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AnnualReport2021.Klarna Bank AB (publ). Corp.ID 556737-0431January - December 2021
ContentsFinancial information 20213To our Shareholders4Key Achievements 20219Product Launches11Report from the Board of Directors16Business Results18Group and Parent Company Financials22K L A R N A B A N K A B ( P U B L)A N N UA L R E P O R T 2 0 2 12
Financialinformation 2021The information is presented for the Klarna Bank Group, if not otherwise stated.Strong performance of the business over the yearhas delivered:42%31.3%38%(46) 1Gross merchandise volume2– YoY growth(29.5)CET 1 ratioKlarna Holding Group(40) 1Total net operating income– YoY growth147m 400k Active consumersUSD80bn45Global retail partners3(53bn) 1 Gross merchandise volume 2SEK 689bn (484)CountriesUSD1.6bn3(1.1bn) 1 Total net operating incomeSEK 13,754m (10,000)1. All growth figures are based on SEK results figures.2. Total monetary value of sold products and services through Klarna over a given period of time.3. Klarna’s results are reported in SEK. To arrive at USD values, the average exchange rates for 2019, 2020 and 2021 have been used;1 USD equals approximately 9.5 SEK for full year 2019, 1 USD equals approximately 9.2 SEK for full year 2020, and 1 USD equalsapproximately 8.6 SEK for full year 2021.K L A R N A B A N K A B ( P U B L)A N N UA L R E P O R T 2 0 2 13
To ourShareholders.K L A R N A B A N K A B ( P U B L)A N N UA L R E P O R T 2 0 2 14
To ourShareholdersAnother year of high growthand improved economics.In 2016 we formulated an idea of the future ofbanking and financial services. That banks - thatsit at the core of the financial side of our lives could and should play a very different role for usthan they have done historically. They should putcustomers first! Banks should innovate to helpconsumers save time, save money, give themcontrol, and ultimately improve people’s finances,and make them worry less. Since then we havebeen on a mission to realize that vision. It hasnot been easy and it has required us to look atourselves in the mirror and turn every stone on ourown practices.When we launched Klarna 17 years ago, we focusedon providing a better digital version of existingbanking services. On helping customers buy onlinemore safely and without unnecessary friction. Butwe borrowed much of our business model from thebanks. At the time, we did not really reflect on latefees, high interest or revolving - the mechanism ofbeing able to borrow repeatedly but never actuallygetting out of debt. Those were simply acceptedstandard industry practices. By 2016 we hadmatured and come to question a lot of that - the wayit has always been done is not the way it has to be.We made tons of changes but we knew we still hadeven more ahead of us. We also realized that wewanted to strike a balance. We knew we neededto change our practices but to do that we needed toquestion what was really broken in the system andensure again we did not take the easier path offollowing traditional banks. Banks, in a rush to avoidany potential angle of criticism, had abandonedhuge amounts of consumers on low incomes to thehands of payday lenders and loan sharks. As formerFCA executive Chris Woolard expressed it woolardreview-report.pdfK L A R N A B A N K A B ( P U B L)recently in the UK: “A sustainable market needsmore alternatives to high-cost credit.the biggestpotential harms occur where there is a need forthose on lower incomes or benefits to borrow.” 1This brings us to today, I will explain in detaillater on what these changes are, and while I amimmensely proud of them, I am also very proud ofKlarna’s other achievements in 2021. We are nowserving more than 100m active customers acrossthe world, and our free short-term credit productshave become an expression: BNPL. But we havealso continued to grow our Pay Now immediatesettlement option that today represents c40%of transaction volumes. With some truly excitingcompanies like Stocard and Hero joining Klarna,our active consumer number will grow to over147m. We have also massively accelerated ourglobal expansion with the addition of 10 newmarkets since the start of 2020.Our app is becoming exactly that central place inour consumers’ financial lives, and since how wespend our money is a big piece of