Klarna's Moneymour deal boosts lending tech for international ambitions

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Klarna has agreed to acquire Italian fintech Moneymour as part of an innovation push to counter rivals in the popular point of sale credit market.

Moneymour was founded in 2017, and Klarna will build a technology hub in Milan, Moneymour's home base. The hub will fuel international markets, as Klarna is expanding in the U.S., a move that comes with a potential IPO. Klarna has also partnered with CBA to expand in Australia. The Moneymour deal is scheduled to close in the first quarter, and terms were not disclosed.

Klarna was particularly attracted to Moneymour's engineering and technology capabilities. “We’re impressed with what the Moneymour team has achieved so far, and we are also happy to now progress the establishment of our new product development hub in Milan. The talented team has developed an interesting offering for the Italian market, and with their knowledge and expertise we can further strengthen our underwriting capabilities in the market,” Koen Köppen, Klarna's chief technology officer, said in a press release.

Moneymour’s credit scoring engine allows the startup to offer “buy now, pay later” installment loans based on an instant credit assessment. The credit scoring engine feeds customer balance and transaction data into an algorithm to produce an underwriting decision. The technology delivers a fast, automated credit decision that requires only a few clicks by consumers making the experience appear seamless which is key for targeting millennials (Klarna’s main target customer group).

“Moneymour has developed a technology that uses the PSD2-regulated access to account facility. Under PSD2, licensed PSPs have the right to access any European bank account if the account holder gives his/her consent. This means that Moneymour can check the balance and activity on the customer’s payment account and based on that, develop a real-time credit score on that customer. This is an innovative open banking use case that I believe has strong potential,” said Ron Van Wezel, senior analyst at Aite Group.

Klarna expects the acquisition to expand its presence in Italy and to leverage the Moneymour technology across its other markets to deliver a better customer shopping experience.

“The option to “pay later” is becoming an important tool for European merchants as it improves conversion [into] sales. Consumers can easily check out and deal with the invoice later when the goods have arrived,” said Van Wezel.

Fintechs and traditional financial institutions are investing in Installment loans, which are a popular alternative to credit cards, particularly with millennials. Klarna faces competition from Splitit, which recently signed an onboarding deal with Stripe, and from Affirm, PayPal and other fintechs.

Klarna's valuation recently passed $5.5 billion, and the firm has entered a series of deals with merchants such as Abercrombie & Fitch, H&M, Peloton, Samsung, Adidas, IKEA, Nike and Expedia. Klarna has more than 200,000 merchants in its 17-nation merchant network. It has more than 2,700 employees and currently operates in 17 countries.

Visa acquired a stake in Klarna in 2017 recognizing the importance of the installment lending segment as an alternative to credit cards in completing merchant purchases. Other investors in Klarna include U.S. rapper Snoop Dogg, Commonwealth Bank of Australia, BlackRock, Dragoneer Investment Group and Swedish clothier H&M.

In 2017 Klarna introduced financing for subscription-based services starting with TaylorMade Golf to expand into the burgeoning subscription market.

Visa recently made an investment in the installment lending platform ChargeAfter. This follows a similar investment by Mastercard and American Express last year when the duo invested in rival lending platform Divido.

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Lending Point-of-sale Merchant Klarna Affirm Visa