As BNPL giant Klarna signs on more customers, more could struggle to repay loans in a slowing economy

Greg McKenna

<ul>
<li>While buy-now-pay-later giant Klarna gains momentum in the world’s largest economy, there are warning signs Americans are preparing to pull back on spending. The company&#8217;s credit losses rose in the most recent quarter, but a spokesman said it was due to more loan origination, not consumer sentiment. </li>
</ul>



Klarna’s push into the U.S is helping drive <a href="https://fortune.com/europe/2025/05/20/klarna-hits-100-million-users-revenue-onetime-costs-jump-fintech/">record revenues</a> for the Swedish “<a href="https://fortune.com/europe/2025/05/19/uk-moves-forward-regulate-buy-now-pay-later-firms-klarna-clearpay-zilch-paypal/">buy now, pay later</a>” giant. It’s also fueled worries, however, about whether Americans’ somber mood on the economy could weigh on the buzzy fintech’s bottom line.<div class="paywall-selector"></div><div class="paywall">



Klarna <a href="https://fortune.com/2025/04/05/klarna-stubhub-initial-public-offering-new-york-stock-exchange-ipo-liberation-day-tariffs-doordash/">postponed plans</a> to go public after President Donald Trump’s tariffs sent the <a href="https://fortune.com/article/markets-recoup-losses-jpmorgan-ceo-jamie-dimon-warns-investor-complacency/">stock market</a> into free-fall in early April. In a preliminary IPO <a href="https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/klarnagroupplcf-1.htm">filing</a>, the company, which was reportedly targeting a $15 billion valuation, acknowledged an economic downturn or market disruption could make it more difficult to collect loans.&nbsp;&nbsp;



Credit losses hit $136 million in the first quarter, according to the company earnings <a href="https://s205.q4cdn.com/644747736/files/doc_financials/2025/q1/Q1-25-Klarna-Earnings-Release.pdf">release</a>, increasing 17% from the same period last year. However, a company spokesperson said they rose because Klarna made more loans, not because the company’s customer base or the economy worsened.&nbsp;



Klarna does not charge interest on its short-term loans, making money from the fees it charges merchants like <a href="https://fortune.com/company/walmart/" target="_blank">Walmart</a>, <a href="https://fortune.com/company/ebay/" target="_blank">eBay</a>, and DoorDash—as well as customers who do not pay on-time. As a share of total payment volumes, the company’s credit losses remained relatively low at 0.54%, up slightly from 0.51% last year.



Quarterly revenue surpassed $700 million, in large part thanks to 33% growth in the U.S., as an AI-powered avatar of CEO Sebastian Siemiatkowski noted during a brief video presentation.



“Delinquency trends are improving, especially in the U.S.,” the company said in the earnings release, “signaling strengthening credit performance.”



Klarna’s net loss more than doubled from last year to $99 million, though the bottom line took a $59 million hit from increased stock-based compensation to employees.



<h2 class="wp-block-heading">Klarna stays nimble as consumer sentiment plummets</h2>



While Klarna gains momentum in the world’s largest economy, however, there are warning signs Americans are preparing to pull back on spending. Consumer sentiment has hit the second-lowest level in the five decades the famed University of Michigan <a href="https://www.sca.isr.umich.edu/">survey</a> has been tracking the metric, with May responses closing two days after news of the Trump administration’s <a href="https://fortune.com/2025/05/14/us-china-tariffs-christmas-shipping-orders/">trade détente</a> with China.



Bigger discretionary outlays on things like airfare and lodging declined in March and April, according to <a href="https://fortune.com/company/bank-of-america-corp/" target="_blank">Bank of America</a> credit card <a href="https://institute.bankofamerica.com/content/dam/economic-insights/consumer-checkpoint-may-2025.pdf">data</a>. The bank’s monthly consumer <a href="https://rsch.baml.com/report?q=Q3x7hxduMGkYnpzIzJjdCw&amp;e=bofa_global_research_media%40bofa.com&amp;h=sNZ-iw">survey</a>, meanwhile, found fewer consumers planned to buy big-ticket items like new homes or appliances this year.



Some pockets of borrowers are showing early signs of stress. Only 11% of credit card accounts made the minimum payment on their bill in the final quarter of 2024, <a href="https://fortune.com/article/record-americans-minimum-credit-card-payment/">a record</a> since the Federal Reserve Bank of Philadelphia began tracking the number 12 years ago. More recently, delinquent <a href="https://fortune.com/2025/05/15/consumer-debt-delinquency-surges-student-loan-payments-pause-expires/">consumer debt</a> in the U.S. hit a five-year high as the Trump administration restarted collections on student loan payments in default.



Amid the uncertainty, Klarna says it can remain nimble. Each loan is evaluated, the company said, and 83% of outstanding loans are repaid or otherwise closed within six months.



However, the story so far has been mostly one of bad vibesWeakness in the so-called “soft data” of surveys and sentiment has not shown up in most “hard” measurements of consumer strength, including spending and employment. According to the latest <a href="https://www.bea.gov/news/2025/personal-income-and-outlays-march-2025">release</a> from the Bureau of Labor Statistics, personal income and expenditures both increased in March.



Tariffs—whatever their eventual size or scale—are a clear negative for consumers, said Jim Caron, chief investment officer at the portfolio solutions group at <a href="https://fortune.com/company/morgan-stanley/" target="_blank">Morgan Stanley</a> Investment Management.&nbsp;&nbsp;



“I think people have become somewhat fearful,” he told Fortune. “But do those fears manifest themselves? Will they actually be realized at some point in the future?”</div>

Credit losses increased 17% year-over-year to $136 million in the first quarter. 

More Klarna customers could struggle to repay loans

Sebastian Siemiatkowski, wearing a yellow shirt, talks into a microphone.

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