Snoop Dogg-backed firm Klarna becomes Europe's biggest fintech start-up valued at $5.5 billion

Key Points
  • Swedish online payments firm Klarna said Tuesday it had reached a valuation of $5.5 billion, making it Europe's most valuable private fintech start-up.
  • Klarna offers a 'buy now, pay later' service for shoppers.
  • A handful of European fintech start-ups are expanding into the U.S. market.
U.S. rapper Snoop Dogg appears in an ad for Swedish fintech firm Klarna.

Swedish online payments firm Klarna announced Tuesday that it has reached a $5.5 billion valuation following a $460 million funding round, making it Europe's largest private fintech company.

The Stockholm-based start-up, which provides a 'buy now, pay later' service for shoppers, said it would use the new funds to continue its expansion into the U.S. market. The funding round was led by San Francisco-based Dragoneer Investment Group.

Klarna has taken on incumbents in the retail and payments industries by offering customers the option to pay for purchases in increments over time, without paying interest. The company purchases an order directly from retailers and then invoices customers, so the buyers never pay the merchant directly.

Klarna was founded in 2005 and said Tuesday it is "in sight" of $1 billion in annual revenue. The company, which launched in the U.S. in 2015, said it is growing at a rate of 6 million new American customers per year.

Klarna CEO: See ‘massive disruption’ to retail banking in next five years

"The uniqueness of Klarna's consumer offering, providing a healthier, simpler and smarter alternative to credit cards, with the addition of multiple services to smoothen the shopping experience, online and offline, is clearly resonating with the US consumer," the company said in a press release Tuesday.

Klarna joins a handful of European fintech start-ups that are expanding into the U.S. market. German online bank N26, which was valued at $3.5 billion last month, recently launched its mobile banking app in the U.S., while British app-only bank Monzo started offering its services to American customers in June.

Klarna announced a partnership with Snoop Dogg earlier this year, which saw the rapper invest in the company and feature in an advertising campaign for it. CEO Sebastian Siemiatkowski recently said he thinks the firm has matured to a level where it could launch an initial public offering.

— CNBC's Ryan Browne contributed to this report