Klarna’s announcement that it will bring “buy now, pay later” loans to food delivery app DoorDash two weeks ago was intended to showcase the Swedish fintech’s US growth before its long-awaited initial public offering. Instead, it triggered a backlash. The tie-up prompted a flurry of jokes on social media with users comparing taking on debt to pay for food deliveries to the subprime loans that caused the last financial crisis.

The outcry illustrates the scepticism around the “BNPL” loans that have fuelled Klarna’s growth: interest-free instalments offered to shoppers at checkout, often for low-value purchases. Its advocates see Klarna’s New York IPO — for which it is targeting a $15bn valuation — as a tipping point that will finally cement the sector as a staple of consumer finance.

Although Klarna primarily makes money by collecting fees from retailers when it processes payments — as well as earning interest on some of its loans — consumer champions say interest-free BNPL lending is predatory because the lender generates fees should customers fail to make their instalments on time.

WE SHALL SEE WHO WINS THE FINTECH WARS

“Their destiny will be to become a full service digital neobank, as is the destiny of Revolut, Monzo and Chime,” said QED’s Morris. “They’re all on a collision course, but the market is so big because the banks largely abdicated that segment.”