Klarna's 2019 Expansion Drove Losses

The spike in loan losses showed that Klarna was buying growth with looser early market economics, not simply exporting a mature Nordic credit machine into new geographies. In 2019, Klarna pushed hard into the US with Pay in 4 and app led acquisition, while the UK mix also shifted toward faster growing pay later products. That brought in new shoppers fast, but with thinner data, softer underwriting signals, and more overlap with rival BNPL users, losses rose before those cohorts matured.

• Klarna reported its first annual loss in 2019 as loan loss rate moved from 3.6% to about 6% during international expansion. The same period included a major US push, with Klarna saying Pay in 4 and its shopping app were gaining traction quickly and adding consumers at a rapid pace.
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• This is a normal stress point for BNPL expansion. In a new market, the lender has less repayment history, weaker merchant density, and more one time users acquired through promotions. Klarna later disclosed that US provision for credit losses was 9.6% in 2019, then improved materially as underwriting models and repeat usage got better.
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• The underlying product also matters. Klarna often uses soft credit checks and short duration unsecured loans, which makes checkout friction low and merchant conversion high, but can also admit users who are simultaneously borrowing from Affirm and Afterpay. In 2019 US data, 18% and 20% of Klarna users also used those rivals.
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Going forward, the playbook is to turn expensive new market cohorts into cheaper repeat users. Klarna has already shown this can happen, with later disclosures showing much stronger US transaction margins and lower credit loss rates once scale, merchant density, and local underwriting data catch up to customer acquisition.