Klarna

Wise

Klarna

Klarna makes money from merchant fees and consumer interest. Merchants pay Klarna 3-6% of each transaction — they're willing to pay because Klarna increases conversion rates by 30%+ and average order values by 45%.

On "Pay in 4" (interest-free installments), Klarna makes money purely from merchant fees. On longer financing (6-36 months), Klarna charges consumers interest up to 25% APR.

Klarna also earns revenue from its shopping app (affiliate commissions when users discover and buy from merchants), and from its Klarna Card.

Wise

Wise charges a small, transparent fee on every transfer — typically 0.3-0.7% depending on the currency pair. That's it.

No hidden exchange rate markup, no receiving fees, no minimum amounts. The fee is shown upfront before you confirm the transfer, and Wise always uses the real mid-market exchange rate.

Banks typically charge 3-5% through hidden rate markups, making Wise roughly 8x cheaper. Wise also earns interest on customer balances held in the Wise account and on the float between receiving and settling transfers.

Klarna

Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson were students at the Stockholm School of Economics. In 2005, they entered a startup competition with an idea: let people buy things online and pay later.

At the time, online shopping was still new and most people were terrified of entering their credit card details on the internet. The idea was simple — Klarna would pay the merchant immediately, and the customer would get an invoice with 14-30 days to pay.

The competition judges hated it. The idea was dismissed as financially irresponsible and the team didn't win.

But Siemiatkowski pressed on. Swedish e-commerce was growing fast and merchants were desperate for any way to reduce cart abandonment.

Klarna's "pay after delivery" model was a hit because it shifted the risk — customers could receive the product, try it on, and only pay for what they kept.

The first customers were Swedish e-commerce merchants selling fashion and home goods. Klarna handled the invoicing, fraud detection, and collections.

Merchants saw conversion rates jump because customers were more willing to buy when they didn't have to pay immediately.

Wise

Kristo Käärmann was an Estonian working at Deloitte in London, getting paid in British pounds but needing to send money home to Estonia in euros. Every time he made a transfer, his bank skimmed 3-5% through hidden markups on the exchange rate.

Taavet Hinrikus had the opposite problem — he was Skype's first employee, getting paid in euros but living in London and needing pounds.

They came up with an elegantly simple hack. Käärmann would put pounds into Hinrikus's UK bank account.

Hinrikus would put the equivalent in euros into Käärmann's Estonian account. Both used the real mid-market exchange rate — the one you see on Google — with zero markup.

They were essentially matching currency needs without ever sending money across borders.

In 2011, they turned this hack into a company called TransferWise (rebranded to Wise in 2021). The product automated what they'd been doing manually — matching people who needed to send money in opposite directions and settling the transfers locally in each country.

When perfect matches weren't available, Wise used its own float to bridge the gap.

Klarna

Klarna grew by being embedded at checkout. The strategy was to sign up the biggest online retailers and become a payment option alongside Visa and PayPal.

Once Klarna was at checkout, consumers discovered it organically. The "Pay in 4" button became ubiquitous across fashion, electronics, and home goods retailers.

The Klarna app became a growth engine beyond checkout. By building a shopping app where users could browse products, discover deals, and track deliveries, Klarna turned from a payment method into a shopping destination.

The app has 35+ million monthly active users who start their shopping journey inside Klarna before even visiting a retailer.

International expansion was aggressive. Starting in Sweden, Klarna rolled out across Europe, then into the US, UK, and Australia.

The US became the biggest growth market — American consumers were especially receptive to Pay in 4 as an alternative to credit cards. By 2023, Klarna had 34 million US users.

Wise

Wise grew through a combination of radical price transparency and media-savvy campaigning. Käärmann was unapologetically loud about how much banks were ripping people off.

Wise ran campaigns showing the exact markup banks charged versus Wise's fee. They published a "hidden fees calculator" that let people see how much their bank was stealing on international transfers.

Banks hated it. Customers loved it.

