rawat, U.S. Payments Analyst at Bernstein, and I'm delighted to be with me here today, Sebastian Seat. I think I'll just call you Sebastian.

Sebastian Siemiatkowski, CEO

Don't worry about that.

Harshita Rawat, Analyst — Bernstein

Sebastian, thanks so much for joining us today.

Sebastian Siemiatkowski, CEO

Thank you for having me.

Harshita Rawat, Analyst — Bernstein

You've had a busy last 12 months with the IPO, PSP partnerships, the launch of the Klarna card and Argentic shopping experiences. Let's take a step back. How has the company evolved in the past few years, in your view?

Sebastian Siemiatkowski, CEO

Fantastically, in my view. I mean, I'm a pretty big shareholder myself and I'm very optimistic about what I'm seeing. I think that the core strategy I mean people may not be as familiar with the story in the US but you know I've been running the company for 20 years since we co-founded it back in 05 and I've seen what we do over multiple economical cycles I've seen it in multiple markets and maturing and out of that came all the learnings and the playbook that we're now we when we are expanding in the US market and for us the key thing has been to establish ourselves with what we would call lifestyle spend which is basically the kind of click classical buy now pay later or the charge card equivalent products so this is like Sephora Macy's where there is a fairly high frequency of spend but the tickets are around $100 $200 and the focus of establishing there is because based on our experience from other markets in Europe is once you've really nailed that you can then expand into the financing segment the big ticket spend and you can also move into the everyday spend groceries and the and so forth actually not that's different than Amex old strategy if you go back to kind of Amex trying to reach parity with Visa and Mastercard back in the 90s 2000s where they also started in lifestyle spend then for us it's more fashion for them it was more travel and tickets and you know restaurants and so forth but very similar in that and if I look at what we've done in the US that's exactly what we won we've clearly won market share and dominance in the in the buy now pay later kind of lifestyle spend category and more recently we've entered into what we call fair financing or big ticket spend which has almost like as we also share with the market almost like surprised us how well received our products and services and the demand of our services have been and how fast we've been growing market share in that segment so that has grown you know a lot But ironically, I'll just say this as a fun detail, you know, our growth in the everyday span, in the debit, for example, our PayNow product in the U.S., is growing in percentages almost faster than fair financing. But nobody talks about it because it doesn't have the same implications on the revenue. It's not as visible. But to us, it's a core part of our strategy as well. So we're very excited about seeing that. And the U.S. market in general growing at such a high rate.

Harshita Rawat, Analyst — Bernstein

And your business has changed quite a lot over the past couple of years. How do you define Klarna today, and what is your vision around what Klarna could be over the next several years?

Sebastian Siemiatkowski, CEO

Well, I think that the, I actually would argue that our vision and direction has been extremely consistent over my 20 years. Now, then, you know, sometimes media have reported or talked about, or we have talked about some things more or less, but, like, it's actually been very, very similar, and it is exactly what I said, which is that there are basically three segments of spend that consumers have there is their everyday spend on the groceries the metro tickets the uber rides the all that stuff there is the kind of lifestyle spend and then there is the occasional big ticket spend and if you want to maximize your total addressable market but also for profitability reasons which i can come back to but if you want to grow you know maximize your time you need to be relevant in all three of those categories it's very important that you have an offering from a payments perspective that consumers can use you for everything right which is exactly the same conclusion Amex had 20 years ago when they were like oh oh not being in groceries not being in gas stations is going to make our card less attractive than making sure that it's available everywhere so so that is the and has been a very consistent and core part of our strategy there's if you look at those three segments on in the big ticket spend the attractiveness is high revenue per transaction you make more money if you issue a big loan for a phone you're gonna make a lot of revenue and you can make a lot of profit in absolute terms that the size is just larger that's what's attractive about that in in everyday spend the interesting thing is you generate deposits and if you generate deposits and positive balances you drop your funding costs, and you become even more competitive versus the traditional banks and incumbents. So each one of those three segments have, and the lifestyle spent to us is the one where we think it drives the most frequency, the most preference among the consumers. So each one of the three segments have their strengths and their attractiveness. And to us, it's been very vital to operate in all three of them because it maximizes the TAM, and it has the biggest potential from a profitability perspective over the kind of full life cycle. So, yeah, so I think that that has been actually very consistent. And then people sometimes, you know, we talk about our banking products or more kind of everyday spend and save products, and then that has gotten more attention, and then sometimes, you know, there's more focus on our fair financing offer and what's going on there. And so people may sometimes misperceive that as like, oh, they're switching. But the truth is it's the exact same thing. We want to be relevant for our consumers for all of their spending. And we know there's advantages to each three of these segments. So I think it's more for us to consider from a communication perspective and kind of how we represent the company and so forth to show this and tell this story in a better and concise way.

