Klarna Applies for U.S. Banking License: Utah Charter Bid Marks Next Phase

The buy now, pay later giant Klarna is gearing up to expand its suite of financial products.

To advance that plan, the Sweden-born company filed on Monday with the Federal Deposit Insurance Corporation and Utah’s state banking regulator to secure an industrial loan company charter.

In Europe, Klarna has operated under a banking license since 2017 through Klarna Bank AB, which offers bank-style services such as holding customer funds, taking deposits, and providing credit and payments infrastructure alongside its consumer checkout products. In the U.S., it delivers parts of its offering through partner financial institutions, most commonly via WebBank.

A company spokesperson declined to discuss additional intermediary or bank relationships.

The application signals a bid to bring more activity under direct control and to broaden its menu of services, the company said Monday, adding that stronger competition could follow in the U.S. market. Klarna has already helped cement pay-in-installments options as a standard checkout feature for many merchants, and its growth has pushed rivals and card-linked lenders to roll out their own installment products and merchant tools.

CEO Sebastian Siemiatkowski characterized a charter as the logical next step, arguing it would help customers borrow prudently, build confidence, and increase choice and innovation for shoppers and merchants.

Although the headquarters remain in Stockholm and the initial public listing was registered in London last year, Klarna’s emphasis is increasingly American: the U.S. now produces the most revenue, and most investors are stateside, a spokesperson said by email.

Founded in 2005 as Kreditor and rebranded in 2010, Klarna went public for the first time last year. Since then, amid a broader fintech downturn, its shares have fallen by roughly half.

Airline Partnership: Fintech Push Takes Flight

Signaling those ambitions, Klarna announced a long-term arrangement with an airline partner that will take its financing options to millions of U.S. travelers, another shot at the entrenched card ecosystem.

• Southwest Airlines
• Qatar Airways
• Lufthansa
• Emirates
• TAP Air Portugal

Airlines face mounting pressure to modernize payments, a Klarna spokesperson said by email, noting carriers have invested billions in retail technology while checkout flows remain largely card-centric and little changed for decades.

Skeptics note that tight links between U.S. airlines and card issuers through loyalty programs could slow adoption. Klarna may be betting travelers will try an alternative method, said Sam Wares, a director at consulting firm The Strawhecker Group.

Wares cautioned that unseating cards will be tough because travel purchases are deeply tied to rewards.

Whether Klarna’s financing will beat traditional card payments is uncertain, and rising trip costs could influence choices, he added. Younger customers, he said, may prove more open to the option.

Bringing Banking In-House

Klarna isn’t the only company moving to deepen financial services through a charter. Other firms have also pursued industrial loan company approvals in recent months:

• PayPal
• Affirm

Siemiatkowski has long targeted disruption of U.S. financial services. Klarna’s hallmark BNPL product already offers an alternative to conventional banks and credit cards.

If regulators grant a U.S. bank license, Klarna says it will internalize banking operations and lessen reliance on third-party partners, even as it praises its existing partner banks. In practice, that could mean more funding, underwriting, servicing, and account-like functions moving onto Klarna’s own rails, as well as room to introduce additional bank-style products over time, such as deposit-backed offerings and a broader set of credit products, subject to regulatory approvals and the company’s product decisions. Such a shift could also change its economics by reducing partner-related costs while expanding revenue tied to interest income and other bank operations, alongside higher compliance and capital requirements.

For consumers, a charter could translate into a more seamless experience in the Klarna app, potentially faster product rollouts, and clearer accountability when issues arise because more steps would sit with a single provider rather than multiple intermediaries. If Klarna eventually offers deposit products tied to the bank, eligible balances could come with FDIC insurance protections.

If Klarna becomes a regulated U.S. bank, customers may see tighter integration and stronger protections on bank-held funds, but also more formal credit underwriting, more account rules, and new fee or rate structures that differ from today’s partner-led model.

Consumers could also face changes that cut the other way, including stricter eligibility checks, different dispute and servicing processes, and the possibility that new banking products encourage higher borrowing limits or more cross-selling. And while a charter can increase oversight in some areas, it does not automatically make every Klarna product “risk-free,” particularly for shoppers who juggle multiple installment plans.

With those partnerships, Klarna has cultivated sizable U.S. demand: since 2019 it has extended $91.3 billion in credit to millions of consumers, and hundreds of thousands of merchants use its services, the company said. Klarna did not provide an updated, more precise count of current U.S. consumers or U.S. merchants beyond those ranges.

If the FDIC-insured charter is approved, the bank would operate as a company subsidiary led by Gary Harding, previously CEO of Milestone Bank and Prime Alliance Bank.

Charter Debate and Regulatory Crosswinds

The industrial charter Klarna seeks has become a political flashpoint.

Lawmakers from both parties, backed by segments of the banking industry, argue that an ILC charter can exempt companies from being defined as a “bank” under the Bank Holding Company Act. Because ILCs do not offer demand deposit accounts, they can avoid Federal Reserve oversight, critics contend.

In January, Sens. John Kennedy of Louisiana and Andy Kim of New Jersey introduced legislation to close what they called the “shadow banking loophole.” The measure is pending before the Senate Committee on Banking, Housing, and Urban Affairs.

In May, the Independent Community Bankers of America warned that excluding the Fed from ILC supervision creates a dangerous gap in safety-and-soundness oversight and introduces unnecessary systemic risk.

Last year, Kim and Sen. Elizabeth Warren proposed a moratorium on commercially owned ILC charters until such companies are defined as “banks” under the Bank Holding Company Act.

Even so, Trump-appointed regulators have signaled greater openness to ILCs. FDIC Chair Travis Hill last year promoted the charter as one avenue to spur the formation of new banks.

Stellantis won approval in May to launch an ILC, while Ford and GM received conditional go-aheads in January. Investment firm Edward Jones followed in February.