# EDGAR Filing Document

**Accession Number:** 0002003292
**File Stem:** 0002003292-26-000007
**Filing Date:** 2026-2
**Character Count:** 1433074
**Document Hash:** 5900bdd77471ee9aab3f33a39036af45
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0002003292-26-000007.hdr.sgml**: 20260226

**ACCESSION NUMBER**: 0002003292-26-000007

**CONFORMED SUBMISSION TYPE**: 20-F

**PUBLIC DOCUMENT COUNT**: 357

**CONFORMED PERIOD OF REPORT**: 20251231

**FILED AS OF DATE**: 20260226

**DATE AS OF CHANGE**: 20260226

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Klarna Group plc
- **CENTRAL INDEX KEY:** 0002003292
- **STANDARD INDUSTRIAL CLASSIFICATION:** FINANCE SERVICES [6199]
- **ORGANIZATION NAME:** 02 Finance
- **EIN:** 000000000
- **STATE OF INCORPORATION:** X0
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 20-F
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 001-42832
- **FILM NUMBER:** 26690315

**BUSINESS ADDRESS:**
- **STREET 1:** 10 YORK ROAD
- **CITY:** LONDON
- **STATE:** X0
- **ZIP:** SE1 7ND
- **BUSINESS PHONE:** 0046734205795

**MAIL ADDRESS:**
- **STREET 1:** 10 YORK ROAD
- **CITY:** LONDON
- **STATE:** X0
- **ZIP:** SE1 7ND

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Klarna UK II plc
- **DATE OF NAME CHANGE:** 20231205

?xml version='1.0' encoding='ASCII'? klar-20251231

**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

______________________________________

**FORM 20-F**

______________________________________

**(Mark One)**

□ **REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934**

**OR**

⌧ **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

For the Fiscal Year Ended to December 31, 2025

**OR**

□ **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE** **ACT OF 1934**

For the transition period from ______________ to ______________

**OR**

□ **SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES** **EXCHANGE ACT OF 1934**

Date of event requiring this shell company report:

**Commission file number 001-42832**

______________________________________

**Klarna Group plc**

______________________________________

**Niclas Neglén**

**Chief Financial Officer**

**investorrelations@klarna.com**

**10 York Road,** 

**London, SE1 7ND**

**United Kingdom**

**(Name, E-mail and Address of Company Contact Person)**

Securities registered pursuant to Section 12(b) of the Act:

---

| | | |
|:---|:---|:---|
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| **Ordinary shares, nominal value $0.0001 per** <br>**share**<br>| **KLAR** | **New York Stock Exchange** |

---

Total ordinary share capital outstanding: 377,507,910

Securities registered or to be registered pursuant to Section 12(g) of the Act.

---

| |
|:---|
| **N/A** |
| (Title of class) |

---

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act.

---

| |
|:---|
| **N/A** |
| (Title of class) |

---

Indicate the number of outstanding shares of each of the issuer's classes of capital or common stock

as of the close of the period covered by the annual report.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the

Securities Act.

Yes □&nbsp;&nbsp;&nbsp;&nbsp;No ⌧

If this report is an annual or transition report, indicate by check mark if the registrant is not required to

file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Yes ⌧&nbsp;&nbsp;&nbsp;&nbsp;No □

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13

or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period

that the registrant was required to file such reports), and (2) has been subject to such filing requirements

for the past 90 days.

Yes ⌧&nbsp;&nbsp;&nbsp;&nbsp;No □

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File

required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the

preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ⌧&nbsp;&nbsp;&nbsp;&nbsp;No □

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-

accelerated filer, or an emerging growth company. See definition of "large accelerated filer,"accelerated

filer," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

---

| | | | |
|:---|:---|:---|:---|
| Large accelerated filer | □ | Accelerated filer | □ |
| Non-accelerated filer | ⌧ | Emerging growth company | □ |

---

If an emerging growth company, indicate by check mark if the registrant has elected not to use the

extended transition period for complying with any new or revised financial accounting standards provided

pursuant to Section 13(a) of the Exchange Act.

□

Indicate by check mark whether the registrant has filed a report on and attestation to its

management's assessment of the effectiveness of its internal control over financial reporting under

Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that

prepared or issued its audit report.

□

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the

financial statements of the registrant included in the filing reflect the correction of an error to previously

issued financial statements.

□

Indicate by check mark whether any of those error corrections are restatements that required a

recovery analysis of incentive-based compensation received by any of the registrant's executive officers

during the relevant recovery period pursuant to §240.10D-1(b).

□

Indicate by check mark which basis of accounting the registrant has used to prepare the financial

statements included in this filing:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| U.S. GAAP | □ | International Financial Reporting Standards as issued <br>by the International Accounting Standards Board<br>| ⌧ | Other | □ |

---

If "Other" has been checked in response to the previous question, indicate by check mark which

financial statement item the registrant has elected to follow.

