One (small) upside of the recent market volatility: Klarna’s delayed IPO gave me more time to write. The listing may now be six months out—but the show must go on.

This is the third post in a three-part series on Klarna’s IPO and its evolving business model. If you want us to know what we are working on, when we are not writing this newsletter, register here.

In Part 1, we explored Klarna’s rapid ascent—from dorm-room idea to fintech juggernaut—and the pressures that forced a pivot from hyper-growth to profitability.

In Part 2, we poured over Klarna’s revenue model, its underlying unit economics, and its bold ambition to become a financial super app.

In this third instalment, we examine Klarna’s competitive position and explore its medium- and long-term strategic priorities. With the IPO now delayed, the bigger question is whether Klarna can transcend its BNPL roots, compete with the platforms it once aimed to disrupt—and do so successfully in the world’s largest payments market.

The Shifting Competitive Landscape

Klarna operates in one of the most fragmented—and fiercely contested—corners of fintech: Payments. Its rivals span the full spectrum of payments:

• Traditional cards: Visa, Mastercard, and domestic debit networks

• Digital incumbents: PayPal and Block (Square)

• BNPL specialists: Affirm, Afterpay, and Zip

• Embedded commerce players: Amazon, Walmart, Shopify

• Mobile wallets: Apple Pay, Google Pay, Alipay, WeChat Pay

• Account-to-account rails: Pix (Brazil), iDEAL (Netherlands)

To stand out, Klarna must offer more than credit. In Part 2, we argued that Klarna’s pivot from pure BNPL provider to a full-spectrum super app is an effort to own the consumer’s digital wallet. The Klarna Card, Klarna App, and Klarna Balance aren’t just new products—they’re strategic tools to deepen engagement, increase frequency, and capture more of the commerce stack.

The standalone BNPL model is under pressure. Over the last five years, at least a dozen BNPL firms have shut down—including Openpay and Latitude Pay in Australia, Laterpay in Germany, Zest in India, and Pace in Singapore. The survivors increasingly look like incumbents:

• Tech giants (Apple Pay Later)

• Banks (My Chase Plan, NAB Now Pay Later)

• Card networks (Visa Installments, Mastercard Installments)

• Hybrid fintechs (PayPal’s Pay in 4)

In short: BNPL is becoming a feature, not a business. Klarna’s success now hinges on becoming more than BNPL—and doing so at scale, across geographies. And its largest opportunity lies in the US.

The Land of Milk and Honey?

Klarna’s competition isn’t just broad—it’s local. Payment preferences are shaped by history, regulation, and infrastructure. In Sweden and Germany, BNPL accounts for 21% of e-commerce volume; in the UK, just 7%; in the US, only 5%. That low penetration makes the US Klarna’s biggest opportunity—and its biggest risk.

Since launching five years ago, Klarna’s US business has become its largest revenue contributor. The progress is striking:

• US GMV: $25 billion in 2023

• Affirm (global GMV): $31 billion

• PayPal Pay Later: $33 billion

• Block/Afterpay: $32 billion

Margins have improved dramatically: Klarna’s US transaction margin rose from -84% in 2019 to +23% in 2024. Processing and servicing costs fell with scale, and credit losses dropped from 10% to just 1%—evidence of improved underwriting and customer selection.

With a large addressable market, room for share gains, and clear margin tailwinds, Klarna’s US operation is the key swing factor - for both medium-term earnings and ultimate market valuation.

How Klarna Stacks Up

When Klarna finally IPOes, it will be benchmarked against other payment providers, and specifically Affirm (Symbol: AFRM), its closest pure play peer. Shares in Affirm got heavily hit in the sell-off, being down 13% in a month, which surely impacted Klarna’s management decision to delay the IPO.

Below is a snapshot comparing Klarna to Affirm and other payment providers, on volume and economics.

Key Takeaways:

1. Klarna generates roughly one-third of Affirm’s gross profit per dollar of GMV 

2. Klarna appears more efficient on operating expenses

3. Operating leverage is limited: costs don’t scale linearly with GMV

While Affirm is growing faster, it’s still only about one-third the size of Klarna. The margin gap reflects two factors:

• Geographic focus – Affirm operates almost exclusively in the US, where margins are higher. Klarna is still scaling there.

• Product mix – Affirm leans into higher-ticket, longer-term financing. Klarna is anchored in short-term, low-ticket BNPL with tighter economics.

Conclusion

Klarna’s IPO delay says more about market conditions than company-specific issues. Yet, when it finally lists, investor questions will likely focus on Klarna’s competitive edge, margin trajectory, and the durability of BNPL economics.

The fundamentals are shifting in Klarna’s favor. Its US business is scaling. Its product suite is broadening. And its transaction margins are rising.

If Klarna can prove its model in the world’s largest payments market, it may yet become the poster child of the post-BNPL era—and open the doors for others still waiting to go public.

IPO or not, Klarna’s next chapter is already being written -- in America.