China's Ant Financial buys small stake in Swedish fintech partner Klarna

Klarna, Europe's most valuable fintech company, said on Wednesday that China's Ant Financial Services Group had taken a small stake in it as the two strengthen their online shopping partnership.

The Swedish 'buy now, pay later' app is already embedded in AliExpress, the international shopping platform run by e-commerce giant Alibaba Group , an affiliate of Ant Financial.

"The current partnership where Klarna payments are available in AliExpress should now expand to new markets globally," CEO Sebastian Siemiatkowski told Reuters, adding that Klarna and Ant Financial would also develop new products.

Klarna, founded in 2005, is backed by rapper Snoop Dogg, U.S. venture capital firm Sequoia Capital and Australia's biggest lender Commonwealth Bank of Australia.

It enables consumers to buy online without having to provide payment details to the merchant they are buying from. Instead, Klarna pays for the order, which is then dispatched.

It invoices the buyer, who typically gets 14 or 30 days to settle - a proposition that is attractive to millennials sceptical about the high costs of credit cards.

Ant Financial's investment amounts to a stake of less than 1% and was made up of existing and new shares, according to a source familiar with the matter.

It was done at a "slight uptick" to the $460 million funding round in August, the source said. That round had valued Klarna at $5.5 billion (4.3 billion pounds) and was led by California-based Dragoneer Investment Group.

The investment by Ant Financial, which did not comment, comes at a time of disruption caused by the coronavirus epidemic. AliExpress warned customers on Tuesday of delays to deliveries.
More broadly, Chinese Big Tech is taking a circumspect approach to investing in European fintech, typically taking minority stakes rather than launching all-out takeovers - as was the case with Tencent's <0700.HK> backing for Berlin-based smartphone bank N26.

Klarna, which describes itself as the European market leader, slid to a loss in 2019 as it invested to grow in the United States. It has launched this year in Australia and is looking to expand further in Europe.

The partnership with Ant Financial will follow that footprint but Klarna has no ambitions to enter China, said Siemiatkowski.

"The U.S. is often used as a benchmark of what it means to be competitive but in my world it just does not compare to the Chinese one," he told Reuters.

"The level of innovation there is just tremendous, especially in app retail and payments - they are the global pace setters. For Klarna, there is much more opportunity in other markets."