Bubble or New King? "European Huabei" Klarna is Set to List on the NYSE

1) Klarna's IPO is not only a major event in the fintech field but also marks that the "Buy Now, Pay Later" (BNPL) model has evolved from an emerging concept to a mainstream payment method. The company achieved profitability in 2024, proving that its business model can be healthy and sustainable after scaling up.

2) Klarna's core competitive advantage lies in its extensive global user and merchant network, as well as its powerful AI-driven risk control and data analysis capabilities. As of mid-2025, its user base has exceeded 111 million, and it has partnered with over 790,000 merchants, creating a network effect that is difficult to replicate.

3) The investment research team at RockFlow believes that despite the challenges faced by the BNPL industry, such as tightened regulations and fluctuating bad debt rates, Klarna's global layout, technological innovation, and gradually maturing profit model enable it to stand out in the BNPL market and become the "super gateway" in the new consumer finance era, bringing long-term returns to investors.

In the U.S. stock market, every IPO that creates a stir is not just about a company going public; it's a manifestation of a new era's wave. Just as Circle's listing revealed the huge potential of compliant crypto finance, Klarna's IPO signals an accelerating new consumer finance revolution centered around the "Buy Now, Pay Later" (BNPL) model.

Klarna is one of the largest players in the "Buy Now, Pay Later" space. The "Big Four" in this field include Klarna, Affirm, PayPal, and Afterpay, which is owned by Block.

If you're looking for a listed company to compare with Klarna, Affirm is the closest match. If you own shares in Block, you also own Square, Cash App, and now Proto Mining. Similarly, BNPL is just a part of PayPal's extensive business. Therefore, Affirm and Klarna are "pure-play" BNPL participants.

The core of the BNPL model is that it allows consumers to split their shopping payments into several interest-free installments, significantly lowering the psychological threshold of shopping and effectively increasing the conversion rate and average order value of e-commerce. Among Generation Z and Millennials, this model has become a more popular payment method than credit cards. And Klarna, as one of the global leaders in the BNPL field, is at the heart of this revolution.

Klarna's listing will provide investors with an unprecedented opportunity to bet on the wave that is reshaping the global e-commerce and consumer finance landscape. Whether it can demonstrate significant growth potential and market appeal after listing, like Circle did, will be one of the most anticipated stories in the U.S. stock market this year.

The Transformation from Scale to Profitability

Unlike many tech companies that rely on "burning money for growth," Klarna has successfully achieved profitability while experiencing explosive growth. This is not a coincidence but the result of both its innovative business model and rigorous financial management.

Klarna's business model mainly generates revenue by charging transaction commissions from merchants and late fees from overdue users. With the booming development of the global e-commerce market and the increasing penetration of the BNPL model, its transaction volume has continuously reached new highs. According to the latest financial report, the company's revenue in the first half of 2025 reached $1.524 billion, a year-on-year increase of over 15% compared to $1.325 billion in the previous year. This strong growth momentum is mainly due to its rapid expansion in the U.S. market and the continuous increase in transaction volume in its core European market.

What's even more exciting for the market is that Klarna turned a profit in 2024, achieving a net profit of $21 million. This marks the transformation of its business model from pursuing scale to pursuing sustainable profitability. This change sends a clear signal to investors: Klarna is no longer a "money-burning" growth machine but a mature enterprise capable of self-sustaining development.

In the BNPL industry, the bad debt rate is the core indicator for measuring a company's health. Klarna's financial reports show that its bad debt rate has remained at a low level in the past year, lower than the average level of the U.S. credit card industry. This is thanks to its powerful AI-driven risk control system, which can make credit decisions within milliseconds by analyzing massive data points of 111 million users, effectively identifying and rejecting high-risk users.

This technology-driven risk management is the key for Klarna to maintain stable profitability while expanding rapidly.

Moreover, behind the financial data is Klarna's powerful network effect. As of mid-2025, its user base has exceeded 111 million, and the number of partner merchants has exceeded 790,000. Among them, it has over 100 million users in Europe. These large-scale data not only provide valuable "fuel" for Klarna's risk control system but also build an insurmountable moat for new competitors.

Klarna's achievement of profitability in 2024 is a crucial milestone, proving to the market that the BNPL model, after reaching a certain scale, can not only continue to grow but also achieve healthy and sustainable profitability. This effectively refutes the market's concerns about the fragility of the BNPL business model.

