Klarna Eyes U.K. Finance Rules as Factor in Blockbuster IPO

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Europe’s most valuable startup, Klarna Bank AB, said its decision on whether to move ahead with a blockbuster listing in London hinges on the U.K. government’s post-Brexit financial services regulation.

The Swedish payments company’s Chief Executive Officer Sebastian Siemiatkowski hopes the British government “follows the lead of Singapore” in easing the burden of red tape on the industry. He wants rules that allow customers to “shift banks in the click of a button.”

Allowing innovation in finance would help Klarna and other financial technology companies grab business from traditional credit cards. Klarna enables consumers to “buy now and pay later” in interest-free installments for items they buy online from retailers including Asos, Decathlon and Lululemon.

Klarna Eyes U.K. Finance Rules as Factor in Blockbuster IPO

Klarna has more than 90 million users and over 14 million customers worldwide and offices in London and Manchester. It’s considering a listing in the U.K. capital in the next year or two. Britain’s departure from the European Union has created an “amazing opportunity” for London to be at the center of banking and fintech for the future, the CEO said in an interview.

“What I’m very keen on is being able to continue having a very long-term perspective,” Siemiatkowski said. “I am slightly worried about the quarterly reporting and the impact it might have on our culture. From that angle, I’ll evaluate what’s a good listing place.”

Klarna also plans to apply for a British banking license within the three-year post-Brexit grace period which expires in April next year, so that it can start taking deposits in Britain. The company is leaning toward a listing in New York but may pick London, the CEO said in an interview published by Quartz earlier this week.

Klarna Eyes U.K. Finance Rules as Factor in Blockbuster IPO

“In deciding where to list, we are considering a range of factors including the investment culture and appetite for taking a long-term view, the potential for a fair valuation, and the strength of support for the fintech sector which of course is very strong in the U.K.,” a spokesman for Klarna said.

Given Klarna’s IPO ambitions, what also worries Siemiatkowski is the future of equity markets as coronavirus restrictions ease and consumers splurge the savings they built during lockdowns. Klarna was valued at $31 billion in a funding round earlier this year, triple the level of September.

The Bank of England reckons the unleashing of savings could fuel a consumer boom on a scale not seen since the 1980s. “As these people start spending again, they’ll start withdrawing money from those savings accounts, and that to me is a bigger risk that we might have a tough equity market ahead of us,” Siemiatkowski said.

Klarna Eyes U.K. Finance Rules as Factor in Blockbuster IPO

He acknowledges, however, the inconsistency of choosing an IPO over a direct listing, in light of the company’s mission to challenge the traditional banking model.

“I just don’t like bankers,” he said. “When I look at the fee system that traditional banks are making from IPOs, it’s a transfer of wealth that’s going away from shareholders, from the potential buyers of the stock, and into somebody else’s pocket. Whatever we can do to help promote a different banking industry -- even if it’s as simple as a direct listing -- is attractive.”

Central bank digital currencies will be another route toward making online payments fairer and more efficient because for too long, retail banking has been “taxing society for moving money from A to B,” he said. “The transfer in itself should come down to zero and digital currencies have the potential to accomplish that.”

The company is hoping the Bank of England will back a central bank digital currency to smooth online payments, joining authorities from Sweden to China in exploring the next big step in the future of money.

Though the final product is a few years off, Governor Andrew Bailey said earlier this month. His deputy Jon Cunliffe warned that unless governments embrace the idea private companies will take control of the money people use.

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