Harshita Rawat, Analyst — Bernstein

And ubiquity is important to you, right? Which is what is driving a lot of the PSP partnerships, which is what is driving a lot of your consumer initiatives.

Sebastian Siemiatkowski, CEO

Sorry, you said what? Ubiquity, yes.

Harshita Rawat, Analyst — Bernstein

So before we talk more about the underlying business, any comments, Sebastian, on the current trends you're seeing across your businesses?

Sebastian Siemiatkowski, CEO

In general, I'm very optimistic when I see what's happening. And I already mentioned the strong growth in the US, the strong growth in both debit and in fair financing. So in these two newer segments of ours, I would argue, in the US. So I'm very excited about what I'm seeing.

Harshita Rawat, Analyst — Bernstein

So I'm going to sitge gears and talk about flexible payments as a whole. Klarna's mission has been to re-imagine how people spend. And flexible payments are a big part of that. There is a perception amongst investors that flexible payments or buy not pay later as some people may call it, are primarily used by consumers who don't have access to credit. Clearly that's not the case. consumers across a wide range of demographics use Klarna merchants are adding these payment options because they're seeing higher conversion so tell us about why you see that's not the case and then I have some follow-ups well I

Sebastian Siemiatkowski, CEO

think it's definitely first of almost we have introduced some it's not really a novel concept we have brought back concepts that some of us remember from when they were younger that banks abandoned. When I was working at Burger King as a 15-year-old and you would swipe your card, you would press 1 for debit and press 2 for credit. And the banks removed that particular feature because as a consequence of it, your bill at the end of the month was smaller because you had put in some of your transactions on debit. And if the bill is smaller, you're less likely to revolve. And if you don't revolve, you're less likely to make the bank money. But from a consumer protection perspective and consumer preference perspective, the concept of an active choice between debit and credit is very thoughtful and makes sense. There's a fantastic McKinsey study from 15 here in the U.S. that talks about a group of U.S. consumers called the self-aware avoiders. These are people that actually carry less debt, are more financially conscious than your typical group. Their income level is slightly higher than subprime. And they have tested credit cards, found it to be a bad product for them. They call it the product of the devil, to be honest. And they find themselves suddenly carrying much more debt than they were intending to. And then they pay it off. And they say, I'm not touching that product anymore. And they are looking for a 0% installment-based product so that they can occasionally use credit. that's our primary target group of users and it turns out that that group is also a better you know they pay better they are less likely to find themselves in financial difficulties because they're thoughtful about the decision-making so there's a perception and then there's the reality in regards to this and so the products that we've tried to introduce are coming back to like debit and then I think sometimes because the terminology is new people argue like you you know what, buy now, pay later has not seen an economical cycle. I mean, I've been doing this company now for 20 years, so I've seen a lot of economical cycles with the BNPL. And first and foremost, if you want to tie it to something, if you need to tie it to something that you're familiar with historically, call it a charge card equivalent, because that's what it is. It is a charge card equivalent product. It has short duration, you pay off very quickly, and you don't borrow a big amount. That's why Amex has been talking about being spend-centric versus lend centric and that's why Klaunai is talking about being spend centric versus lend centric because that is our primary product and it carries much lower risk than the credit card products carry. Then there's other aspects as well which is that because we're doing real-time underwriting it means that we can adjust our underwriting in real time across the board and because the durations on the buy now pay later product are so short it also means that if I change my underwriting within 60 days i refresh more than half of my balance sheet which is unheard of for a traditional incumbent bank running a large credit card portfolio with an average outstanding debt of four thousand dollars and an inability to adjust at that at that with that agility right so so now obviously we also have the fair financing their durations are slightly longer but that's also it's not a novel concept we call it fair financing because we try to price it more fairly we try to offer it in a in a nice you know with with more caution towards the consumer but it is point of sale installments that has been around since you know i think the first example was 1850s here in in new york when you were financing sewing machines right so point of sale installments has been around for a long period of time and that's what our fair financing product is these are so they are not necessarily new concepts in that sense um but then there are digitally native They're presented, you know, they're marketed in a new way and consumers really pick up on them and find them more attractive because there is a lot of bad practices that credit card companies and kind of pay private labor credit card practices have applied that consumers are rejecting. And so they see benefit to coming to these products that are more fair, more easy to use, more transparent, not that different than what you've seen in the carrier industry when people launched these new carrier phone companies that had simpler plans, simpler pricing, and we saw kind of a movement of the market in that direction in the younger generation. It's kind of the same thing, to be honest.

Harshita Rawat, Analyst — Bernstein

So let's talk a little bit about Klarna user base, the 119 million users growing 21% year over year. Is there some demographic differences between northern Western Europe and the U.S.?