Klarna's Core Barriers: Network Effect and AI Risk Control

The investment research team at RockFlow believes that Klarna is not just a simple payment tool. Its deep moat lies in two core aspects:

Firstly, it's its extensive global network effect. In the world of fintech, scale is a barrier. Klarna has accumulated over 111 million active users and a large merchant network globally. This network effect creates a strong positive cycle:

• For consumers, more and more merchants support Klarna payment, making it a ubiquitous and convenient payment option.
• For merchants, connecting to Klarna allows them to reach its large user base and increase sales by leveraging the high conversion rate brought by the BNPL model.

This mutual attraction and locking between users and merchants make it difficult for new entrants to shake Klarna's market dominance. Especially in its core markets such as Europe and the United States, Klarna has become the synonym for BNPL in the minds of consumers and merchants.

Secondly, it's its strong technological barrier, especially the AI-driven risk control system. The core risk of the BNPL model is bad debts. If risk control is not strict, the platform is likely to suffer huge losses due to user defaults. Klarna has long invested in technology research and development, and its AI-driven risk control system is its most crucial competitive advantage:

• Real-time risk control: Klarna's system can analyze massive user data in real-time, including consumption habits, payment history, device information, etc., and make decisions on whether to approve payments and how much credit to grant within milliseconds. This precise risk control ability enables it to effectively control bad debt risks while expanding rapidly.
• Personalized service: In addition to risk control, AI is also used to provide users with personalized shopping experiences and recommendations. This not only enhances user stickiness but also brings higher sales to merchants.
• Operational efficiency: Klarna's AI technology is also widely used in back-end operations such as customer service and fraud detection, significantly reducing labor costs and improving overall operational efficiency, which provides an important guarantee for its profitability.

Challenges and Opportunities Coexist: Tightened Regulations and Market Competition

Any disruptive innovation comes with risks, and BNPL is no exception. Klarna's future development faces two major challenges:

Tightened regulations:

With the rapid growth of the BNPL market, regulatory authorities around the world have begun to closely monitor the industry. Some countries have included BNPL in the scope of credit regulation, requiring BNPL companies to comply with stricter information disclosure and consumer protection rules. For Klarna, this is both a risk and an opportunity. The risk is that the increase in compliance costs may affect its profitability; the opportunity is that stricter regulations will eliminate small companies lacking compliance capabilities, consolidating the market position of compliance pioneers like Klarna.

Fierce competition and bad debt risks:

The BNPL market is already a red ocean. Competitors include established fintech giants like PayPal, as well as other outstanding players in the BNPL field such as Affirm and Afterpay (which has been incorporated into Block). These companies all have large user bases and strong financial strength, posing severe challenges to Klarna in their respective home markets. At the same time, macroeconomic fluctuations, such as inflationary pressures, may lead to a decline in consumers' solvency, increasing the bad debt risks for BNPL companies.

Despite the numerous challenges, Klarna's advantages are still prominent. Its valuation of up to $14 billion and the IPO fundraising target of $1.27 billion show the strong optimism of the capital market about its prospects. Klarna's global layout allows it to diversify risks in a single market, and its continuous technological innovation keeps it ahead in the fierce competition.

Conclusion

The investment logic behind Klarna is not just about betting on a company's short-term growth but on a grand narrative: the arrival of the new consumer finance era.

The investment research team at RockFlow believes that there are mainly three long-term catalysts for Klarna's valuation:

• Fundamental changes in consumption habits: The BNPL model is redefining consumers' payment habits. It's not competing with credit cards for market share but creating a brand - new payment scenario that meets the needs of the new generation of consumers for flexibility, transparency, and low cost.
• Maturity of the business model: Klarna's achievement of profitability proves that its business model has the ability to self - sustain after scaling up. This makes it no longer a company that simply relies on financing and burning money for expansion but a healthy and sustainable business entity.
• The value of the "super gateway": BNPL is just the starting point for Klarna. Its large user and merchant network gives it great potential to become a "super gateway." In the future, Klarna can provide users with more financial services, such as personal finance management and savings, based on its payment data, extending its business value from the payment stage to the entire consumer finance ecosystem.

Just as Circle has its value in the crypto world, Klarna also has the scarcity of an "orthodox ticket" in the new consumer finance field. Its IPO will be Wall Street's "coming - of - age" recognition of the BNPL model.

This article is from the WeChat official account “RockFlow Universe”, author: RockFlow, published by 36Kr with authorization.