Swedish fintech Klarna valued at $5.5 billion in funding round

FRANKFURT (Reuters) - Online payments firm Klarna, which has attracted a growing following with its “buy now, pay later” service for shoppers, said on Tuesday it had raised $460 million in a funding round that makes it Europe’s most valuable fintech startup.

Investors led by San Francisco-based Dragoneer Investment Group put new money into the Swedish company, giving it a valuation of $5.5 billion and additional financial firepower to expand in the United States.

Klarna, founded in 2005 by chief executive Sebastian Siemiatkowski and partners, enables consumers to buy online without having to provide payment details to the merchant they are buying from.

Instead, Klarna pays for the order, which is then dispatched. It invoices the buyer, who typically gets 14 or 30 days to settle. Its core products are interest-free in the U.S. and UK markets, with merchants paying for its services.

Joining other European fintechs like Berlin-based smartphone bank N26, Klarna said it would invest proceeds to expand in the United States, where it was adding new customers at an annual rate of 6 million.

Klarna said it wanted to offer U.S. consumers a simpler alternative to credit cards, while building up partnerships with merchants including rue21, ASOS, Lulus, Toms, Superdry, Sonos and Acne Studios.

“Finally, transparency, technology and creativity will serve the consumer,” Siemiatkowski said in a statement.

U.S. millennials, influenced by the fallout of the financial crisis of a decade ago, are more averse to credit cards than their elders.

Only a third of 18-29 year olds has one, compared to 62% of 50-64 year olds, according to research by Bankrate here, with many preferring debit cards.

Klarna’s biggest existing shareholders, including Sequoia and Bestseller, invested more than $100 million earlier this year, setting the stage for this external round.