What:

Klarna secures UK Electronic Money Institution license, enabling it to offer banking services and cashback rewards to British customers alongside its BNPL products.

Why it is important:

The expansion into banking services represents a strategic diversification for Klarna amidst growing concerns about BNPL lending risks, allowing it to build more sustainable revenue streams whilst maintaining its consumer finance leadership.

The UK's financial regulator has granted Klarna an Electronic Money Institution (EMI) license, marking a significant expansion of the Swedish fintech's capabilities in the British market. This authorization enables Klarna to offer comprehensive banking services, allowing customers to hold and manage money in Klarna accounts, top up balances via debit cards, and earn up to 10% cashback on purchases. Founded in 2005 by Sebastian Siemiatkowski, Klarna has evolved from its BNPL roots to position itself as a consumer neobank, following its delayed IPO this year. The company has actively diversified its offerings, launching mobile phone plans in June alongside competitors Revolut and N26, and introducing a Visa debit card for US customers that integrates with its existing Pay in 4 and Pay Later products. This banking license represents Klarna's strategic push beyond flexible payments into everyday financial management, as stated by Abby Vickers, head of Klarna's UK subsidiary.

IADS Notes:

Klarna's acquisition of a UK banking license in July 2025 represents the culmination of a strategic evolution that began in September 2024 with their expansion into physical retail through Adyen. The company's subsequent partnership with Apple Pay in October 2024 and securing Walmart as an exclusive partner in March 2025 demonstrated its ambition beyond pure BNPL services. However, this growth occurred amid increasing scrutiny, as October 2024 reports showed problem borrowing growing at twice the industry rate. The landscape grew more complex when Affirm entered the UK market in November 2024, emphasizing responsible lending just as research revealed BNPL's 10% boost to consumer spending. By May 2025, Klarna faced dual challenges: a 17% increase in credit defaults and the UK's announcement of comprehensive BNPL regulations for 2026. This banking license, therefore, arrives at a crucial juncture, potentially allowing Klarna to diversify its revenue streams while adapting to stricter regulatory requirements in a market where over 10 million consumers now use BNPL services.

Klarna gets green light to launch banking products in UK