Klarna conquered credit. Next stop: banking.

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Hello and welcome to Protocol | Fintech! This Tuesday: Klarna's new funding round, Greensill faces restructuring and fintech's "extraction" business model.
By the way: What are your favorite fintech podcasts? Reply and let us know, and we'll share the best suggestions with other readers. (Here's a list of 20 to get you started if your library's not yet filled out.)
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Klarna has raised $1 billion more in funding at a $31 billion valuation this week, the latest sign of growth in the "buy now, pay later" sector. The deal makes Klarna Europe's most highly-valued private fintech company, and second globally behind Stripe. The company is also aggressively moving into the U.S. and other markets.
Driving the explosive growth in the "buy now, pay later" sector, besides the pandemic? Many consumers, especially younger ones, prefer not to use credit cards, Klarna's U.S. head David Sykes said.
The growth of Klarna could crowd out smaller competitors, but a number of startups are instead targeting specific niches in the "buy now, pay later" sector.
But Klarna and its big rivals have a grander vision, and are looking to expand beyond providing point-of-sale credit and into other financial services.
The risk: What if people buy now, but don't ... pay later? With concerns that consumers could pile themselves into debt, just as they do with credit cards, the U.K. recently announced plans to regulate "buy now, pay later" companies. Such companies are currently not covered by the U.K.'s Financial Conduct Authority, but regulation could make this form of credit harder to obtain.
The future is positively digital. Ready? Consumers, investors and shareholders are savvier than ever. Everyone needs to create more engaging experiences that keep pace with today's new expectations. See how you can stay ahead with next-gen technologies that deliver on what matters most. We can help.
Mastercard's scramble to back the right fintechs. Linda Kirkpatrick, Mastercard's president for U.S. operations, told Ben Pimentel: "We want to partner with as many companies as we can, because we don't know what consumers will ultimately choose as their preferred form of payment."
WhatsApp thinks business chat is the future. But from privacy policy screw-ups to UI questions, can it crack the super-app riddle? David Pierce tried to find out.
What fintech trend are you most worried about?
We're incentivizing entrepreneurs to take the easy path and build something that doesn't actually solve people's problems. Insane valuations for fintech businesses that generate a lot of revenue (because interchange is an amazing way to extract value) despite incremental, mediocre products. Products that are identical to what incumbents offer with a little lipstick, and that will regress further towards the mean as their customer acquisition cost climbs. If your objective is to just make a bunch of money in an IPO or some nice secondary rounds and have minimal impact, sure, good on you. But that's just not that interesting to me.
What in fintech do you think needs to be fixed?
The business model. Fintech is primarily a value extraction market today. Companies that find a way to distribute value creation into markets dominated by extractors almost always win huge market share. And I'm seeing a new generation of companies making the same mistakes the incumbents did: making money at the expense of their customers. Selling customers' data, profiting from their struggle (like charging a transaction fee every time someone needs to withdraw from an ATM or get an advance on their pay), encouraging them to spend money they don't have on things they don't need, etc. They think their start-up culture will save them from turning into the bad guy, and they're wrong. Incentives eat culture for breakfast.
What was your biggest blunder and what did you learn from it?
I didn't let people help as much as I should have. I decided to build a fintech that sells to and integrates with employers to get a more complete picture of our users' financial lives and the ability to move money in real time as it's earned, thinking those advantages were the only way to make a differentiated product that would actually help people. I was right about that, but I completely underestimated how hard enterprise is versus direct-to-consumer, and didn't make the hires we needed as soon as we needed. We've just about figured out the go-to-market half now, but man, did it take too long! I didn't use the expertise around me — my board, advisors, mentors, etc. — to help me make those hires.
The future is positively digital. Ready? Consumers, investors and shareholders are savvier than ever. Everyone needs to create more engaging experiences that keep pace with today's new expectations. See how you can stay ahead with next-gen technologies that deliver on what matters most. We can help.
Thanks for reading — see you Friday!
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