Sebastian Siemiatkowski, CEO

Not really. What we see clearly is, compared to all the other fintechs that I have at least looked at closer, I would call the other fintechs as many times used by tech bros. You know, there are tech bros products. There are crypto trading, tech bro products for tech bros living in Silicon Valley. That's not Klana. Klauna is not a tech product Klauna is skews more female than male and skews more towards like I wouldn't even say 20 to 30s it's almost like 25 to 40s and I'm really happy because in our relationship with our merchants everyone knows who's taking the economical decisions nowadays and it's not the males anymore so I'm very happy that our target group is with that people actually taking those financial decisions. And so that's the clear thing. But obviously, that also comes from the fact that we are in lifestyle spend, right? So we are big in Macy's, Sephora, and so forth, where the target audience also skews more in that direction. But that's really the target audience. And they're financially conscious people.

Harshita Rawat, Analyst — Bernstein

So I want to ask about the other side of the network, the merchant. Your merchant count grew by 49% last year to $1 million. You have PSP partnerships with Stripe, and next year, I understand WorldPay and JP Morgan will go live this year, along with your recently signed partnership with WorldLine. Tell us about the importance of PSP partnerships for Klarna.

Sebastian Siemiatkowski, CEO

I mean, this comes back again to one of the key observations that we did is that if you want to be truly a global network of payments, you are going to have to be relevant for every category of spend so if you're only big ticket you're not going to be relevant if you're only lifestyle spend you're not going to be relevant if you only are debit you know you're also not going to be relevant so we needed to make sure that we have all of these three products we call them pay now paying for or buy now pay later and then the fair financing and then also that we have a significant geographical coverage if you're only in one market, it's harder. Obviously, the U.S. is large, but even then it's harder. So having enough global coverage is relevant. I remember fondly a conversation with IKEA back in the days where they told me that Klana had graduated from being a local payment provider to a regional one. And I was just laughing and saying, like, how do I get to the global spot? And I would say we're there now. And the benefit of that is then when we go to Stripe, Adyen, WorldPay, all these deals that we've signed, we, in order to reach parity with Visa and MasterCard as a network, just like Amex did back in the days, a decade ago or two, we needed all payment methods for all categories of spending, and we needed enough geographical coverage. But once we've now achieved that, the benefit is we can go and say, let's do a default deal. And a default deal means that not only are we available as alternative payment methods, There's a lot of alternative payment methods on Stripe, on JPMorgan Chase, on all these payments providers, but we want to be default. Default means a new merchant signs up. What do they get default? They get Visa, MasterCard, and now Klana as part of the default signup. That makes a huge difference because it means that we don't need to go and convince people to add us on, to put us on. Even if it's a click of a button, it still is an additional sales activity. It's still an additional effort. it. And what this now means, and that's why you're seeing as more and more of these PSPs are putting us default, that's what you're now seeing suddenly accelerating our acceptance points or our number of merchants, which is growing at almost 50%. And we are very happy that we've signed those deals with basically, I would say, the majority of the large global PSPs. And as they integrate this and start putting us default it sets really the foundation for a continuous long-term growth of uh of clana and availability across all these markets across each each of these segments but again i think it's important to stress that like you need to have a payment method that's also relevant for subscriptions and if you only have financing that's not relevant for subscriptions you're not going to put your netflix on a subscription on an installment it doesn't make sense but Klauna is actually very big in subscriptions we have Disney Plus we have tons of subscriptions and why is that important because if you want to have that kind of partnership with stripe a huge proportion of stripes volume is subscription merchants and so if you don't have a payment product that's relevant for all the categories stripe are gonna say well like it sounds lovely to put you default but we can't put you default because you're not relevant for all of our merchants so it still has to be on a merchant by merchant bases and that is the big big delta in execution and success in our opinion so so that's why that is a very very critical part of our strategy and

Harshita Rawat, Analyst — Bernstein

that clearly drives network effects yes can you talk more about stripe and the learnings from being live with them what percentage of stripes merchants are you now integrated with and what has been the merchant feedback like no so I can't