Word of mouth was enormous. Expats, immigrants, freelancers, and remote workers — anyone who sent money across borders regularly — told everyone they knew once they discovered Wise.

The savings were so dramatic (sometimes hundreds of dollars per transfer) that people couldn't help sharing.

The Wise Platform created a new growth vector. By licensing its infrastructure to banks and financial institutions, Wise got embedded into products used by millions of customers who had never heard of Wise.

When your bank offers "powered by Wise" international transfers, Wise grows without acquiring the customer directly.

Klarna

The valuation collapse was humiliating. Klarna raised at a $46 billion valuation from SoftBank in 2021.

One year later, they raised a down round at $6.7 billion — an 85% haircut. It was the most dramatic valuation drop in fintech history.

Employee stock options were underwater. Siemiatkowski had to lay off 10% of the workforce.

The entire BNPL category went from hot to radioactive in months.

Credit losses are the existential risk. Klarna is lending money to consumers who want to buy things they can't afford to pay for right now.

When the economy slows, defaults rise. Klarna's credit losses hit $1 billion in 2022.

The company had to tighten underwriting significantly and pull back from riskier markets. The tension between growth (approve more loans) and profitability (reject risky borrowers) defines every quarter.

The IPO in 2025 was a comeback story but with caveats. Klarna went public at $15 billion — a major recovery from the $6.7 billion trough but still less than a third of its 2021 peak.

The company finally turned profitable by slashing costs with AI (replacing hundreds of customer service agents with AI chatbots) and tightening credit standards. But investors remain cautious about the BNPL model's long-term sustainability.

Wise

Regulatory complexity across 60+ countries. Wise holds licenses in dozens of jurisdictions, each with different compliance requirements.

In 2023, Wise received a record £7.8 million fine from the UK's FCA for anti-money laundering control failures between 2020-2022. Käärmann himself was fined by the FCA for personal tax compliance issues.

For a company built on trust and transparency, regulatory problems hit the brand harder than they would for a traditional bank.

Growth is slowing as the easy gains are captured. Wise grew rapidly by converting customers away from overpriced bank transfers.

But as the most price-sensitive customers have already switched, finding new growth requires either expanding into new products (which dilutes focus) or new geographies (which adds regulatory complexity). Revenue growth has decelerated from 50%+ to the 20-30% range.

Competition from Revolut, PayPal, and traditional banks. Revolut now offers competitive exchange rates.

PayPal has improved its international pricing. Some banks have started matching Wise's rates for premium customers.

The "banks are ripping you off" message becomes less powerful when banks start charging less.

Klarna

Pay in 4 is the signature product — split any purchase into four interest-free payments over six weeks. Pay in 30 lets customers receive the product first and pay within 30 days.

Financing offers longer-term payment plans with interest for larger purchases. The Klarna App is a shopping destination — browse deals, track orders, manage payments, and earn cashback.

The Klarna Card is a physical Visa card that lets users Pay in 4 anywhere. Klarna Creator is a platform for influencers to earn commissions sharing products.

Klarna AI is their customer service chatbot that handles two-thirds of support queries.

Wise

Wise International Transfers is the core — send money to 160+ countries in 40+ currencies at the real exchange rate. The Wise Account is a multi-currency account that holds 40+ currencies with local bank details in major markets (USD, GBP, EUR, AUD).

The Wise Business Account serves companies with international payroll, batch payments, and multi-currency management. The Wise Card is a debit card that automatically converts at the mid-market rate when you spend abroad.

Wise Platform is a B2B API that lets banks and businesses embed Wise transfers into their own products — major banks like Monzo and N26 use it.

Klarna

Sequoia Capital, SoftBank, Silver Lake, GIC, Atomico, Commonwealth Bank of Australia, Heartland

Wise

Andreessen Horowitz, Peter Thiel's Valar Ventures, IVP, Lead Edge Capital, Baillie Gifford, Richard Branson