Klarna Group (KLAR)

We would not really view Klarna as a direct competitor to Visa/Mastercard, but there is some overlap. KLAR is focused more on the buy-now-pay-later (BNPL) business. This segment has been seeing good growth and as consumers become more constrained (for better or worse), these BNPL offerings can see higher demand as consumers look for alternatives to help with their spending. The business is inherently higher risk and would likely be volatile in a weakening economy but growth currently is high. It has just gone public recently and is in a bit of a drawdown frome where they started trading but we do think it is a name to keep an eye on.
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They offer all sorts of personal financial services to consumers and merchant partners include Airbnb, Walmart, eBay and Apple to facilitate payments. 76% of revenues come from transaction and service fees, plus traditional lending with few bad loans. It was profitable 14 years before they invested in growth to scale up in 2019, focussing on the US. They've been unprofitable since, though growth started to rise in 2023. Gross merchandise volume was +12% YOY in 2023, then 14% in 2024, then +21% in Q2-2025. Revenues: 20% in 2023, 24% 2024. Adjusted operating margin has risen from -38% in 2022 to +6.4% in 2024, so improving growth. Caveats: they sold only 16% of shares from the company, so the IPO was mostly about letting existing shareholders and employees ring the register; he's rather investment for growth rather than exit liquidity for venture capitalists. However, they have excellent cash flow and have been in business for 20 years. He expects +15% sales growth this year, so that's 5.4x 2024 sales. Can be bought at current levels though he prefers Affirm.