that, Klarna hasalso risen to become a natural platform for manymore shopping services. With more than 301msuccessful matches of consumers to brands andretailers, this has further accelerated our partnernetwork to over 400k global retailers. As a result,merchandise volumes are at record levels of USD80bn and we are seeing very exciting numbersin our in-store offering now live across c80,000retail locations in the US like Macys, Sephora andFootlocker, and partnerships with the top 3 largestmall operators in the US.As exciting all of this is, it is not what makes methe proudest. What makes me the proudest isthe major accomplishments achieved in ourunderwriting capabilities AND the critical businessmodel decisions that were decided and executedthroughout 2021 that marks the full transformationinto a world leading sustainable bank businessmodel that will return billions into the hands ofconsumers.A N N UA L R E P O R T 2 0 2 15
To our ShareholdersLosses at all time lowWith our focus on creating products whichconsumers love powered by effectiveunderwriting - our credit loss rates havereduced by over 30% since 2019. 2 This is amajor achievement, most importantly sincebehind that numerical reduction is the lives oftens of thousands of consumers where we haveavoided adding to an unhealthy debt burden.The detailed reader will however notice that inabsolute terms our credit losses are growing,not shrinking. This is entirely explained byKlarna’s growth, expansion to new markets andmassive inflow of new customers. It is morechallenging to underwrite a new customercompared to an existing returning one.As one can see in the graph below, if ourmerchandise volumes were the same as 2 yearsago, our losses using today’s underwriting modelswould be 30% lower (#1). However the additionalvolume through our strong growth even with thosenew more efficient underwriting models is addingan additional USD 100m 3 of losses (#2). Finally asseen in #3, the addition of new markets and newcustomers where loss levels are initially higher isthen adding an additional USD 300m 3 of losses.Credit losses USDbn321With samevolumes as 2019losses declinedby over 30%0.2Credit lossesImprovedunderwriting onmature marketvolume growthadded 100mof lossesVolume growthfrom newcustomers ingrowth marketsadded 300mof losses0.5-30%Credit losses as % of GMV0.56%0.36%0.67%20192019 at 2021loss rates2021Volume (USDbn)One particular strong and important developmentis the US. It is our fastest-growing key market, andsoon to be our largest market. We have reducedour credit losses by 60% since 2019.2Credit lossescomparison between2019 actuals and“2019 at 2021 lossrates”, where the latterhas been calculatedapplying, at countrylevel, 2021 creditloss rates to 2019merchandise volume.3Calculated applying,at country level, 2021credit loss rates tothe 2019-2021 volumegrowth.A unique thing that sets Klarna apart from theindustry is how we underwrite and onboardconsumers to our credit products. Credit cardsmake one initial assessment at sign up, give youa credit limit and then encourage you to spend,spend, spend. They hope the consumer will makethe minimum repayments and pay interest on thebalance - forever - because that’s their businessmodel.K L A R N A B A N K A B ( P U B L)35 45 80Our extensive research and interviews withconsumers finds that with those sufferingpersistent debt, most often there is sadly a broaderaddictive behavior that sits at the center of thoseconsumers’ situations. The majority of their debtwill be with high-cost credit cards, unsecuredloans, payday lenders etc. In addition to that theywill most often have overdue electricity bills, phonebills, rent. Since Klarna never lends cash and theoutstanding balance on average is USD 100, whenconsumers find themselves in debt, the amountowed to Klarna represents about 2% of their totaldebt. It is important to us to try to avoid themhaving an additional Klarna bill in what is already achallenging situation.A N N UA L R E P O R T 2 0 2 16
