Six months after listing on the New York Stock Exchange at $40 a share, Klarna is trading at roughly $12. The Swedish buy-now-pay-later company that once symbolised European fintech’s arrival on Wall Street has lost more than three quarters of its market value since its September debut. On Tuesday, it announced a $1.7 billion significant risk transfer transaction with a consortium led by Värde Partners, its sixth such deal, designed to free up capital and support up to $40 billion in lending. The deal is the company’s largest and most efficient SRT to date. The question is whether financial engineering can sustain a growth trajectory that the public markets have decisively repriced.
A significant risk transfer, or SRT, is a mechanism by which a bank transfers the credit risk of a defined loan portfolio to external investors, typically through synthetic securitisation. The underlying loans stay on the bank’s books, but the risk of loss shifts to third parties. When structured correctly, the transaction qualifies the bank for regulatory capital relief, reducing risk-weighted assets and freeing equity that can be deployed against new lending. For Klarna, which holds a Swedish banking licence and operates as a regulated bank, the SRT structure allows it to stretch its capital across a much larger loan book than its balance sheet would otherwise support.
The deal covers $1.7 billion of euro-denominated loans under a three-year agreement. Niclas Neglén, Klarna’s chief financial officer, described the banking licence as “one of our biggest competitive advantages” and the SRT programme as the means by which Klarna maximises every unit of capital. It is the kind of statement that reads differently depending on whether you view Klarna as a technology company that happens to have a banking licence or a bank that happens to have good software.
The transaction follows a $2 billion facility Klarna announced on 23 March with funds managed by Elliott Investment Management, the activist hedge fund. That deal doubled an existing forward-flow and whole-loan sale agreement under which Klarna sells newly originated US financing receivables to Elliott-managed funds on a rolling basis. Over the extended three-year term, the facility is designed to support up to $17 billion of US lending. Together, the two deals give Klarna a capital architecture that can support more than $40 billion in total lending capacity, a figure that dwarfs the company’s current balance sheet and speaks to the ambition of its expansion, particularly in the United States.
The US market is where Klarna’s growth story is strongest, and where the capital is being pointed. In the fourth quarter of 2025, US revenue grew 58 per cent year on year. The company now counts 29 million American consumers, roughly 11 per cent of the adult population. Its full-year 2025 revenue reached $3.5 billion, up 25 per cent, on gross merchandise volume of $127.9 billion. The fourth quarter alone delivered Klarna’s first billion-dollar revenue quarter, at $1.082 billion. Active consumers globally stand at 118 million, with over one million merchants on the platform. By the metrics that matter to a lending business, Klarna is growing fast.
The stock market does not appear to agree that growth alone is sufficient. Klarna’s shares have fallen from a 52-week high of $47.48 to roughly $12, a decline that reflects broader market scepticism toward unprofitable or marginally profitable fintech business models, as well as specific concerns about credit risk in a macroeconomic environment where consumer delinquencies have been ticking upward. The IPO raised $1.37 billion in September 2025, with shares priced at $40 and demand oversubscribed by roughly 25 times. That enthusiasm has evaporated.
Klarna’s response has been to double down on capital efficiency rather than retrench. The SRT and Elliott structures are designed to grow lending without proportionally growing the balance sheet, a strategy that works as long as credit performance holds and investor appetite for the underlying risk remains. Värde Partners, which leads the SRT consortium, has deployed $13 billion through its asset-based finance strategy since 2008 and is an experienced participant in the European risk transfer market. Elliott’s involvement in the US programme reflects the hedge fund’s conviction in the credit quality of Klarna’s short-duration consumer receivables.
The AI dimension is relevant here. Klarna has been among the most aggressive companies in technology or finance in using artificial intelligence to reduce headcount. The company shrank from approximately 7,400 employees to around 3,000, largely through attrition and a hiring freeze in which departing staff were replaced by AI systems rather than new hires. CEO Sebastian Siemiatkowski said publicly that an OpenAI-powered customer service assistant was doing the work of 700 agents, and that remaining employees received a 60 per cent pay increase funded by the savings. However, the company subsequently began rebuilding parts of its human customer service capacity after discovering quality issues with the fully automated approach, a shift from full AI replacement to a hybrid model that complicates the narrative of frictionless efficiency.
The broader context is a BNPL sector that has matured past its hype cycle. The regulatory environment has tightened in the EU, the UK, and Australia. Credit losses across the industry have normalised at levels higher than the pandemic-era lows that made every portfolio look pristine. Klarna’s banking licence, once seen primarily as a competitive moat for deposit-taking and lending, is now also the mechanism through which it accesses SRT capital relief, a tool traditionally associated with established European banks rather than technology companies.
What Klarna is building, through the SRT programme, the Elliott facility, and its banking infrastructure, is a capital-light lending machine that can originate at scale while transferring risk to institutional investors with appetite for consumer credit. If the execution holds, the company’s lending capacity will be determined not by its own equity but by the depth of the third-party capital willing to absorb the credit risk. That is a powerful model, but it is also one that depends on continued confidence from counterparties like Värde and Elliott, confidence that could evaporate quickly if Klarna’s credit performance deteriorates.
For now, the numbers suggest the strategy is working operationally even as the stock market remains unconvinced. Revenue is growing. The user base is expanding. The capital architecture is becoming more sophisticated. But a 76 per cent decline from the IPO high is not a market correction. It is a market judgement. Whether Klarna’s latest round of financial engineering proves that judgement premature or prescient will depend on what happens to consumer credit in the next twelve months, and whether $40 billion of lending capacity turns out to be an engine of growth or a measure of exposure.
