Klarna Group plc KLAR

The business

Klarna sits between a shopper and a merchant. It pays the merchant, lets the shopper pay now or later, and earns merchant fees, interest, membership revenue and gains when receivables are sold. Pay Later remains the engine at 77% of Q2 gross merchandise volume, while Pay in Full was 10% and longer-term Fair Financing reached 13%. The business is increasingly two things at once: a checkout network and a consumer lender funded primarily with deposits.

The slice doing the incremental work is Fair Financing. Its volume grew 82% to $4.7B, while total volume grew 18%. That mix shift helped revenue rise 27% to $1.0B and the revenue take rate reach 2.84%, up 20 basis points. It also lengthens the credit clock. The average loan book still turns about ten times a year with an average balance of $124 and duration near 40 days, but U.S. Fair Financing charge-offs run in a 3% to 4% expected range, far above the loss profile of short Pay Later.