Sebastian Siemiatkowski, CEO

talk about those exact numbers because it's a single commercial relationship But we're very happy. They're happy. We're seeing that it has been well-received. I think for all of these PSPs, there are two things that they try to accomplish. One is that they want to see that the payments products that they introduce to their merchant base is driving conversion rate. If it's driving conversion rate, if it's adding additional sales, they know that by adding this, they're helping their merchant and they're growing their own volume at the same time so it becomes kind of a win-win right so you would not have these partners lean into doing this partnership with us if they don't didn't have the business results and then the other thing is that the merchants need to see you know and the merchants also see that then in their growth of volume and growth of sales and so kind of becomes a win-win I think what I've been trying to also highlight to the PSPs is that they don't necessarily treat feel that the networks have been what should I say to be nice competitive or there has been enough competition in that space so they feel a little bit that like they're looking for somebody to come in and create a little bit of competitive pressure on the kind of incumbent networks and when I've been highlighting this to our partners they have now tested that in conversation with large networks and they see that it's working that the fact that clon is grabbing market share and growing its its its presence is now creating a little bit a way for them to kind of push their partners a little bit it's actually interesting people don't know this back in the days now pretty long back time but still and for one or two years Sweden was the only market in the world where the large networks saw a decline in online market share of payments because of klanas dominance and rice and so that made the networks obviously wake up to the fact that there is competition here and um and it's just because we've been trying to offering a really great payment solution online but now also offline at the same point of time we cooperate with networks we have our own card and so forth so but i think that that's been that has been an important part for the big psps as well that they feel that's like oh finally somebody can come in and create a little bit pressure on the on the networks and you also work closely with them on

Harshita Rawat, Analyst — Bernstein

product. I think that's also something we hear very often from them. Tell us about how your merchant base has evolved from kind of this initial focus on clothing, accessories, to now you also have travel, leisure, food, and beverage. Yep, so that goes exactly back to the strategy.

Sebastian Siemiatkowski, CEO

In the U.S., we were very lifestyle-spend-centric, so we were very focused on that segment of where we took a very significant market share and we had another competitor of ours in that space that we were kind of heads on in that space really. And so I think now we have really won that market segment. And now we're kind of expanding to the other two, right, which is more the financing side and the everyday spend, even though the financing is the one that gets the most attention when we talk to investors and so forth. that to me the other one is as important so so that also then means that we sign up merchants of other kinds I would put travel into big ticket spend because it kind of is what it is even though there's variations if you look at low cost airlines the buy now pay later offering is actually more attractive but if you look at like more you know cruises charter you know they're kind of like longer vacation stays and so forth you have financing is a more attractive type payment method but yeah it's just again if you have a relevant product that is also really good for each of these three segments then suddenly you have a bigger TAM and you can go and sign more diverse type of merchants across the spectrum so Sebastian I want to go back to your earlier

Harshita Rawat, Analyst — Bernstein

comments and Klarna being spend centric not lens centric this is somewhat different from some of your peers how does how do we expect this focus to manifest in your product roadmap and your approach to growing your lending products no I think it is

Sebastian Siemiatkowski, CEO

very important I mean we turn around our books more than ten times a year we look at our peers and they turn around their book two three times a year I think if I remember correctly sorry if I'm giving you the wrong number I suspect Amex is at nine or it's slightly below us in how much they turn around their books and to us it's very important most like I really think Amex is an interesting company because people don't necessarily think about it as a bank they're the 10th largest bank in the US but they don't think about it the bank they think about it there's like a lifestyle brand customer service company with like a card you know it's like and I think it gives people a little bit of a challenge to like put them in a box and I think Lana to some degree has that similar aspect to it that we think about ourselves like that we think about us as a customer service company we're driving additional volume we have a marketing revenue business that is significant where you know our user base of 120 million is very relevant to our merchants so they want to market into our user base just like people would pay Amex to market to their user base but the spend centric what's important about it is that a big part of our volume and and and portfolio if is so quick duration it's really a charge card equivalent I would call it and that has implications for your underwriting that has implications for your risk that has implications for how you fund it it has tons of implications I think it is a very attractive and interesting business And I think that the balance between that one and the fair financing or point of sale installments is that when I look back over 20 years, the share between the debit business, the buy and out pay later business and the financing business has always varied slightly. And that just has to do with like, you know, over different phases of the company, we focus more on this industry or we focus more on these products or we announce big partnerships and they affect our, the kind of share between the three. And now for the first time we published here in the U.S. in our latest numbers, you can actually look at how much payments volume there is per the three categories, both in the U.S. and in Europe. so you can see that kind of happening but if I look over my 20 years I see that that's natural variations over the time you kind of you tend to move towards the consumer wallet that's where you end up which is like okay how much does the consumer spend on big ticket items how much do they spend on lifestyle and how much transactions do they have in everyday spend and that's where Klan over time trends towards the same division between the three because our target is to be the not the one payment solution for our customers both online and offline entering into the card business had the same was the same purpose was to grow our TAM because we think that the card is the most efficient way to let our consumers spend with Klana offline as well not only online right so it's all about TAM and then the proportion between the two those are variations over the quarters or even sometimes years but generally long-term speaking you're going to trend towards what are consumer spending so to speak where are

Harshita Rawat, Analyst — Bernstein

consumer based spending so i want to turn to the us where you are finding some of that equilibrium between um kind of the fair financing product and the pay later products your us expansion has driven significant growth for you but has also introduced some volatility in your numbers because of how the accounting etc works what have been the key learnings from scaling the U.S. business over the past few years what aspects of the U.S. expansion have

