Yahoo Finance’s Myles Udland, Julie Hyman, and Brian Sozzi speak with Klarna CEO, Sebastian Siemiatkowski, about the state of the company amid COVID-19 and future outlook.
JULIE HYMAN: Well, people who are buying presents online this holiday season have more options than ever in terms of payment, and also in terms of not paying immediately. Klarna offers one of those options. It's a buy now, pay later service, also the most highly valued, privately held fintech in Europe. And the founder and CEO, Sebastian Siemiatkowski is joining us right now. Sebastian, it is great to see you again.
I want to start, actually, not with holiday shopping, but somewhere else, if I could, because we here on the show have been talking a lot about the hot IPOs recently. We've also, of course, been talking about one of your competitors, Affirm, which now appears to be delaying its IPO. Where are you guys standing on that front in the IPO process? How are you thinking about timing at this point?
SEBASTIAN SIEMIATKOWSKI: Well, I think, look, we've been very fortunate. Our biggest shareholder is Sequoia Capital. And Michael Moritz is on our board, who obviously was on the board of Google and YouTube and a lot of successful companies. We've had this discussion for a long period of time. They joined as an investor 10 years ago. They've had a very long-term perspective, and we still do.
So, you know, we'll see how things develop, but from our perspective, there's benefits to IPO-ing and being public, but there's also a lot of benefits to being a private company. Private markets are still very liquid, and also it allows us to be very long-term about what we're doing. Because we generally think that this is going to be the decade of disruption in retail banking. The last one was about disruption of retail, now it's retail banking's time. And in that disruption, you want to have a long-term objective because there's going to be a massive shift in this market.
BRIAN SOZZI: Sebastian, let's just assume you are going to stay a private company. You got a bank license, I believe, in 2017. What are your plans to utilize that more in 2021 and beyond?
SEBASTIAN SIEMIATKOWSKI: Well, I think that we are continuously building out more products in that area-- less so in the US, obviously, than in Europe. But as an example, in Europe we have, in the last year, issued over half a million debit/credit cards, which obviously is a quite amazing feat for us, so we're quite happy about that. And we're developing deposit services and so forth. So in Europe, we're more known as a neobank, similar to Chime, maybe, in the US. So slightly different offering than the one that people associate with us in the US.
MYLES UDLAND: And Sebastian, building off of that, I'd love if you could maybe outline some of the dynamics that are different in Europe versus the US. And it seems to me from my vantage point, and what do I know, that fintech in Europe's a little bit more-- I don't know if advanced is the right word, but it certainly is more ubiquitous or wider-spread. Do you see some of those trends coming to the US here, and what might that look like? What are the players that are going to be disintermediated by the growth of a company like you guys and a firm here in the States?
SEBASTIAN SIEMIATKOWSKI: Yeah, I can't really tell why that is the case, but it does seem to me that there's been more successful large-scale fintechs in Europe. Look, as I said initially, we're going into a time where I really believe that this is the decade of disruption of retail banking. And if you ask yourself, like, who's going to be successful in that, I think we're going to end up with a few global players that play in the retail banking space, and some of them will have their origins in the tech companies, some of them will have their origins in banks that are able to reinvent themselves, and some will be fintechs. And then some people will lose out in this transition as always happens. And so I think that's kind of how things will play out.
In regards to Klarna, you know, we are seeing now almost 12 million users in the US alone. We have 90 million users globally, so we think we are on an exciting trajectory to be one of those succeeding players in that disruption. And obviously, over time we want the consumer experience to be the same across all markets because we're seeing that that is actually doable today. I mean, 10 years, 20 years ago, it was very difficult for a bank to offer consumer services across all these jurisdictions because there was so many different regulations, different challenges. But today, it's actually possible to do that thanks to the more modern technology that we used than the legacy banks.
JULIE HYMAN: So Sebastian, if you guys are starting to issue debit and credit cards, for example, and you have that bank charter that you were just talking about a few moments ago, how, then, do you differentiate yourself from a bank? In other words, what makes you special, sort of, as a fintech, and how do you do that disruption while still retaining your identity as a fintech, but offering traditional banking services?
SEBASTIAN SIEMIATKOWSKI: Well, I think it's in that mix, actually, that the excitement is. We're both kind of a fintech, fast-moving, fast-paced, innovate a lot, try new product offerings, be very customer-obsessed. I mean, it's not, maybe, a big secret, but the problem is that the banking industry had more or less given up on their customers. They're not very customer-obsessed, they're more profit-obsessed. And I think that there's a big opportunity to come with a bank offering that is actually about the consumer.
One example of that is that buy now, pay later solution that we provide in the US, which actually allows people to take a $200 purchase and split it on four equal free installments with no cost to the consumer. Now, that's very different from the traditional credit card charging you 29% if you revolve. And so that's one good example of that.
And then we also are very favored in the US by the fact that people like Macy's, and Etsy, and Sephora, and Express, and Foot Locker are promoting these solutions to the consumers. Because they in turn see a lift in AUV and a lift in conversation rate as the younger demographic doesn't use credit cards anymore because they've grown so tired of the poor practices that credit cards have applied in how they offer their services, how it's all about finding a way to get you to revolve eventually at those high interest rates.
So there's a lot of opportunity to change, provide really customer-focused, transparent, and great services in this area. And it's the dream of an entrepreneurial company because you have high barriers of entry, low innovation, a lot of tech legacy. Like, you can't imagine a better place to innovate than in retail banking, in essence.
JULIE HYMAN: Sebastian, it's good to catch up with you. Hope to check back in with you soon, especially if there's any news on the IPO front. Happy holidays to you, Sebastian Siemiatkowski, Klarna CEO. Thank you so much. Appreciate it.
SEBASTIAN SIEMIATKOWSKI: Thank you so much for having me. Thank you.