Ant financial takes stake in Swedish payments firm Klarna

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The financial services affiliate of Alibaba Group Holding Ltd has agreed to buy a minority stake in Klarna, and will expand its international partnership with the Swedish payments firm.

Ant Financial, which owns payments platform Alipay, plans to expand current collaborations, such as the AliExpress partnership that lets Alibaba Group users access Klarna’s “pay later” service, the companies said in a statement on Wednesday.

Ant will hold about a 1% stake in Klarna following this funding round, two people familiar with the matter said, asking not to be identified as the talks are private.

Terms of the deal weren’t disclosed.

Ant Financial is the biggest player in China’s $27 trillion payments market, and is expanding into consumer lending, letting customers who may not necessarily have formal credit histories access loans via a few taps of their smartphones. It’s a similar model to Klarna, which offers short-term credit for online shopping, fronting the bill for customers and letting them pay later in installments or 30 days after delivery. The 15-year-old Stockholm-based firm also offers financing from six to 36 months.

Klarna, which is backed by the rapper Snoop Dogg and Sequoia Capital, has been riding a wave of investment in fintech firms. The company raised $460 million in August at a valuation of $5.5 billion. Fintechs are challenging more established banks and credit card companies, targeting younger users accustomed to handling their banking and shopping on their smartphones.

Last month, Klarna agreed to buy Italy’s Moneymour for an undisclosed sum, giving the company access to underwriting capabilities and building out its product development hub in Milan. Klarna’s used by more than 200,000 retailers and e-commerce platforms including H&M, Ikea and Nike shops, the company said.

Still, some companies have found it difficult to break into the market. N26 GmbH, the German mobile bank backed by billionaires Peter Thiel and Li Ka-Shing, said in February that it will end U.K. operations, blaming the country’s plan to leave the European Union and Brexit’s affect on its banking license.

Bloomberg News