Sweden's Klarna to Invest $100 Million in U.S. Launch

By Jens Hansegard 

STOCKHOLM--Sweden's Klarna AB will spend more than $100 million over the next three years as it kicks off its U.S. online payments business.

Klarna, which provides retailers with a mobile payments solution, makes most of its money by charging the merchants fees. However it also gets income from underwriting risk for online merchants and by offering their customers credit products, such as installment plans.

Unlike other tech startups, which tend to prefer working out of Silicon Valley or New York, the Swedish company has decided to set up shop in Columbus, Ohio.

"Columbus is at the heart of U.S. e-commerce activity and is the perfect launchpad for our expansion," said Brian Billingsley, chief executive for Klarna North America.

The company will launch in the U.S. after Christmas and will add another office in New York in the near future. In September it said that it expects to launch with five to 10 merchants signed up for the service.

Klarna has already begun working with U.S. merchants on the European market, such as mobile-shopping app wish.com.

Klarna, which numbers more than a thousand employees serving customers in markets such as the U.K. and Germany, will operate with a staff of around 20 in the U.S. But the company expects to have more than a hundred employees in a couple of years.

In the U.S., Klarna will face many other players vying to grab market share in online and mobile payments, including Amazon.com Inc. and Stripe Inc. The biggest competitor, however, is eBay subsidiary PayPal, which is the default payment option on millions of U.S. websites. PayPal posted revenue of some $7 billion last year, compared with Klarna's $219.1 million in 2013. eBay plans to spin off PayPal business into a separate publicly traded company next year.

In a funding deal last year, the Swedish company was valued at $1.4 billion, and Sequoia Capital, whose previous investments includes early stakes in Apple and Google Inc., is Klarna's largest outside backer. So far, Klarna has received almost $300 million in outside backing and has said that it doesn't have to raise more capital for its U.S. launch although it may seek more funding as it ramps up its U.S. operations.

Write to Jens Hansegard at [e-mail]

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