To our ShareholdersKlarna’s model is much more sustainable. When aconsumer chooses Klarna for the first time, we giveconsumers a small line of credit, usually aroundUSD 100. Then we do a new assessment for eachand every transaction they make. We see thatconsumers can use the product responsibly beforewe make small increases in the amount available tothem. This is why 99% of our lending is repaid andour losses are below the card industry standard.This also means that on average a consumer inarrears will owe us USD 100 compared to a USconsumer who on average will have an outstandingbalance of over USD 5,000 on their traditionalcredit card. 4Consumers have no interest in paying interest and they shouldpay with money they haveLet’s set the record straight once and for all.Consumers should first and foremost pay withmoney they have. Period. This is why we arecontinuing to expand our Pay Now option. Weare especially proud to launch it in the UK.Less known is that Klarna owns the world’slargest account-to-account based paymentsinfrastructure, through our acquisition of Sofortback in 2014. This allows us to create a trulyunique and cost efficient alternative to theexisting payments network. Again we are happyto see that c40% of our transaction volume is PayNow and we expect that share in physical storesto come closer to 90%.Online however, credit makes sense. Theopportunity to touch and feel before you pay, theability to avoid having to wait for your money backwhile retailers’ process returns are just two greatexamples of where credit makes sense, but thereare many more. In fact it is not credit itself that isthe problem. Former FCA executive Chris Woolardstated in a UK report on BNPL stated: “credit makes4Experian, woolardreview-report.pdf6Calculated by takingrevenue forgone in Q421 as a result of thesechanges ( 50m) overQ4-21 net operatingincome.7Revenue impactcalculated by addingback fees and chargesthat have beenremoved from ourconsumer offeringsas part of our updatedpractices.K L A R N A B A N K A B ( P U B L)economies work and has a social purpose.” 5The problem is what form of credit. High-costcredit, credit that encourages you to push debtforward indefinitely as well as tons of other poorpractices by credit card companies, banks andother less serious actors really are a menace tosociety. In 2021 Klarna removed the last elementsof such business practices that we had inheritedfrom the industry. No more revolving, always 30days rather than 15 days to pay, and the removalof tons of additional fees puts us at the very frontof sustainable credit and payments products.These changes do not come withoutconsequences, we estimate that, all else equal,our annualized revenue for 2021 and 2022would be c10% 6 higher and that we have alreadyreturned USD 50m 7 to the pockets of ourconsumers in Q4 2021 alone. These actions aresupported by our merchants and consumers,who are already rewarding us with long-termsustainable relationships that far outstrip theshort-term impact of these changes.A N N UA L R E P O R T 2 0 2 17
To our ShareholdersThe true heroesThe true heroes that have made those changespossible, however are our 400k retail partners.We salute and thank you for your support.They also made it entirely clear to us thatthey were fed up with the old models. For toolong the credit card markets have been riggedagainst them. While networks have been ableto charge high interchange fees for credit cardacceptance, banks have not used those fundsto offer attractive financing options to theirconsumers. Instead, banks have pocketed theinterchange fees and in addition to that, chargedtheir consumers staggering interest rates of upto 60% APR 8 for any financing options. All ofwhich has benefited the banks and the banksonly. What makes this even worse is credit cardshave functioned as a massive redistribution ofwealth by either entirely excluding low incomehouseholds or charging them high APRs. Highincome households have been given free interestoptions in combination with aggressive cashbackand loyalty points systems effectively workingas a redistribution of wealth from the poor to the8nerdwallet.com;banktracker.com9Federal Reserve Bankof BostonK L A R N A B A N K A B ( P U B L)rich - an inverted Robin Hood if you like. In the US,the lowest income households pay USD 21 in feesand interest while the highest income householdsreap USD 750 9 in rewards. Retailers told us ‘nomore’: with Klarna’s model their cost of paymentsgoes directly to the pocket of consumers inthe form of short-term interest-free credit thatfurther increases their spending power. Andwhen finance is available at zero cost, consumersreward them with their loyalty. This is the ultimatepurpose of financial services to grow and makemarkets function more .well yes, smooothly.Finally, I would like to say that this great progresscould not have been achieved without thecommitment and ambition of our passionateand ambitious employees and the tremendoussupport of our shareholders. We are far fromdone and I hope you will continue to standbehind us as we continue on this challenging butextremely fun journey.SebastianA N N UA L R E P O R T 2 0 2 18
