Swedish fintech unicorn Klarna recorded steeper losses in the third-quarter as costs related to the firm’s transition to becoming a fully-fledged bank offset record revenue.
The buy now, pay later firm – which has set its sights on becoming a digital bank – recorded a loss of $95m (£72m) for the three months ending 30 September 2025, a steep fall from just $5m for the same period last year.
This was also wider than the $53m in the second quarter.
It comes as the firm increased its provision for potential sour loans that offer interest to 0.72 per cent, from previously 0.44 per cent of total volumes.
Despite this, consumer credit losses – actual losses incurred divided by the firm’s total value of all goods sold – fell to 0.44 per cent from 0.45 per cent previously.
The move to raise provisions on interest-bearing loans comes as Klarna accelerates its transition to traditional banking, and shifts away from its traditional buy now, pay later operations.
The fintech launched the ‘Klarna Card‘ in July, which chief executive Sebastian Siemiatowski said had “exploded since its debut”.
Over 4m users now use the product accounting for 15 per cent of transactions.
Siemiatkowski said the spike in provisions was tied to “expected profit lag that happens when you grow fair financing at this pace.”
Klarna’s record quarter offset by costs
The earnings update follows Klarna’s public offering in September, after its previous plans were derailed by President Donald Trump’s tariff agenda.
The company’s stock popped 15 per cent from its IPO price to $45.82 in its Wall Street debut, but has since given up gains and shed nearly a fifth of its market value to $37.65.
The group’s revenue shot up in the third-quarter, namely driven by a 51 per cent surge in the US.
Klarna notched its highest quarter on record at $903m.
Niklas Kammer, senior equity analyst at Morningstar, said: “If we look at actual performance rather than accounting metrics, the quarter was good.”
He added: “The growth in fair financing has a short-term accounting pain, but brings strong economics to Klarna if we take a slightly longer perspective.”
In July, the firm received an electronic money institution licence from the Financial Conduct Authority, setting it up to compete with UK fintech veterans Monzo and Revolut.
The firm has continued to move at speed its transition to a digital bank, with a batch of new product launches to take on high street lenders including membership perks and tiered offerings.