Klarna’s IPO and Neobank Rebranding: A Credible Pivot in a High-Cost Fintech Era?

Klarna’s long-awaited IPO, set to price at $35–$37 per share for a $14 billion valuation, marks a pivotal moment for the Swedish fintech giant. Once valued at $45.6 billion in 2021, the company has faced a brutal reckoning amid shifting market dynamics, regulatory scrutiny, and the collapse of the BNPL hype cycle. Now, Klarna is betting on a rebranding as a “digital retail bank” to justify its valuation and attract investors in a high-interest-rate environment. But does this transformation hold water—or is it a desperate repositioning in a crowded and increasingly regulated fintech landscape?

The Neobank Gambit: Diversification vs. Profitability

Klarna’s pivot from BNPL to neobanking is more than a rebrand—it’s a strategic overhaul. The company has launched products like the Klarna Card (a Visa-powered debit card with BNPL options), deposit accounts, and AI-driven personalization tools, aiming to replicate the success of Chime and Affirm while distancing itself from the BNPL stigma of excessive consumer debt [1]. According to a report by CNBC, Klarna’s U.S. expansion now includes $26 billion in funding from Nelnet to support its “Pay in 4” product, signaling a push into installment lending [2].

However, diversification alone isn’t a panacea. While Klarna’s Q2 2025 revenue hit $823 million—a 25% year-over-year increase—its net loss widened to $53 million, driven by a 64% surge in loan loss provisions and operational costs [3]. This contrasts sharply with Affirm’s Q4 2025 results, which showed $876 million in revenue and positive operating income, and Chime’s IPO filing, which highlighted $1.67 billion in annual revenue with an 88% gross margin [4]. For Klarna to succeed, it must demonstrate that its neobanking features can generate recurring revenue and reduce reliance on volatile BNPL margins.

Valuation Realities: A $14 Billion Bet in a Cautious Market

Klarna’s $14 billion IPO valuation sits between its 2022 down round ($6.7 billion) and its 2021 peak. By comparison, Affirm’s valuation has plummeted from $47 billion to $15–22 billion, while Chime’s IPO priced at $11.6 billion after a private market peak of $25 billion [5]. These declines reflect investor skepticism toward fintechs that prioritize growth over profitability. Klarna’s IPO, led by Goldman Sachs and JPMorgan, is being marketed as a “renewed” opportunity, but its financials tell a mixed story: 76% of revenue still comes from transaction and service fees, with interest income accounting for just 24% [6].

The company’s valuation also faces headwinds from macroeconomic conditions. With U.S. interest rates hovering near 5.25%, BNPL models—historically reliant on low-cost capital—are under pressure. Klarna’s shift to neobanking could mitigate this risk by leveraging deposit-taking and fee-based services, but its $9.5 billion in consumer deposits (as of late 2024) must be managed carefully to avoid liquidity challenges [7].

Regulatory Risks: Compliance Costs and Digital Resilience

Klarna’s neobanking ambitions come with significant regulatory hurdles. As a licensed bank, it must comply with stringent capital adequacy rules, liquidity requirements, and evolving frameworks like the EU’s Digital Operational Resilience Act (DORA), which mandates robust cybersecurity and data governance [8]. These costs are non-trivial: Klarna has already cut staff and automated compliance processes to offset expenses, a move that risks alienating users if service quality declines.

Moreover, the BNPL segment remains under scrutiny. In the U.S., the Consumer Financial Protection Bureau (CFPB) has intensified oversight of BNPL providers, while the UK’s Financial Conduct Authority (FCA) has imposed caps on late fees. Klarna’s “Pay in 4” product, which allows consumers to split purchases into four interest-free installments, could face margin compression if regulators limit fee structures or require stricter credit checks.

The Bottom Line: A High-Risk, High-Reward Proposition

Klarna’s IPO pricing reflects cautious optimism. At $35–$37 per share, the stock would trade at a price-to-revenue multiple of roughly 17x based on its $823 million Q2 revenue. This compares favorably to Affirm’s 2025 multiple of ~25x but lags behind Chime’s IPO multiple of ~15x. However, multiples are only part of the equation. Investors must weigh Klarna’s strategic pivot against its persistent losses, regulatory exposure, and competition from both incumbents (e.g., PayPal, traditional banks) and peers (e.g., Affirm, Afterpay).

For the IPO to succeed, Klarna must prove that its neobanking features can drive sustainable profitability. This means scaling deposit accounts, reducing loan loss provisions, and leveraging AI to cut costs without sacrificing user experience. If it can do this, the $14 billion valuation might be justified. If not, the IPO could follow the fate of other fintechs that overreached in a high-rate world.

In the end, Klarna’s rebranding is credible—but only if it delivers. The coming months will test whether its pivot from BNPL to neobanking is more than a rebranding gimmick.

Source:
[1] Klarna IPO: Investors to scrutinize fintech's digital bank pivot, [https://www.cnbc.com/2025/09/08/klarna-ipo-investors-to-scrutinize-digital-bank-pivot.html]
[2] Klarna Archives, [https://finovate.com/category/klarna/]
[3] BNPL Fintech Klarna Faces Q2 Losses As It Gears Up For Business Expansion And US IPO, [https://www.crowdfundinsider.com/2025/08/247638-bnpl-fintech-klarna-faces-q2-losses-as-it-gears-up-for-business-expansion-and-us-ipo/]
[4] Chime IPO: S1 Breakdown, [https://www.mostlymetrics.com/p/chime-ipo-s1-breakdown]
[5] The Great Fintech Recession: How Rising Interest Rates..., [https://www.linkedin.com/pulse/great-fintech-recession-how-rising-interest-rates-exposed-pf%C3%BCtze-1fwxe]
[6] Klarna Business Model Explained & Cost to Build a Klarna-like App, [https://risingmax.com/blog/klarna-like-app]
[7] Klarna IPO F-1 Filing - Zoomer FIRE, [https://substack.com/home/post/p-159103306?utm_campaign=post&utm_medium=web]
[8] Ten Fintech Technology Trends Shaping the Industry in 2025, [https://dashdevs.com/blog/ten-technologies-shaping-the-future-of-fintech-in-2023/]