Klarna Applies to Start a Utah-Based Bank – Digital Transactions

The buy now, pay later specialist Klarna AB said early Monday it has submitted applications with U.S. regulators to start an industrial bank called Klarna Bank USA.

The company’s applications, filed with the Federal Deposit Insurance Corp. as well as the Utah Department of Financial Institutions, follow its move toward banking in other markets. It has owned a licensed bank in Stockholm, its global headquarters city, for nine years and has extended more than $91 billion in credit in the U.S. market over the past seven years, according to the company. 

Now, Klarna says, its own U.S. bank charter would allow it to bring its banking products, including merchant services, in-house.

The move to establish a U.S. bank arrives only a month after Klarna launched savings accounts in the U.S. market. The FDIC-insured accounts are offered through WebBank. Now, such products and features could be offered directly by Klarna if its banking application wins approval, according to the company. 

“Our own banking license is the natural next step, giving customers tools to borrow responsibly and build financial confidence,” says Sebastian Siemiatkowski, Klarna’s cofounder and chief executive, in a statement.

Klarna reports 119 million users globally, generating 3.4 million transactions daily. Its payment-acceptance services are used by more than 1.1 million merchants and service providers.

Now, with its latest move, the BNPL company is seeking to expand its U.S. reach. “Klarna’s seeking a Utah ILC charter is an attempt to control its full stack and economics in the U.S., to fund its BNPL and credit receivables with insured deposits rather than partner-bank warehouse lines,” says Eric Grover, proprietor of the payments consultancy Intrepid Ventures, in an email message.

Klarna has tapped banking veteran Gary Harding to take on the roles of president and chief executive of the new bank. Harding’s experience includes serving as chairman and chief executive of Milestone Bank, based in Salt Lake City, and president and CEO of Woods Cross, Utah-based Prime Alliance Bank.

The new bank, if approved by regulators, would be a wholly owned unit of Klarna Inc., the company says, with a Utah charter and FDIC insurance. It would be governed by its own board, which Klarna says would operate independently, and would be subject to its own governance and internal controls.