Sebastian Siemiatkowski, CEO

been surprising to you? Well I think that the key learning you have well if I look at the the swings that you're referring to in the U.S. and I look at my historical experience in Europe it's exactly the same playbook as always you you sign some new merchants you get some swings back and forth and long term that turned out to be a very good decision now the difference this time around we're a public company back then it was private so you would go to the board and you would say hey we had a little bit of a swing here we had some more fair financing business it has some short-term quarterly implications on our numbers but we all know what the long-term strategy is right and that was the end of the conversation now obviously we see that we are gonna have to be more thoughtful in both planning and we already are in like both communication around this you know sharing uh the split between these businesses we've also increased transparency around the splits and also kind of help you know uh share with the market what's going on in that in that regards uh longer term however it's the exact i mean if anything i would say we were a very successful buy now pay later lifestyle spend charge card equivalent business in the u.s we then decided to move into the territory of big ticket spend for real seriously we had a little bit of business there already earlier but like really go all in on that one and yes we were a little bit surprised how fast we got market share that there was so much demand for the product that we actually could be so competitive and we could you know take market share we were a little bit surprised of that and then that also had implications on how when we reported that so but we're very excited about it I mean to us to say it's a huge you know it's a confirmation of our product of our services of our underwriting technologies of how you know how good we are in underwriting and I would also add to that something that's underreported is the tremendous structural advantage that we have from a funding cost perspective because we raise deposits in Europe which are fixed term deposits so they're also like 12 months deposits they're very stable and they're very cheap so from a funding cost perspective when we compared to some of our US competitors we have a quite large delta in funding cost similar to what traditionally people would say incumbent banks have over over fintechs and this means that we can actually also even even on a on a deal we can be more competitively priced both for the merchant pricing and the consumer pricing or the interest rates and earn the same returns or better that some of our competitors can because of that funding cost advantage and because of our ability to use a European based raised deposits for funding our US business so all of these things obviously have played into this into what you've seen and still as I look at these quarters I'm quite excited as an investor shareholder when I see the performance and the success of our

Harshita Rawat, Analyst — Bernstein

business in the US and I want to follow up on the US fair financing business can you remind us how credit metrics delinquencies are trending as go as these cohorts mature your recent disclosure suggested slightly higher delinquencies in the 2025 fair financing cohorts anything to call out there no I mean it's

Sebastian Siemiatkowski, CEO

very stable it's according to plan you're always going to have some small minor deviations i think the important thing that hasn't been understood well enough that we should have emphasized more is one of the benefit of starting with the buy now pay later lifestyle spend is you get to know the customers you know them and you have seen them pay back and their payments their payback ratios on hundred dollar loans you've issued a hundred dollars to them multiple times and you've seen their payback rates then you go and start issuing a thousand dollar financing loan and the vast vast majority of the consumers that we have now issued fair financing to are people that we've seen on buy now pay later there's a very very small fraction of that that is new customers so this means that you have an existing cohort of people that we know that we've tracked and seen for a longer period of time that we're then issuing bigger a bigger financing thing but I would also argue that like even then people sometimes forget that like yes our fair financing business in the us is growing etc but like we are still far off from the 4 000 average outstanding dollar value of a credit card right so even if you're kind of looking at that you're saying okay they used to do 100 on average outstanding they're maybe going to four five hundred dollars it's still like far off from the 4 000 so it's still very cautious lending in my opinion compared to you know the traditional incumbent banks and so

Harshita Rawat, Analyst — Bernstein

forth in that regards. And your US transaction margins at 27% is quite a bit lower than your international margins, as you showed in your recent disclosures, which is at 46%. I know some of that is just simply maturity of the market. And then there is some accounting related to kind of fair financing. Maybe talk about the path to bringing US transaction margins higher, and which because it has such a high flow through to your bottom line so I

