Exactly, the share price is pricing in stellar growth but as...

Exactly, the share price is pricing in stellar growth but as Klarna have discovered that growth in customers is a very expensive exercise.

The recent APT update which stated quite clearly that they have cash reserves to last multiple years indicates they have recognised this and will be more conservative in international expansion plans.

They noted sales were down 15percent in UK alone, it seems the expected growth will not be forthcoming and cash balances will continue to be eroded.

Klarna’s US and UK expansion take their toll, as fintech posts first annual loss

Klarna is Europe's most highly-valued fintech, alongside Revolut. In a bid to keep its crown, it invested heavily last year - causing overall losses despite healthy revenues.

The company’s 2019 annual report, which was published on Wednesday.

The Swedish “buy now-pay later” lender noted a drop in over $100m since the previous year — from a profit of $10m in 2018 to a loss of $93m this year. It’s the first time the company has been in the red since launching in 2005, having delivered an unusual “profitable-on-day-one” commission model with thousands of retail partners, including ASOS and H&M.

Klarna, which joins Revolut as Europe’s most highly-valued fintech, beat its peers to the mark in expanding into the US, a destination that continues to hold unparalleled glamour for European startups. Klarna began its launch stateside in 2015 but took time in securing the necessary licenses, finally ramping up its efforts to accumulate customers early last year after a mammoth $460m fundraise.

Notably, the new geographies seem to have made the business more problematic. It has attracted more customers who aren’t paying back; Klarna recorded that customers defaulting on payments doubled from 2018, reaching SKr1.86bn (nearly $200m) in credit losses last year.

Elsewhere, investors have also flagged the difficulties of cracking the US market, despite the country’s affinity to credit.

“What I tell companies when they want to go to the US is ‘think of it like China’. The cultural gap between the US and Europe is as big as Europe and China,” Yann Ranchere, a partner at early-stage venture capital fund Anthemis, told Sifted last year.