KeyAchievements2021.K L A R N A B A N K A B ( P U B L)A N N UA L R E P O R T 2 0 2 19
Key Achievements202180bn 147mUSD GrossMerchandise VolumeActive consumersIn 2021 we expanded the Klarna ecosystem tovastly increase consumer touchpoints acrossmarkets, services and products to fuel thegrowth of our 400,000 retail partners withsustainable payments. Consumers value Klarna’sintegrated products that save them time and45 400k CountriesGlobal retail partnersmoney by helping them make informed decisionsand take control of their finances, increasingloyalty and return visits over time. As a resultconsumer adoption has accelerated with over100m consumers using Klarna with a further 47musers added through acquisitions.25m 71%3x30US consumersUS consumer growthUS GMV in2021 vs 2020Retail partners inUS top 100The US continues to be Klarna’s fastest-growingkey market by volume and now Klarna’s secondlargest by revenue, much of it fuelled by theapp’s success. US volumes have more thantripled YoY, fuelled by 71% growth in Klarna USconsumers to 25m in January 2022.Through our ambitious 2021 product expansionincluding the launch of the shopping app to 18markets, we are creating more opportunities forconsumers to engage with our retail partnersthrough Klarna, attracting new consumers whilegrowing loyalty among existing users. In growthmarkets, products that can be used acrosschannels are supporting consumer acquisitionand ongoing loyalty including the app and shopanywhere browser extension. Consumers shouldfirst and foremost pay with money they have.Period. This is why we are continuing to expandour Pay Now option. We are especially proud toK L A R N A B A N K A B ( P U B L)launch it in the UK. Less known is that Klarnaowns the world’s largest account-to-accountbased payments infrastructure, through ouracquisition of Sofort back in 2014. This allowsus to create a truly unique and cost efficientalternative to the existing payments network.Again we are happy to see that c40% of ourtransaction volume is Pay Now and we expectthat share in physical stores to come closer to90%.The Klarna Card has been particularlysuccessful meeting consumer demand for fairand transparent alternatives to conventionalcard offerings. Over 800k consumers acrossSweden, Germany and the UK, up 50% YoY, nowtake advantage of the card’s flexibility with clearpayment schedules, no interest, and no FX markup with the US launch waitlist at 500,000 justdays after launch.A N N UA L R E P O R T 2 0 2 110
Key AchievementsProduct Launches40%Top 103xUS share of global Klarna appdownloadsUS shopping apps2021App users purchase frequencyvs non-app users0101800k Klarna card users.US launch soon.02Shop-anywhere app nowavailable in 18 markets.0203Shop-anywhere browser,1m users - 5* rating.04Pay Now launched inthe UK, US soon to follow.05Klarna Express button livewith Macy’s and Coach.040503A N N UA L R E P O R T 2 0 2 111
Key AchievementsKlarna app is the single largest volume channelThe Klarna app is now the single largest driverof GMV across the Klarna ecosystem, fuellinggrowth for Klarna and its retail partners throughconsumer acquisition and referrals. It is thesecond fastest-growing app on a downloadsbasis 1 compared to major global paymentspeers. The US has the highest share of Klarnaapp users of any market and accounts for over40% of global downloads, placing Klarna in theTop 10 US shopping apps. 2 In December, USdownloads of the Klarna app outpaced PayPal,YouTube, Snapchat, Whatsapp and Twitter. Theshop-anywhere online or in-store capability ofthe app drives loyalty with features consumerslove, with app users purchasing c3x more oftenthan non-app shoppers.US APP DOWNLOADS25m2020202120m15m10m5m0mKlarnaCompetitor 1Our app is becoming a central place in ourconsumers’ financial lives. The app supportssignificant consumer growth through easyaccess to everything from purchases across allchannels, card balances and bank accounts,1AppAnnie, 20212Apptopia, 2021K L A R N A B A N K A B ( P U B L)Competitor 2Competitor 3Competitor 4spending overviews, returns, carbon tracking,retailer offers and Klarna’s shop anywhereonline functionality - all services that havetangible value for consumers in their everydaylives.A N N UA L R E P O R T 2 0 2 112
