Klarna, the largest fintech company in Europe, has got a banking licence from the Swedish Financial Supervisory Authority.

Klarna is one of Europe’s highly valued tech startups. It is an e-commerce company that provides payment services. It allows customers to purchase and receive goods before paying for them. Instead, it sends buyers an invoice post-purchase — effectively extending to them a line of credit.

It now operates in 18 markets. It works with 70,000 merchants and has around 60 million users. The company, which was founded in Sweden in 2005, is profitable and worth over $2bn.

The new Klarna Bank can operate across the European Union, offering retail banking services.

The success of the business model offers an alternative to the use of credit cards.

Klarna was founded by Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson when they were in the Stockholm School of Economics. Aiming to simplify payment solutions, they came up with Kreditor, which allowed customers to make purchases first and pay later.

In 2016, the company made transactions amounting to €13bn and generated revenue of over €350 million. It claims to handle 450,000 transactions per day.

Siemiatkowski, also the company’s CEO, wants to disrupt and reshape the retail banking sector.

Daniel Döderlein, who is the founder of another Scandinavian fintech firm Auka, expects Klarna to be the next Visa. “Klarna has done what most banks haven’t managed. That is: they created a simple solution to an everyday problem.”

Except money is offered as a line of credit and the card networks, as well as the banks who still make big revenue from online transactions, are out of the loop. Businesses using the solution even accept a higher commission charge because they know customers won’t abandon their shopping carts due to a cumbersome payment experience.“Now that they have so many customers, a shiny new bank licence and soon, direct access to accounts when PSD2 takes effect, they’re perfectly primed to become a preferred credit provider.”