□ Item 17&nbsp;&nbsp;&nbsp;&nbsp;□ Item 18

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

Yes □&nbsp;&nbsp;&nbsp;&nbsp;No ⌧

**TABLE OF CONTENTS**

---

| | |
|:---|:---|
|  | **Page** |
| **[Part I](#i9081d9e2b8b94bd284aa0c3cb95258fc_10)** |  |
| [Item 1. Identity of Directors, Senior Management and Advisers](#i9081d9e2b8b94bd284aa0c3cb95258fc_13) | [1](#i9081d9e2b8b94bd284aa0c3cb95258fc_13) |
| [Item 2. Offer Statistics and Expected Timetable](#i9081d9e2b8b94bd284aa0c3cb95258fc_16) | [2](#i9081d9e2b8b94bd284aa0c3cb95258fc_16) |
| [Item 3. Key Information](#i9081d9e2b8b94bd284aa0c3cb95258fc_19) | [3](#i9081d9e2b8b94bd284aa0c3cb95258fc_19) |
| [Item 4. Information on the Company](#i9081d9e2b8b94bd284aa0c3cb95258fc_28) | [77](#i9081d9e2b8b94bd284aa0c3cb95258fc_28) |
| [Item 4A. Unresolved Staff Comments](#i9081d9e2b8b94bd284aa0c3cb95258fc_52) | [130](#i9081d9e2b8b94bd284aa0c3cb95258fc_52) |
| [Item 5. Operating and Financial Review and Prospects](#i9081d9e2b8b94bd284aa0c3cb95258fc_55)  | [130](#i9081d9e2b8b94bd284aa0c3cb95258fc_55) |
| [Item 6. Directors, Senior Management and Employees](#i9081d9e2b8b94bd284aa0c3cb95258fc_73) | [201](#i9081d9e2b8b94bd284aa0c3cb95258fc_73) |
| [Item 7. Major Shareholders and Related Party Transactions](#i9081d9e2b8b94bd284aa0c3cb95258fc_76) | [214](#i9081d9e2b8b94bd284aa0c3cb95258fc_76) |
| [Item 8. Financial Information](#i9081d9e2b8b94bd284aa0c3cb95258fc_79) | [217](#i9081d9e2b8b94bd284aa0c3cb95258fc_79) |
| [Item 9. The Offer and Listing](#i9081d9e2b8b94bd284aa0c3cb95258fc_82) | [218](#i9081d9e2b8b94bd284aa0c3cb95258fc_82) |
| [Item 10. Additional Information](#i9081d9e2b8b94bd284aa0c3cb95258fc_85) | [219](#i9081d9e2b8b94bd284aa0c3cb95258fc_85) |
| [Item 11. Quantitative and Qualitative Disclosures About Market Risk](#i9081d9e2b8b94bd284aa0c3cb95258fc_88) | [239](#i9081d9e2b8b94bd284aa0c3cb95258fc_88) |
| [Item 12. Description of Securities Other than Equity Securities](#i9081d9e2b8b94bd284aa0c3cb95258fc_91) | [244](#i9081d9e2b8b94bd284aa0c3cb95258fc_91) |
| **[Part II](#i9081d9e2b8b94bd284aa0c3cb95258fc_94)** |  |
| [Item 13. Defaults, Dividend Arrearages and Delinquencies](#i9081d9e2b8b94bd284aa0c3cb95258fc_97)  | [245](#i9081d9e2b8b94bd284aa0c3cb95258fc_97) |
| [Item 14. Material Modifications to the Rights of Security Holders and Use of Proceeds](#i9081d9e2b8b94bd284aa0c3cb95258fc_100) | [246](#i9081d9e2b8b94bd284aa0c3cb95258fc_100) |
| [Item 15. Controls and Procedures](#i9081d9e2b8b94bd284aa0c3cb95258fc_103) | [247](#i9081d9e2b8b94bd284aa0c3cb95258fc_103) |
| [Item 16. \[Reserved\]](#i9081d9e2b8b94bd284aa0c3cb95258fc_106) | [248](#i9081d9e2b8b94bd284aa0c3cb95258fc_106) |
| [Item 16A. Audit committee financial expert](#i9081d9e2b8b94bd284aa0c3cb95258fc_109) | [248](#i9081d9e2b8b94bd284aa0c3cb95258fc_109) |
| [Item 16B. Code of Ethics](#i9081d9e2b8b94bd284aa0c3cb95258fc_112) | [248](#i9081d9e2b8b94bd284aa0c3cb95258fc_112) |
| [Item 16C. Principal Accountant Fees and Services](#i9081d9e2b8b94bd284aa0c3cb95258fc_115) | [248](#i9081d9e2b8b94bd284aa0c3cb95258fc_115) |
| [Item 16D. Exemptions from the Listing Standards for Audit Committees](#i9081d9e2b8b94bd284aa0c3cb95258fc_118) | [249](#i9081d9e2b8b94bd284aa0c3cb95258fc_118) |
| [Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers](#i9081d9e2b8b94bd284aa0c3cb95258fc_121) | [249](#i9081d9e2b8b94bd284aa0c3cb95258fc_121) |
| [Item 16F. Change in Registrant's Certifying Accountant](#i9081d9e2b8b94bd284aa0c3cb95258fc_124) | [249](#i9081d9e2b8b94bd284aa0c3cb95258fc_124) |
| [Item 16G. Corporate Governance](#i9081d9e2b8b94bd284aa0c3cb95258fc_127) | [249](#i9081d9e2b8b94bd284aa0c3cb95258fc_127) |
| [Item 16H. Mine Safety Disclosure](#i9081d9e2b8b94bd284aa0c3cb95258fc_130) | [252](#i9081d9e2b8b94bd284aa0c3cb95258fc_130) |
| [Item 16L. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](#i9081d9e2b8b94bd284aa0c3cb95258fc_133) | [252](#i9081d9e2b8b94bd284aa0c3cb95258fc_133) |
| [Item 16J. Insider trading policies](#i9081d9e2b8b94bd284aa0c3cb95258fc_136) | [252](#i9081d9e2b8b94bd284aa0c3cb95258fc_136) |
| [Item 16K. Cybersecurity](#i9081d9e2b8b94bd284aa0c3cb95258fc_2615) | [252](#i9081d9e2b8b94bd284aa0c3cb95258fc_2615) |
| **[Part III](#i9081d9e2b8b94bd284aa0c3cb95258fc_142)** |  |
| [Item 17. Financial Statements](#i9081d9e2b8b94bd284aa0c3cb95258fc_145) | [254](#i9081d9e2b8b94bd284aa0c3cb95258fc_145) |
| [Item 18. Financial Statements](#i9081d9e2b8b94bd284aa0c3cb95258fc_148) | [255](#i9081d9e2b8b94bd284aa0c3cb95258fc_1099511630750) |
| [Item 19. Exhibits](#i9081d9e2b8b94bd284aa0c3cb95258fc_256) | [255](#i9081d9e2b8b94bd284aa0c3cb95258fc_256) |
| [Signatures](#i9081d9e2b8b94bd284aa0c3cb95258fc_259) | [257](#i9081d9e2b8b94bd284aa0c3cb95258fc_259) |
| [Glossary of terms](#i9081d9e2b8b94bd284aa0c3cb95258fc_2177) | [258](#i9081d9e2b8b94bd284aa0c3cb95258fc_2177) |
| [INDEX TO CONSOLIDATED FINANCIAL STATEMENTS](#i9081d9e2b8b94bd284aa0c3cb95258fc_148) | [F-1](#i9081d9e2b8b94bd284aa0c3cb95258fc_148) |