Key Achievements4m4x9Global reward membersincrease in purchase frequencyof reward membersFurther markets to launchrewards programFastest-growing customer segment across markets areconsumers who purchase 2 a monthKlarna’s rewards program, which now has c4mmembers in the US and Australia and is drivinga 4x uplift in repeat purchases in the US, willbe rolled out to the UK, DACH, Nordics and allgrowth markets in 2022. The fastest-growingcustomer segments by volume generated 3in both mature and growth markets are thosewho purchase through Klarna more than twicea month. We continue to invest in ensuring ourconsumers can access the best benefits throughrecent acquisition Stocard, a mobile wallet thatbrings together loyalty cards all in one place, andproposed acquisition PriceRunner’s unparalleledproduct categorization, reviews and pricecomparison platform.301m2.6x45400k Clicks toretailers in 2021Growth in clicks toretail partnersOf Top 100 US retailers live withKlarna’s advertising servicesGlobal retail partnersPowerful consumer acquisition through expanding partnerships,verticals and servicesKlarna is a growth partner for retailers, not amarketplace. In 2021 we expanded the waysretailers can use Klarna to connect withconsumers through complementary acquisitionswhile diversifying revenue streams. Klarna nowsupports retailers through the entire salesfunnel from consumer acquisition to shoppingto post-purchase experience. Our compellingpre-purchase proposition for consumers nowincludes instantly shoppable content, live andvirtual shopping, running search and dynamic ad3campaigns, in-app sponsored placements, andlaunching tailored content creation partnerships.New, enhanced services will come online during2022 with rollout to many more retail partners.Klarna’s unique post-purchase experienceallows consumers to access delivery trackinginformation, instant refunds, and Klarna’s 24/7support smooths the experience betweenretailers and their customers in either the Klarnaor retail partner’s app.2019-2021K L A R N A B A N K A B ( P U B L)A N N UA L R E P O R T 2 0 2 113
Key AchievementsConnecting consumers with retailers, bringing the in-storeexperience onlineKlarna is scaling existing retailer relationshipsglobally alongside its market expansion whileexpanding into new and growing verticals suchas travel, event ticketing, beauty and highfrequency verticals such as pharmacy andgrocery. Klarna’s tailored premium and luxuryoffer has added 51 new global partners in 2021driven by consumer demand as 84% of luxuryshoppers want flexible payments as a standardpart of the purchasing experience.4 The breadthand reach of our partnerships across marketsand verticals support consumer preference forKlarna and increases return shopping throughchoice and convenience.65kSMBs joined Klarna in 2021400k Partnership giving accessto millions more SMBsKlarna is also a growth partner for Small andMedium-sized Businesses (SMBs) connectingsmall businesses with global consumers.Our enhanced global strategic partnershipwith Stripe will allow millions more SMBs tointegrate Klarna seamlessly into their customer4Global retail partnersexperience. Klarna is also creating an avenue forSMBs to access BNPL through its partnershipwith Billie, giving Klarna unprecedented breadthacross channels, verticals, and wth in partnersRise in globalin-store volumesCountries where Klarna isavailable in H&M storesThe State of Smooth:Unpacking Luxury in2022, Klarna, 2022K L A R N A B A N K A B ( P U B L)A N N UA L R E P O R T 2 0 2 114