Sebastian Siemiatkowski, CEO

think one of the maybe most or biggest unknowns or biggest misunderstandings of Clona is if you ask what is the biggest cost that we have above transaction margin dollars it is now almost every quarter payments fees not credit losses and like I think everyone thinks that it's credit losses when in fact it's payments fees and I think that's a huge difference and it surprises me that this is not more well talked about and I think we need to do a better work to talk about this if I look at my buy now pay later product and I compare it between the US and my mature markets like to your point again it depends if you look at fair financing the debit the pay now product but if you look at buy now pay later as an example to your point the gross margin as we would call the transaction margin of it would be in the 2030s in the US it would be in the 50s 60s in this in in countries like Sweden and our more mature European markets what's the Delta well the Delta as share of revenue is almost entirely payments this like basically losses per revenue of that product in our mature European markets and the US are almost identical so the whole Delta is just payments fees and in order to fix payments fees what do you do how do you get it to the same level as in Europe well there are precedents of that PayPal back everyone will remember if you're in the fintechs you remember how PayPal was kind of balancing between ACH and partnerships with Visa and MasterCard to drive that cost down so you have there's a very well known playbook in the US to drive down your payments fees it's called ACH we now have the initiative of the Fed now, we have different, you know, there's tons of ways. But again, this is why being present in the everyday spend category and everyday save category is so important, because what we've seen in Europe is if we have a debit base, if people store money with Klana, then they use that money for their next purchase, which means that we never go externally and have to hit the payment rails for those transactions. So to us, getting more money to stay within the system, having relevant products in the everyday spend and saving products is actually very very critical because that is what then allows you to drive down the payments fees in combination with ACH practices and so forth so I think that like I understand that like generally speaking there's a sentiment like oh we obviously we focus a lot and we continuously develop and AI is accelerating our abilities from a underwriting perspective and the underwriting technology and the loss management but there's very stable performance the way we see it it's all according to plan the big objective for me right now is to close that gap on payments fees because that is going to really has the potential of releasing a significant amount of profit and transaction

Harshita Rawat, Analyst — Bernstein

margin dollars for us let's talk more about the everyday spend yeah and talk about the Klarna card in that context it has reached 5 million users tell us about what happens when a user enrolls for the Klarna card how does it change their purchase frequency in Klarna and how does Klarna differentiate itself versus

Sebastian Siemiatkowski, CEO

the other card offerings yeah so I think that the I'm very happy to see what I've seen with it so it has a number of features it kind of brings back that press one for debit and two for credit experience so it allows consumers to actively choose on a per transaction basis whether they're going to use it on debit and credit which is a which something is that is in big advance in big demand from the consumer base in addition to that what I'm happy to see is that I wanted to avoid to make sure that it isn't purely like a fair financing card but it's not just used by the consumer to fund the particular purchase and that's it i wanted to make sure it actually becomes part of their everyday spend and so the debit proportion of on the card is i'm very happy by what we're seeing already that there is a meaningful debit demand there and that we're getting a meaningful spend on the debit side but i mean generally speaking if you look at our revenue per user which personally i actually think sometimes is a better metric than transaction margin dollars. I think risk adjusted revenue per user is probably the optimal metric for Klarana. And if you look at it, it has been around $30 for quite some period of time. But why is it then not improving? Well it is actually improving a lot. What's happened is on the 2022 cohort it's gone up it's almost in the 50s now but the new cohorts they start at like 18 20 and so what's happened is because our user base has been growing at such a high pace the new cohorts kind of you know push down the average number for the total and so that's why it stayed stable at 30 in addition to that we acquired a business called stoke hard which had extremely low revenue per user but brought in 40 million active users on the app on their app and then we've transformed them now into the Klona user so so this these two things have kind of kept that 30 but now I'm starting to see that 30 come up when you get somebody on the card you can get the revenue per user in the 100 hundred fifty dollars so it increases transaction frequency it drives up revenue per user and I think it is so it has all the benefits of that and I think it's why it's so important to me as well is because sometimes I feel people get misled to look too much at take rates when they look at a company like us and that's a mistake because if you were Amex you know in the late 90s your take rates were higher but in order to get into groceries and gas and gas stations and all that stuff you had to accept that you were not going to be able to charge the same take rates but what you did at the same point of time is you massively increased revenue per user because you became relevant for all of the spending of your user base and so what clana is doing right now is focusing on that revenue per user and it's the right long-term strategy but as a as an as a consequence of that you can see a little bit of swings on the take rate because sometimes we tap into for example debit transactions which may have a different take rate they may be much lower uh you know in in us the take rate is not regulated because the interchange is not regulated. In Europe, it's much lower. So you will see these mix effects going on between the countries, between the different payments mix. And then if you focus too much on that tick rate, you might be misled into what's going on in the underlying company. So to me, what's much more important is to look at the revenue per user or the risk-adjusted revenue per user if you want that because that allows you to really see that if that's growing and it's improving, which it is, then you're doing the right long-term thing for the company and it's going to have a very good effect on transaction margin dollars and so forth.

Harshita Rawat, Analyst — Bernstein

And also creates habituation and stickiness.

Sebastian Siemiatkowski, CEO

Exactly. Close relationship, yeah.

Harshita Rawat, Analyst — Bernstein

I want to switch gears and talk about agentic commerce. It's still early, but it's an important trend to watch. You recently launched the Klarna shopping app on ChatGPT, and you're integrated, I believe, with Google Search and Gemini. How do you see agentic commerce evolving, and how could it change Klarna's value proposition for its customers?