---

KLARNA GROUP PLC1

**Part I**

**Item 1. Identity of Directors, Senior Management and Advisers**

Not applicable.

KLARNA GROUP PLC2

**Item 2. Offer Statistics and Expected Timetable**

Not applicable.

KLARNA GROUP PLC3

**Item 3. Key Information**

A.[Reserved.]

B.Capitalization and Indebtedness.

Not applicable.

C.Reasons for the Offer and Use of Proceeds.

Not applicable.

**Risk Factors**

Investing in our ordinary shares involves a high degree of risk. You should consider carefully the risks

and uncertainties described below, together with all of the other information in this report. The risks and

uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are

unaware of or that we deem immaterial may also become important factors that adversely affect our

business. If any of the following risks actually occur, our business, results of operations, financial condition

and future prospects could be materially and adversely affected. In that event, the market price of our

ordinary shares could decline, and you could lose part or all of your investment. We have grouped our risks

and uncertainties under the following headings:

Risks related to our Business and Industry:

Risks Related to Our Regulatory Environment

Risks Related to Intellectual Property, Data Privacy and Cybersecurity

Risks Related to the Ownership of Our Ordinary Shares

**Risks Related to Our Business and Industry** 

**Our success depends on our ability to attract additional merchants, to retain and grow our relationships with our** 

**existing merchants and to continue enabling merchant success.**

Our success depends on our ability to expand our merchant base in a cost-effective manner, grow our

merchants' revenue and continue enabling merchant success. As more merchants join our network,

consumers benefit from an increased selection across verticals, channels and geographies, and purchase

more frequently with Klarna, which in turn increases our GMV and revenue. Conversely, if we are not able

to retain current or attract additional merchants to our network, our consumers may stop using our

network, use it less frequently or use fewer of our solutions, products and services.

The attractiveness of our network to merchants depends on a number of factors, some of which are

beyond our control, including, but not limited to:

• the size of our consumer base;

• our brand and reputation;

• the amount of merchant fees that we charge;

• our ability to sustain our value proposition to merchants for consumer acquisition by

demonstrating higher conversion at checkout and helping merchants establish and maintain direct

relationships with consumers;

KLARNA GROUP PLC4

• the attractiveness of our technology and network to merchants;

• our global footprint;

• solutions, products and services offered by competitors; and

• our ability to perform under, and maintain, our merchant agreements.