Key AchievementsKlarna has seen accelerated demand acrossits in-store products as retailers look to drivethe consistency of customer experience acrosschannels through one preferred partner.While online retail is predicted to remain thefastest-growing channel, 72% of US retail salesare expected to take place in-store in 2024 5but in 2020 only 4% of offline sales included5New markets added in 2021BNPL, leaving significant headroom for growth.6Additionally, Klarna’s partnership with USmall operators Simon and Macerich and nowBrookfield allows Klarna to reach a potential 2billion shoppers, putting Klarna at the forefrontof shoppers’ minds in an enviable place in theshopping journey at over 300 major shoppingdestinations across the US.25New countries added through Stocard acquisitionMarket-leading expansion paceKlarna has entered some of the fastest-growinge-commerce markets in the world includingSpain and France, and now Canada. France hasalready reached 1m consumers since launchin June, and in Canada we launched with 300retail partners including Harry Rosen, Mejuri,and Frank And Oak, and global retailers suchas adidas, Sephora Canada, L’Oreal Canada,and GameStop. We have ambitious plans forfurther markets in 2022 where retailer demandand e-commerce market CAGR growth createmultiple growth opportunities across Klarna’ssuite of products and services. The acquisitionof Stocard has also provided Klarna withconsumers in 25 additional countries, providing aprimed user base for future expansion.Disrupting global retail banking through transparencyand better outcomes for consumers5Forrester, 20216Worldpay, 2020At Klarna we believe banking should besimple. Klarna’s investment in its open bankinginfrastructure - the largest open bankingnetwork in Europe with 15,000 banks in 24countries - provides our partners with fast,secure payments services, powers Klarna’sservices including the Klarna app and immediatesettlement, Pay Now, and underpins plannedmarket expansion. This investment also benefitsconsumers through the ability to integrate theirwider financial landscape including Klarna’snew current accounts and savings accounts.The desktop fixed deposit offering, partnershipwith deposit marketplace Raisin and new in-appsavings account Festgeld means consumerstrust Klarna with over EUR 6bn of their money.Festgeld already has EUR 100m of depositsless than one month after launch, illustratingconsumer demand for banking products thatbetter serve their needs.K L A R N A B A N K A B ( P U B L)High-cost credit, credit that encouragesconsumers to push debt forward indefinitelyas well other poor practices by credit cardcompanies, banks and other less seriousactors negatively impacts consumers. Klarnais committed to driving transparency andbetter consumer outcomes across the globalbanking and payments industry. In the Nordics,Klarna launched an industry-wide transparencyinitiative across the entire consumer creditmarket and implemented new product changesincluding improved payment reminders,elimination of fees, and amended paymentterms. The additional removal of endlessrevolving credit lines means consumers arepaying back their loans c20% earlier. The clearconsumer benefits of this program means Klarnawill now scale it to key global markets, tailored tolocal product fit and consumer preference.A N N UA L R E P O R T 2 0 2 115
Report fromthe Board ofDirectors.K L A R N A B A N K A B ( P U B L)A N N UA L R E P O R T 2 0 2 116
Report from theBoard of DirectorsThe Board and CEO of Klarna Bank AB (publ)hereby submits the report for the period January1 - December 31 2021. Klarna Bank AB (publ)’sparent company is Klarna Holding AB (publ).This report presents the figures for Klarna BankAB (publ) and its subsidiaries. The report hasbeen prepared in thousands of Swedish kronorunless otherwise stated.Information about the businessKlarna Bank AB (publ) is an authorized bank andis under the supervision of the Swedish FinancialSupervisory Authority (Finansinspektionen).Klarna is a leading global provider of innovativebanking, payments and shopping services. Wecontinuously develop new products to meet thechanging demands of consumers, helping themsave time and money by helping them makeinformed decisions and take control of theirfinances. Together our products and servicesbuild the ‘Klarna Everywhere’ concept, enablingconsumers to choose how, when, and where toshop, pay, and bank with Klarna, based on theirown needs and preferences.Our success is a result of the high degree of trustthat has been built with consumers, retailers, andpartners