Sebastian Siemiatkowski, CEO

Well, first I would say that the most important thing to me was already many, many, many, many years ago when Apple Pay launched, I looked at a big competitor for us, a big wallet, and I said this is a risk because partially that wallet is used, our competitor is being used because of the one-click experience that they provide, and if Apple Pay comes along, it will make them less competitive or less attractive for the consumer so that and then obviously I thought that was gonna happen in two years and I think I read in the news yesterday that Apple pay is larger than that competitor in share of checkout now so it takes a little bit longer than you might sometimes expect it to do but what that taught me is I said to myself okay what this means is the single most important thing is that you have consumer preference. And that you have availability, right? So we concluded that the right strategy was to create maximum distribution. That is through the PSPs, as we already talked about, which is the global distribution. But it's also being integrated into Apple Pay, being integrated into Chrome Pay and Google Pay, making sure that we have a partnership with everyone that provides some kind of checkout capability and so forth because that is the best strategy it will make sure that like if agentic happens through apple or if it happens to google or if it happens through chat gbd or through stripe whatever it's kind of irrelevant in a way because clona is there see so that is like the foundation that you build on uh to me and that was like a very important strategic objective ours to make sure that we would strike those partnership this is also why we did decide to not offer our own PSP like some of our competitors are kind of offering both on the issuing side and being present there but they're also doing merchant acquisition offering and they're competing with Stripe and adding and the others we decided not to do that very very you know for that distinct reason because our distributors don't want us to compete with them right they're not going to distribute us if we compete with them at the same time so if we want to be globally present everywhere we can't compete in that space which is why we sold off that business and left that business and now we're a hundred percent focused on our distributors so that's the foundation on top of that at the same time you obviously want to experiment with can we find can we contribute to agentic commerce can we offer you know additional agentic commerce experiences to our consumer base is that interesting can you do shopping in the app could that be relevant so in addition to what we're doing we're also signing these partnerships deal like with Gemini and so forth to find new venues and new abilities what what people for example are less aware about is that in Europe we acquired the largest comparison shopping network one of the largest in Europe that existed which means that we different than other companies have inventory we know what product is available in what store at what point of time on that's an asset that is actually you all of you have tried already to go to ChatGPT or Antropic to investigate a product you will get good product advice but then you have no clue where it is and you know then you have to go still and search the old way to find that and the data that we have there is extremely valuable to be able to provide that next one-click experience post that to go and understand where the inventory is and so forth so there's tremendous other interesting opportunities but we don't talk about them as much anymore because I mean in this big business that Klana is this is like a smaller business but it's an exciting business that's growing but it's obviously more on the on the margin than that you know the core business of payments and that we offer our consumers

Harshita Rawat, Analyst — Bernstein

and there is some debate with respect to agents around on one hand they can abstract away a brand financial services brand but on the other hand they can also do a better job in transparency for the consumers how do you think about that debate and where does Klana sit within that? I think again my after doing this business for 20

Sebastian Siemiatkowski, CEO

years I said you know is anyone worried about Amex and the implications on agentic commerce on them no why because there's preference there is an audience that likes the product and uses it and so our ambition for the last 20 years is to build that preference with our user if you have that preference I see it especially sometimes sometimes we have exclusive deals with merchants sometimes we're not exclusive and you will see clone annex to other by now palliator providers and so forth and I actually like being side by side because it forces us to truly ask ourselves is there preference for us over the other brands that exist right if you rely on exclusivity you don't really know as much if it's just because you're there or because you're really preferred and what we've seen is on the merchants that offer us side by side by a lot of other options we get the highest market share the highest share of checkout now in the US we have the highest preference so that to me is a sentiment that like you build that right and that's I think is the core you know AI can help you increase quality efficient efficiency become more profitable but the core focus always has to be that like am i growing preference and I think the other thing that you know is critical is you have a brand I think that also we have invested so much in being a differentiated brand in a very boring industry color pink is one versus everyone else's blue but also just like how we speak our campaigns with Lady Gaga with Snoop Dogg how we rate with consumers like it's such an important distinction that doesn't get spoken about a lot but when I talk to the big merchants when I talk to the Nike so the Sephora's of the world why do they want to work with Klarna brand like it's it's the it's like yeah all the other features and everything is great but like brand is the number one thing we have a distinct brand and if you talk to our consumers they love the brand brand is such an important thing and even in an you know in an ai world where agentic whatever brand becomes an extremely big moat and an asset to have because it grows that consumer preference and relationship with the consumer sebastian i want to

Harshita Rawat, Analyst — Bernstein

switch gears and talk about another topic which is always top of mind for investors which is the sensitivity of your business to adverse macroeconomic conditions both in terms of user spending and credit performance how do you think about this I understand your loan book turns over very quickly you talked about and you use transactional level underwriting which is also very unique compared to the traditional players which are both positives but at the same time your fair financing business is also growing quickly yeah as I said I think key to me is that