Our agreements with merchants generally have terms that range from approximately 12 months to 60

months. The termination of one or more of our merchant agreements, particularly with merchants who are

global leaders in their category or who generate substantial portions of our merchant revenue, could result

in a material decrease in GMV or total revenue. As a result, if we fail to retain any of our larger merchants

or a substantial number of our smaller merchants, if we do not acquire new merchants, if we do not

continually expand our GMV and revenues from the merchants on our network or if we do not attract and

retain a diverse mix of merchants across different verticals, channels and geographies, our business,

results of operations, financial condition and future prospects could be adversely affected.

We may fail to grow our consumer base and retain and grow our relationships with our existing

consumers.

We generate merchant revenue when consumers transact on our network and consumer service

revenue from fees paid directly by our consumers. Accordingly, our success depends on our ability to

generate consumer activity and increased GMV from existing consumers and attracting new consumers to

our network. In addition, lower consumer engagement may make our network less attractive to merchants,

negatively affecting our GMV and revenue.

The attractiveness of our network to consumers depends on a number of factors, some of which are

beyond our control. Such factors include, among other things:

• the number and variety of merchants and the related selection of products across verticals,

channels and geographies;

• our brand and reputation;

• consumer experience and satisfaction;

• consumer trust and perception of our solutions, products and services;

• technological innovation; and

• solutions, products and services offered by competitors.

If we fail to retain our relationship with existing consumers, if we do not attract new consumers to our

network or if we do not continually increase usage and GMV from consumers on our network, our business,

results of operations, financial condition and future prospects could be adversely affected.

We may be found to be operating without necessary licenses or other regulatory authorizations, or

fail to comply with requirements of the authorizations that we hold.

Our network connects consumers and merchants, and we offer our products and services in numerous

jurisdictions, each with its own distinct legal and regulatory requirements. We must obtain and maintain

various licenses, registrations and permissions (collectively, "Authorizations"), including banking, electronic

money issuance, payment services, money transmission, credit brokering, servicing, collections and

lending Authorizations, to operate our network across geographies. Failure to obtain or maintain these

licenses, or to comply with their terms and applicable laws and regulations, could result in significant legal

and financial consequences.

KLARNA GROUP PLC5

The regulatory landscape for banking and financial services, especially in the financial technology

sector and regarding cryptocurrency, is complex and subject to change. We must continuously monitor

and adapt to new and changing regulations and licensing requirements in all markets in which we operate

or into which we provide products or services. If we fail to comply with these regulations or operate

without necessary Authorizations, we could face regulatory and/or governmental investigations,

enforcement actions, fines and other penalties, and the risk of our customer agreements being

unenforceable. Additionally, if our Authorizations are restricted, suspended or revoked, in particular our

banking license in the EU, or if we are found to be operating without necessary Authorizations, we could be

forced to cease or limit our operations, including the scope of consumer credit products and solutions

offered in certain geographies, including specific states in the United States, which could adversely affect

our business, results of operations, financial condition and future prospects. The application of country,

state and provincial licensing requirements to our business model is complex and may not always be clear.

While we believe that, as of the date of this report on Form 20-F, we are in compliance with material

applicable licensing, registration or other regulatory requirements, regulators may request or require that

we obtain (or we may independently determine that we should obtain) additional Authorizations in the

future. While we may at any given time actively pursue additional Authorizations, there can be no

assurance that we will be able to obtain them in a timely manner, if at all.

The risks associated with non-compliance are significant given the extensive scope of our operations

across various jurisdictions and the differences among the varying and complex regulatory environments

that we navigate. A material breach of licensing requirements and banking or financial services regulations

could not only result in legal penalties, including revocation or suspension of regulatory licenses or other

Authorizations, fines, orders to cease and desist, or regulatory proceedings, but also damage our

reputation, lead to a loss of consumer trust and impact our relationships with key business partners, in

particular card networks and financial institutions that are similarly subject to extensive regulations and

close regulatory scrutiny. Any of these consequences could adversely affect our ability to attract and

retain customers, merchants and partners and as such damage our business, results of operations,

financial condition and future prospects.

**We partner with card networks, payment service providers ("PSPs") and other participants in the payments** 

**ecosystem to operate our network. We may not be able to maintain or expand our arrangements with such** 

**participants and if our existing arrangements are suspended or terminated, we may be unable to establish** 

**alternative arrangements on favorable terms, if at all.** 

We provide our merchants a number of channels through which they can use our network to accept

payments. For example, Klarna Payments allows merchants to add Klarna as a payment method to their

online checkout, on a website or an app, directly through our API or using their preferred platform, such as

a partner PSP. In operating our network, we also partner with a number of different PSPs. Several of these

PSPs, including Adyen and Stripe, serve as merchant of records ("MoRs") for merchants offering their

products and services through our network. Given the MoRs' direct relationship with these merchants, by

partnering with MoRs we are able to reach and bring to our network a substantial number of merchants

without the need to individually approach, engage, negotiate and integrate our network directly with the

infrastructure of such merchants. Another channel is the Klarna card, a Visa card that allows consumers to

access our various payment methods in any physical store or online setting without the need for merchant

integration to our network. We also contract with various banks in different geographies for payment

processing services to allow customers to pay for their purchases on our network. As a result, our

operations rely on establishing, maintaining and expanding effective working relationships with a wide

array of participants in the payments ecosystem. This is particularly important with respect to MoRs given

that we currently derive a substantial portion of our merchant revenue from merchants utilizing the MoRs

with which we partner. We also plan to continue to drive growth in GMV and revenue generated by

merchants brought to our network through MoRs.

