Klarna applies for bank charter with FDIC and Utah regulator
- Key insights: Klarna has submitted applications to the Utah Department of Financial Institutions and the Federal Deposit Insurance Corp. to establish Klarna Bank.
- What’s at stake: The buy now/pay later lender and aspiring neobank joins Affirm, PayPal and dozens of other fintechs that hope to become a bank.
- Forward look: If approved, Gary Harding, former chairman and CEO of Milestone Bank and former president and CEO of Prime Alliance Bank, will act as president and CEO of Klarna Bank.
Klarna is the
Processing Content
The buy now/pay later lender and aspiring neobank submitted applications this morning with the Utah Department of Financial Institutions and the Federal Deposit Insurance Corporation to establish Klarna Bank, an industrial bank.
“Banking is built on trust,” Sebastian Siemiatkowski, Klarna’s co-founder and CEO, said in a statement. “We’ve seen firsthand the appetite for a fairer, more transparent approach in the U.S., and our own banking license is the natural next step, giving customers tools to borrow responsibly and build financial confidence, while bringing greater competition, innovation, and choice to consumers and merchants alike.”
Klarna has about 30 million annual customers in the U.S., according to the company. It has had a banking license in Sweden since 2017, which extends to the 23 other European countries it operates in.
Klarna joins dozens of other fintechs, including
The charter will allow Klarna to bring its banking operations in-house, remove the lender’s reliance on banking partnerships and reduce its capital costs. Salt Lake City-based WebBank provides debit cards, digital wallets and FDIC-insured, high-yield savings accounts.
“The transition to in-house operations from the partnership model is a big deal,” Ben Danner, a senior analyst at Javelin Strategy and Research, told American Banker.
“Building a deposit customer base is sticky and reduces churn opposed to those who occasionally use their BNPL product and bank elsewhere. Rather than operate ‘like’ a bank, now Klarna will be a direct competitor,” Danner said.
If Klarna’s bank application is approved, Gary Harding, former chairman and CEO of Milestone Bank and former president and CEO of Prime Alliance Bank, will act as president and CEO of Klarna Bank. The bank will have its own independent board, governance and internal controls.
Utah has long been a favorable venue for financial services companies to secure highly-coveted banking charters. This year, it granted the captive finance arms of
The charter application comes as Klarna’s customers are increasingly turning to the Klarna Card — the company’s debit card that uses Visa Flexible Credentials — to shop at brick-and-mortar stores. In the first quarter, the Klarna Card surpassed 5 million users. It also comes on the heels of a highly favorable,
Klarna is also fighting with its former partner, Pagaya, in U.S. courts over accusations that Klarna stole