Sebastian Siemiatkowski, CEO

when you grow your fair financing business quickly which I've done before in other markets make sure you do it to a base that you know one that you have a relationship with and you've seen the payments history with very key that we're doing we have over the 20 years invested so much in our underwriting I sometimes feel like we don't talk enough about the sophistication of our underwriting and and the reason for that is just like it's definitely something we have to do more but it's just that like we've been building this company for 20 years it's like that was so much the foundation and it is the foundation of we do so then you end up talking about the new stuff and the other stuff that you're doing and you forget to emphasize and focus on it i mean this is like my master thesis in university was predictive analytics in using behavioral data to predict credit and fraud losses right so using it well yeah exactly so that's like that's where the whole company is coming from and that's obviously been a very core asset of ours for a long period of time um but in addition to that i think the other things that are important uh when it comes to macroeconomical swings and so forth is also i find it extremely valuable and important which i'm happy about is to be deposit funded the fact that we are doing offloading our balance sheet and so forth and especially since private credit markets have matured in the last 10 20 years so they are more stable more available and probably are going to be more resistant towards economical cycles but I really like the fact that the bank is predominantly you know deposit funded because that is a secure safe way of funding that is less pruned to sentiment shifts in the investor community over different macroeconomical cycles so that it makes me very very very strong and then also even more importantly these are not over day withdrawal deposits these are fixed term 12 months the durations of our deposit base is longer than the durations of our balance sheet and the other side a little bit of it so so I think that like that is a key key asset to have so again because I've run the company for 20 years I've seen it over the economical cycles and we built a foundation that is extremely well you know resistant and and extremely well position for any economical cycle, but currently it looks very well. Our Clona US consumer is in a very good place, the spending patterns look very good, the repaying patterns look very good, so we're very happy with what we're seeing

Harshita Rawat, Analyst — Bernstein

in the numbers as well. And it's fascinating, right, like unlike credit cards, you don't spend so much in customer acquisition, your customer acquisition comes from the merchants, so you don't have to do this big open line of credit for your customers, you do transaction level underwriting, and that

Sebastian Siemiatkowski, CEO

you can obviously switch you're so spot on it's funny you say that because I you know again so I feel like sometimes I'm becoming the old old grandpa here but like I remember when the hottest thing in fintech was the idea that somebody was going to use Facebook data to underwrite consumers and I remember talking to Nigel Morris the founder of Capital One who was on my board back then and he said well look if you bring a new underwriting model to somebody like CapOne it's like nice thank you for improving my margin by five bips it doesn't change the market it's not going to be a disruptive force like it is obviously helpful and can be thoughtful whatever but the key thing if you wanna if you want to challenge the incumbent banks and incumbent car products is customer acquisition cost you know a big bank in the US may pay a hundred two hundred dollars to acquire a new customer if it's a prime customer may cost four hundred dollars the key innovation in my opinion of Klarna is the fact that we have this massive network of merchants who are every day when consumers are coming to their checkout saying hey instead of using your card or whatever used before have you tried con that's really nice 0% interest for installments etc and it's driving in 120 million consumers to the brand with you know basically zero customer acquisition cost that to me was the insight that like okay if we want to disrupt the traditional incumbents in the credit card industry in the banks we have to find a model that allows us to you know basically have zero cac that's pretty much it I even use this sometimes the the equivalent of like imagine you would go down to Macy's in the physical store and you say hey I want to pay for this and they say like do you want to use Klan and you say well I don't have it and the Kirk would say now you do that's how easy it should be right because in that way you're not gonna stand in the airports and bug people when they're running to the flights to sign up for a credit card you're not going to mail them you're going to call them it's at the point of purchase that the idea of trying a new form of payment if it is as simple as clicking a button to start using it and you can get the same underwriting data and so forth which you have online because you have name and address and everything you need then that is a tremendous advantage and opportunity from a customer

Harshita Rawat, Analyst — Bernstein

acquisition perspective sebastian we're almost out of time so my last question for you you've been public for almost nine months and fintech as a sector has been quite volatile during that time what do you think public market investors often underappreciate about cloud i think we covered

Sebastian Siemiatkowski, CEO

most of these things i think that the again i'm a big shareholder i'm a long-term shareholder i i bought a lot of stock myself at uh at uh 37 dollars um you know we bought over 100 million dollars back then so so i'm a big believer in klana's long-term objectives and opportunities and but we obviously um also you know have seen um how the markets have developed and for us it's important to improve our communications uh improve how we present and communicate the company and tell the story so that more people uh get the opportunity to see it through my to our eyes and and why I'm such a big believer in our long term opportunities.

Harshita Rawat, Analyst — Bernstein

That's wonderful. Thanks, Sebastian. I learned a lot. Thank you.