These parties impose various operational, compliance and technical standards that we must follow in

order for such providers to continue facilitating payment processing for our customers. These standards,

KLARNA GROUP PLC6

including the Payment Card Industry Data Security Standard ("PCI-DSS") applicable to the Klarna card,

govern a variety of areas, including how consumers may use their cards, the security features of cards,

security standards for processing, data security and allocation of liability for certain acts or omissions,

including liability in the event of a data breach or other cybersecurity incident.

These providers may change these rules and standards from time to time as they may determine in

their sole discretion and with or without advance notice. Such changes may be made for any number of

reasons, including as a result of changes in the regulatory environment, to maintain or attract new

payments ecosystem participants, or to serve the strategic initiatives of the providers, and may impose

additional costs and expenses on, or be disadvantageous to, certain participants, including Klarna. In

addition, participants in the payments ecosystem are subject to audit by the providers to ensure

compliance with applicable rules and standards. Failure to comply with the applicable requirements and

standards, whether due to operational lapses, regulatory changes or disagreements with these providers,

could result in monetary damages, fines, regulatory investigations, legal proceedings, suspension of our

ability to offer certain payment methods or the termination of our registration or other relationships with

these providers. For example, any removal from card networks' lists of PCI-DSS-compliant service

providers would limit the number of payment channels that our customers could use through our network.

For certain transactions, we partially rely on PSPs and other third parties and, as a result, must pay a

fee for their services. From time to time, payment networks, such as Visa, may increase the interchange

fees that they charge for each transaction using one of their payment methods. Payment processors and

payment networks routinely update and modify their requirements. Any changes in such requirements,

including changes to risk management and collateral requirements, may impact our ongoing cost of doing

business, and we may not, in every circumstance, be able to pass through such costs to our customers, in

which event we would be required to absorb any such cost increases. Furthermore, if we do not comply

with payment processors' or payment networks' requirements, the ability to utilize such networks in our

business may be impaired, which could adversely affect our business, results of operations, financial

condition and future prospects.

The digital payments landscape is subject to rapid technological and regulatory changes. Our

continued compliance with the requirements of card networks, PSPs and other partners necessitates

ongoing investment in technology as well as our legal and compliance functions. These investments may

increase our operational costs and affect our margin profiles. Furthermore, any regulatory changes

affecting the broader payments industry could necessitate adjustments in our business practices,

including in our relationships with card networks, PSPs and other participants in the payments ecosystem.

Our network's success depends on our ability to connect consumers and merchants with

comprehensive payment and innovative advertising solutions. We cannot guarantee that our current

arrangements with the various payments ecosystem participants needed to effectively operate our

network will continue or that, if needed, we will be able to establish adequate alternative arrangements on

terms favorable to us, if at all. We may also fail to successfully expand such arrangements in the future as

needed to facilitate our growth and execute on our strategy. Any disruption in our ability to maintain, grow

or replace, when needed, our relationship with MoRs, or more generally process payments in partnership

with card networks, PSPs and other participants in the payments ecosystem, could adversely affect our

business, results of operations, financial condition and future prospects.

We may fail to promote, protect and maintain our brand.

We believe that developing, protecting and maintaining awareness of our brand in a cost-effective

manner is critical to attracting new and retaining existing merchants and consumers on our network.

Successful promotion of our brand will depend largely on the experience of our merchants and

consumers, including high levels of consumer satisfaction and the effectiveness of our marketing efforts.

We strive to reimagine commerce by putting consumers at the heart of everything we do. If consumers

do not trust our network or do not have a positive experience with our network, they will not use Klarna at

KLARNA GROUP PLC7

all, use Klarna less frequently or use fewer of our products and services than they otherwise intended. We

have invested heavily in both the technology underlying our network and our support team to offer our

consumers seamless experiences throughout the entire consumer journey in order to drive their loyalty

and satisfaction. We have similarly incurred, and expect to continue to incur, significant expenses relating

to our various marketing efforts. Despite such expenditures, any brand promotion activities may not result

in increased revenue and, even if they do, any such increases may not offset the expenses incurred.

Additionally, the successful protection and maintenance of our brand will depend on our ability to obtain,

maintain, protect and enforce trademark and other intellectual property protection for our brand.

If we fail to successfully promote, protect and maintain our brand, including by not maintaining a

consistently high level of consumer service, or if we fail to do so in a cost-effective manner, we may lose

our existing merchants and consumers to our competitors or be unable to attract new merchants and

consumers. Any such loss of existing merchants or consumers, or inability to attract new merchants or

consumers, could have an adverse effect on our business, results of operations, financial condition and

future prospects.