in all markets. This trust is critical in thefinancial sector, and maintaining it requires thatwe operate with the highest ethical standardsand strive to do what is right every day. Suchstandards are embedded across all parts of thebusiness - from handling sensitive personal datato a robust corporate governance framework andensuring all employees are treated with respectin a secure working environment. Klarna’spersonal data protection officer is responsiblefor ensuring that all personal details are handledin accordance with the General Data ProtectionRegulation (GDPR).Klarna was founded in 2005 in Sweden and hasbeen a fully licensed bank since 2017, active in45 markets.K L A R N A B A N K A B ( P U B L)A N N UA L R E P O R T 2 0 2 117
Report from the Board of DirectorsBusiness ResultsNet operating incomeIn 2021 Klarna continued to grow at pace as itlaunched new products, entered new marketsand continued to provide consumers withproducts and services that enable them tosave time, money, make informed decisionsand take control of their finances. GlobalMerchandise Volume increased 42% YoY toSEK 689bn (USD 80bn) and Total net operatingincome increased 38% YoY to SEK 13,754m atperiod-end.Commission income grew 47% YoY to SEK11,254m powered by new and expanding globalretailpartnerships and increasing consumer adoptiondriving additional payments volumes throughKlarna’s channels.Growth in Interest income of 24% YoY (SEK4,040m, USD 471m) remained below that of totalnet operating income as consumer demandfor our interest-free, shorter duration paymentproducts outpaced other payment alternatives.Interest expenses grew to SEK 822m (USD 96m)at period-end driven by significant ongoingvolume growth.Operating expensesIn 2021 we have accelerated our ambitiousmarket and product expansion plans enteringfive new markets and growing our productoffering to include the shopping app in18 markets, the shop anywhere browserextension, current and savings accounts aswell as enhancing Klarna’s suite of retailergrowth services through organic growth andcomplementary acquisitions. As a result,Operating expenses have increased to SEK15,688m and average FTEs at the end of theyear were 4,789 as we scale to provide Klarnaservices globally and continue to supportsignificant growth in existing markets, whilewelcoming new colleagues joining from acquiredcompanies.Net credit losses increased to SEK 4,647m(USD 542m) driven by continued growth in ourconsumer base and expansion into new markets.Liquidity and fundingSignificant volume growth across all marketscontributed to an increase in Loans to thepublic of 49% YoY to SEK 62,087m (USD 6,862m).Growth has been funded in part by the increasein Deposits from public of SEK 59,670m, up94% YoY, driven by the success of our savingsaccount offering in Germany and Sweden.K L A R N A B A N K A B ( P U B L)Klarna’s business model focused on short-termcredits results in a credit portfolio with anaverage turn of 40 days. This gives Klarna theflexibility to steer its balance sheet growth withina short timeframe.Capital adequacy has strengthened furthercompared to the same period last year followingequity raises in H1 2021. Klarna ended the yearwith a CET1 ratio of 31.3%, a strong capitalposition.A N N UA L R E P O R T 2 0 2 118
Report from the Board of DirectorsBranches AbroadKlarna Bank AB (publ) operates Klarna Bank ABUK Branch, Klarna Bank AB German Branch andKlarna Bank AB Norwegian Branch.During 2021, Klarna Bank AB (publ) also beganoperating Klarna Bank, filial af Klarna Bank AB(publ), Sverige (Denmark, June 2021), Klarna BankAB, Sucursal en España (Spain, August 2021), andKlarna Bank AB Irish Branch (Ireland,October2021) and also Klarna Bank AB French Branch(France, January 2022) after the period.Interactions with regulatorsWe continue our positive and proactiveinteractions with regulators: we welcomed the UKGovernment’s Woolard Review and ‘Regulationof Buy-Now Pay-Later’
loans, payday lenders etc. In addition to that they will most often have overdue electricity bills, phone bills, rent. Since Klarna never lends cash and the outstanding balance on average is USD 100, when consumers find themselves in debt, the amount owed to Klarna represents about 2% of their total debt. It is important to us to try to avoid them
