There are few things more satisfying than instant gratification on the never-never. Swedish private group Klarna, one of a growing crowd of “buy now pay later” (BNPL) fintech apps, makes it happen. Shoppers can purchase Lululemon yoga pants or a Peloton bike immediately and spread payments over instalments. Finger-wagging personal finance pundits warn it may all end in tears.
Paid over three instalments, these unregulated products carry no interest charges - Klarna bears the risk of non-payment. Separate, regulated, financing products charge an annual standard rate of 18.9 per cent. Other fees, for late payment, paper statements and debt collection, add up.
It has been a terrific model for investors. Klarna is closing a funding round that will reportedly value it at $31bn, 15 years after launch. That is three times the valuation secured just six months ago. London-based Checkout.com’s valuation rise to $15bn was similarly meteoric. Both are positioned to list on public markets, where Australia's Afterpay has seen shares rise 134-fold from its 2017 flotation price.