**We have a recent history of incurring losses and may not be successful in effectively balancing growth and** 

**profitability in the future.**

Since inception, we have strived to maintain a deliberate balance of growth and profitability. We

remained profitable for the first 14 years as we scaled our operations in Europe. In 2019, we strategically

decided to expand into additional geographies, with a particular focus on the United States, and in the

following three years expanded into 12 additional markets. While our expansion in the United States has

contributed to an increase in our GMV, it has also led to net losses in recent periods. In 2023, our operating

losses started to decline and we began generating positive transaction margin dollars in the United States.

At the same time, we incurred net losses in some of our recent fiscal periods. For example, while we

generated a net profit of $21 million in 2024, we incurred net losses of $273 million in 2025 and $244

million in 2023.

In the future, we may not be successful in delivering sustainable growth or may fail to achieve and

maintain profitability. In particular, there can be no assurance that our GMV, revenue and other key

metrics will continue to grow or not decline, and our growth rate may slow down or decline in future

periods. This, in turn, may prompt us to invest more in our network, adversely affecting our profitability, at

least in the near term. We may also increase our investments to take advantage of growth opportunities,

including by organically expanding into new geographies or growing our network through acquisitions.

Many factors may contribute to declines in our revenue, GMV and other growth rates or affect our

profitability generally, including, but not limited to:

• increased competition;

• slowing demand for our solutions, products and services from both consumers and merchants;

• geographic, product and channel and vertical mix;

• lower sales by our merchants, particularly those with whom we have significant relationships;

• general economic conditions, including interest rates and inflation and unemployment levels;

• a failure by us to continue capitalizing on growth opportunities;

• changes to our operating costs;

• changes in the regulatory environment; and

• the maturation of our business.

KLARNA GROUP PLC8

Our operating results, including take rates and transaction margin dollars, are particularly impacted by

geographical mix, product and channel mix as well as merchant vertical mix. These factors may impact

various line items of our operating results in different ways at any given point in time, which may result in

our operating results fluctuating materially from period to period despite our goal of driving sustainable

long-term growth with achieving and expanding profitability over time. For example, in the near term, while

our Transaction Margin Dollars may grow in absolute terms, our Transaction Margin may decrease,

including as a result of our U.S. operations continuing to grow faster than our more mature markets.

Consequently, you should not rely on our revenue or any other financial or operating metrics for any prior

quarterly or annual period as an indication of our future performance.

In addition, our future operational and financial performance will depend on a number of factors,

including, but not limited to:

• maintaining and developing relationships with existing merchants and consumers as well as

attracting additional merchants and consumers;

• increasing our advertising revenue;

• expanding within, and driving increased GMV and revenue from, our existing verticals, channels

and geographies;

• introducing new solutions, products and services, including in adjacent categories;

• entering into new verticals, channels and geographies;

• continuing to improve our proprietary underwriting model;

• continuing to develop, maintain, protect and scale our network;

• effectively using our personnel and technology resources, including by leveraging AI-powered

solutions to drive innovation and productivity;

• maintaining the security of our network and the confidentiality of the information, including

personal information, provided and utilized across our network;

• securing funding to finance our operations and future growth;

• maintaining adequate financial, business and risk controls;

• maintaining and developing relationships with partner banks, card networks, PSPs and other

partners necessary to support our network and operations;

• capitalizing on growth opportunities;

• implementing new or updated information and financial and risk controls and procedures;

• navigating complex and evolving regulatory and competitive environments, including with respect

to banking and financial services laws, data privacy, cybersecurity and the use of AI-powered solutions;

and

• attracting, integrating and retaining an appropriate number and technological skill level of qualified

employees.

We may not be able to manage our operations, profitability or growth effectively. Any failure to do so

could impair our ability to generate revenue and control our expenses, and, as a result, negatively affect

our business, results of operations, financial condition and future prospects.

KLARNA GROUP PLC9

**We operate in an industry of substantial and increasingly intense competition and may be unable to** 

**compete successfully.**

The markets in which we operate are competitive and evolving rapidly, including with respect to

consumer preferences and regulatory landscape. Our network connects consumers and merchants with

comprehensive payment and advertising solutions across multiple markets in Europe, North America,

Australia and New Zealand. As a result, depending on the market and a particular product or solution, our

network may compete with any of the following:

• Alternative payment methods, such as credit and debit cards—including those provided by card

issuing banks such as J.P. Morgan Chase, Citibank, Bank of America, HSBC, BNP Paribas, Barclays, Credit

Agricole, Santander or American Express—and payment networks such as Affirm, Block or PayPal;

• Traditional credit card networks, such as Visa, Mastercard, American Express, Capital One or

Discover;

• Neobanks, such as Revolut or NuBank;

• "Buy now, pay later" solutions, such as AfterPay; and

• E-commerce platforms with merchant enablement solutions, including advertising solutions, and

integrated payment capabilities, such as Shopify, Amazon or Walmart.

We expect competition to intensify in the future, both as emerging technologies continue to enter the

markets in which we currently operate, or may operate in the future, and as large financial incumbents

increasingly seek to innovate services that may compete with our network.

