Sweden-based Klarna is Europe’s largest privately-held fintech company with 4,000 employees and a valuation of $ 31 billion, inflated by investors like Softbank, General Atlantic and BlackRock. The company has become elephantine in such a short time, offering customers the ability to shop and pay later, earn money by charging merchants for using Klarna’s payment technology. Today, Klarna appoints a new investor: rapper, designer and producer A $ AP Rocky.
“It’s a radical way to approach the credit system,” says Rocky (real name Rakim Mayers), 32. “It helps people develop their financial literacy.”
In addition to the enormous growth of the business, Rocky was motivated to invest in Klarna from his own experiences growing up in Harlem. He noted the payment difficulties, especially on student loans with interest, for people from modest backgrounds. “You are preparing to take on financial debt,” he says. “There is no system that helps us run things around student loans, IRS, banking, or credit.” He describes Klarna as a “layaway plan” on a global scale.
It’s a new chapter in the “funny story” (in Rocky’s words) between the performer and Sweden. In August 2019, Rocky has been released back in the United States after the country remanded him – for assault – after a fight after a concert in Stockholm. Rocky’s cause sparked international outrage, fueled in part by then-President Donald Trump, who went wild on Twitter to plead for the rapper’s release and return to the United States.
Now resuming his relationship with Sweden as an investor in one of the country’s most important companies, Rocky (who starred in the 2016 Forbes Cover 30 Under 30) will organize recycled and vintage fashion experiences in the Klarna smartphone app.
For Klarna CEO and billionaire co-founder Sebastian Siemiatkowski, bringing Rocky to his hat table is a strategic decision for the brand. Klarna prides herself on being the anti-bank bank: Her color is candy pink, and she runs commercials in major cities with investor Snoop Dogg surrounded by Afghan hounds. “We are a very diverse group of people with over 50 nationalities represented, speaking multiple languages and having a very different approach to business,” says Siemiatkowski. “We wanted our brand to represent that, to represent accessibility and availability. We also wanted to add some fun to it.
The company’s trajectory has been anything but relaxed. Making most of its revenue by charging merchant fees of between 3-7%, revenue increased 37% from 2019 to 2020 to reach $ 1.2 billion. Klarna has more than 90 million active users worldwide who conduct an average of 2 million transactions per day with more than 250,000 merchants like Nike, Amazon and Sephora.
Buying now, paying later, however, has led to the backlash from critics who say Klarna encourages overspending. “A decade after the financial crisis, a new generation – some of whom were barely out of elementary school during the last credit crunch – are being wooed by new types of lenders who are rewriting the language of debt in the age of debt. ‘Instagram,’ said the Financial Time in 2018 from Klarna.
The company insists that this is an antidote to the credit system. A representative from Klarna says, “Every new transaction is evaluated before it is approved, and we have limits on how much buyers can spend when using our services. Each time a customer makes a transaction with Klarna, we reassess their ability to refund and assess whether the payment option they want to use is right for them at that time. They also note that customers are prohibited from using Klarna until their outstanding balance has been paid. The company also rarely charges interest to customers, unlike creditors.
For all of these reasons, Rocky thinks Klarna is his best investment yet. “I’m really involved in the field,” says Rocky. “It’s obvious.”
By Alexandra Sternlicht, Forbes Staff
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