Klarna Receives EMI Licence from UK’s FCA

Klarna, the global digital bank and flexible payments provider on Wednesday said that its UK subsidiary, Klarna Financial Services UK (KFSUK) has been authorised by the UK’s Financial Conduct Authority (FCA) as an Electronic Money Institution (EMI), unlocking the launch of Klarna balance and Klarna cashback for its 11 million UK consumers later this year.

Already live in the US and across 14 European markets, Klarna balance will allow the UK citizens to hold and manage funds in a Klarna account. Customers will be able to top it up from their debit card, use it to shop with Klarna, receive refunds directly into it, and earn cashback when they shop.

Klarna Cashback will give consumers up to 10% back on purchases made through the Klarna app. No points or gimmicks – the cashback is added straight to their Klarna balance. They can then spend it anywhere Klarna is accepted.

Abby Vickers, Head of Klarna Financial Services UK, said that this authorisation marks Klarna’s next big step in the UK, moving beyond flexible payments into everyday financial management. While traditional banks are still playing catch-up, Klarna is giving consumers a smarter way to spend, and now, to manage their finances too.

This is what modern money management looks like: manage, spend, and get rewarded, without the hassle, Vickers said.

This authorisation was granted to Klarna Financial Services UK Limited (KFSUK), Klarna’s dedicated UK entity, and builds on the company’s existing UK regulatory permissions. It also lays the foundation for future product expansion, strengthening Klarna’s ambition to disrupt traditional retail banking as it becomes a true everyday spending and saving partner for consumers.

Competing with Other Digital Banks

Meanwhile, a report by Euronews said that the move sets Klarna up to compete with the likes of popular digital banks such as Revolut and Monzo.

Following Brexit, Klarna Bank AB, a fully licensed Swedish bank, continued to provide regulated services in the UK under the FCA’s Temporary Permissions Regime (TPR). In 2023, the fintech then established a new, UK-based entity to provide all consumer-facing services in the UK.

Klarna is currently preparing a New York IPO, its second attempt to list after its first launch was delayed by market turmoil linked to President Trump’s trade war. The shift away from its buy now, pay later focus has intensified since the postponement.

Klarna is seeking to boost investor sentiment after recording a loss of $99 million in the first quarter of 2025, significantly more than the $47 million loss reported a year earlier, Euronews said.

The report also said that customer credit losses also rose by 17% y-o-y. This means that more customers failed to repay Klarna what they owed, raising doubts about the sustainability of the firm’s business model.

The Swedish fintech hit a peak valuation of around $46 billion in 2021 after a funding round led by Japan’s SoftBank. The company then lost around 85% of its valuation in 2022 as it struggled with a period of high interest rates, prompting major job cuts.

The fintech has held a banking licence in Sweden since 2017, and CEO Sebastian Siemiatkowski has previously said the company was considering a US banking licence.