Our competitive position is also affected by our ability to innovate, respond and adapt to changing

market demands and regulatory environments. The financial services and technology sectors are subject

to rapid changes in technology, shifts in consumer behavior and evolving regulatory requirements. To

remain competitive, we must successfully identify and anticipate such developments and formulate and

implement required changes to our network, operations, global licensing and Authorizations portfolio and

business plans and strategy to address them. Our failure to anticipate or respond effectively to these

changes, or to continually develop and enhance our network and products or solutions offered through it,

could result in a loss of market share and adversely affect the attractiveness of our network to both

consumers and merchants.

Technological advances and the continued growth of e-commerce activities and digitization of the

economy have increased consumers' accessibility to products and services and led to the expansion of

competition in digital payment options. As a result, we face competition on many different fronts, including

with respect to:

• flexibility on payment options;

• duration, simplicity and transparency of payment terms;

• reliability and speed in processing applications;

• underwriting effectiveness;

• compliance and security;

• promotional offerings;

• fees;

• approval rates;

KLARNA GROUP PLC10

• ease of use;

• marketing expertise;

• service levels;

• products and services;

• technological capabilities and integration;

• customer service;

• brand and reputation; and

• consumer and merchant satisfaction.

Some of our competitors, particularly traditional credit-issuing banks as well as large internet

marketing providers, are substantially larger and more established than we are, which gives them

advantages over us and our network, such as a more diversified set of product offerings, a broader

consumer and merchant base, the ability to reach more consumers, the ability to cross-sell their products,

operational synergies, the ability to cross-subsidize their offerings through their other business lines, more

versatile technology networks, broad-based local distribution capabilities and lower-cost funding. Our

competitors may also have longer operating histories, more extensive and broader consumer and

merchant relationships and greater brand recognition and brand loyalty than we have, in particular in

markets that we entered later in our operating history, such as the United States, or with respect to

solutions that we introduced more recently, such as digital advertising. If we cannot compete successfully

against current and future competitors, our business, results of operations, financial condition and future

prospects could be negatively impacted.

**Our business depends on our ability to attract and retain highly skilled employees.**

In the evolving financial technology industry, our ability to maintain a competitive edge depends on our

ability to attract, train, nurture and retain a workforce comprising highly skilled professionals across all

areas of our organization, in particular, highly experienced engineers, data scientists, and marketing and

sales specialists. Competition for these types of highly skilled employees is extremely intense. Trained and

experienced personnel are in high demand and may be in short supply. Our continued growth and ability to

innovate and improve our network, products and solutions depend on our ability to recruit from this talent

pool effectively and to offer an engaging and supportive work environment that not only attracts but also

retains these professionals.

In addition, many of the companies with which we compete for experienced employees have greater

resources than we do or operate in jurisdictions, such as the United States, that enable them to offer more

attractive terms of employment, including more favorable share-based compensation packages. Further,

we invest significant time and expense in training our employees, which increases their value to

competitors that may seek to recruit them. Any loss of key personnel, including those in leadership

positions or those with specialized expertise, could disrupt our operations and significantly delay or hinder

our product development and strategic initiatives. Additionally, our ability to preserve our knowledge base

and maintain continuity in our strategic direction is at risk if we cannot effectively manage employee

turnover.

Furthermore, our performance and competitiveness as an employer are influenced by our ability to

comply with, anticipate and adapt to changes in employment and tax laws and regulations, including those

related to labor relations, health and safety standards, immigration policies and taxation of equity-based

compensation. For example, in Sweden and the U.K., social security payments on equity-based

compensation awards payable by the issuer and its employees are uncapped. This makes share-based

compensation offered by us to our employees in those jurisdictions less attractive than similar

compensation programs offered by companies in other jurisdictions, including the United States. We may

KLARNA GROUP PLC11

also become subject to additional social security and tax payments as a result of our multi-class share

capital structure. Depending on future changes in the price of our ordinary shares and the position taken

by applicable tax authorities, such obligations to make social security or tax payments by us could be

material. As a result, it may be more difficult or expensive for us to recruit and retain talent than our

competitors whose workforce is located primarily in jurisdictions with more favorable tax treatment of

equity-based compensation. Changes in such regulations could impose additional burdens on our

operations and limit our flexibility in effectively recruiting, maintaining and managing our workforce across

different geographies and during different business and economic cycles. If we are unable to attract and

retain a highly skilled workforce or are required to make material social security or tax payments in

connection with our equity-based compensation awards or our multi-class share capital structure, our

business, results of operations, financial condition and future prospects could be adversely affected.

**The success and growth of our business depends upon our ability to keep up with rapid technological** 

**developments and continuously innovate and develop new products, technologies and services.**

Our network connects millions of consumers and hundreds of thousands of merchants at scale to

power global commerce. This network facilitates connections across the commerce ecosystem—from

PSPs and banks to credit bureaus and affiliate networks. In order to deliver a seamless commerce

experience to our customers and remain competitive, we must continuously innovate and improve our

network. Incorporating technological advancements into our network requires significant financial and

personnel resources and talent. Our development efforts with respect to these initiatives could distract

management from current operations and could divert capital and other resources from other initiatives

important to our business.

We may not be able to make technological improvements when expected by our consumers and

merchants. In addition, we may fail to effectively implement new technology-driven products and services

as quickly as our competitors or be successful in marketing these products and services to consumers

and merchants. For example, our competitors or other third parties may incorporate AI into their products

and services more quickly or more successfully than us, which could impair our ability to compete

effectively. If we are unable to successfully and timely innovate and continue to deliver a superior

merchant and consumer experience through our network, the demand for our products and solutions may

decrease and our business, results of operations, financial condition and future prospects could be

adversely affected.

In pursuit of our goal of becoming our consumer's everyday spending and saving partner, we expect

that we will need to continue to introduce new products and solutions in our existing categories, while also

expanding our offerings into adjacent categories. For example, we have recently introduced and expanded

various offerings such as in-store and contactless payment capabilities, post-purchase financing solutions,

peer-to-peer payment features and digital wallet and cryptocurrency-related initiatives. The success of

new products or solutions in such adjacent categories could be hampered by a number of factors,

including our relative inexperience operating in such categories or the strength of our competitors. In

addition, new offerings and technologies are inherently risky, due to, among other things, risks associated

with the product or technology not performing at all, or not performing as expected, consumer and

merchant acceptance, technological outages or failures, applicable legal and regulatory requirements, and

failure to meet consumer and merchant expectations. As a result, we could experience increased claims,

reputational damage or other adverse effects, any of which could be material. The profile of potential

consumers using our new products, solutions and technologies also may not be as attractive as the profile

of the consumers that we currently serve, which may lead to higher levels of delinquencies or defaults

than we have historically experienced. Additionally, we can provide no assurance that we will be able to

develop, commercially market and achieve acceptance of any new products, solutions and technologies

and we may also fail to accurately predict the demand for, or growth of, such offerings in the future.

Finally, our investment of resources, including management attention and talent allocation, to develop new

products, solutions and technologies, or make related changes or updates to our network, may either be

insufficient or result in expenses or losses of alternative growth opportunities that exceed the revenue

actually generated from these new offerings. Our inability to successfully introduce new products,

KLARNA GROUP PLC12

technologies or solutions in our traditional or adjacent categories could limit our future growth and, as a

result, have an adverse effect on our business, results of operations, financial condition and future

prospects.

**Our use and provision of AI-powered solutions could lead to operational or reputational damage, competitive** 

**harm, legal and regulatory risk and additional costs.**

We use AI in many aspects of our business, including integrating AI with products and services such as

our customer service chatbot and shopping assistant. We also utilize established ML techniques in real-

time fraud detection and prevention, AML and sanctions screening, product personalization and

generating marketing materials. In addition, we use ML techniques to enable our real-time underwriting

process. There are significant and evolving risks involved in utilizing AI and no assurance can be provided

that the usage of such AI tools, solutions and technologies will enhance our network or help our operations

become more effective, efficient or profitable. The models underlying our AI technologies may be

incorrectly designed or implemented. They may also be trained on, or otherwise use, biased, incomplete,

inaccurate or poor-quality data. We may also not have adequate rights to use the data on which our AI-

powered tools rely. Such technologies and tools may also be adversely impacted by unforeseen defects,

technical challenges, data breaches, cybersecurity threats or material performance issues. Accordingly,

our use of AI technologies and tools may inadvertently reduce our effectiveness and efficiency or cause

unintentional or unexpected outputs that are incorrect, do not match our business goals, standards and

values, do not comply with our policies or procedures, harm our brand and reputation, negatively impact

consumers or merchants or otherwise interfere with the performance of our business. We could incur

liability resulting from the violation of applicable laws and regulations as well as contracts to which we are

a party or civil claims. Additionally, if any of our employees, contractors, vendors or service providers input

our confidential information while using any third-party AI technology in connection with our business or

the products, solutions and services they provide to us, such practice may lead to the inadvertent

disclosure of our confidential information, which may impact our ability to realize the benefit of, or

adequately maintain, protect and enforce our intellectual property rights in, such confidential information

or otherwise harm our competitive position, reputation and business.

We have in the past used, are currently using and expect to continue using in the future, generative AI,

a relatively new and emerging technology in the early stages of commercial use, in certain aspects of our

business, including our customer service chatbot, which could expose us to additional risks. For example,

generative AI may create inaccurate, incomplete or misleading output, reflect unintended biases or

produce other discriminatory or unexpected results, errors or inadequacies, any of which may not be

easily detectable. While we have processes and controls in place designed to mitigate the risks associated

with using generative AI, including human involvement in the training and monitoring of our AI tools and the

alignment of our AI development policies and procedures with guidelines for secure development

practices, if the content, analyses or recommendations that generative AI assists in producing or our

products and services are, or are perceived to be, deficient, inaccurate, biased, unethical or otherwise

flawed, our reputation, competitive position and business may be adversely affected and we may incur

additional costs, including in the form of damages or fines.

To the extent that we do not have sufficient rights to use the data used in, or produced by, the AI tools

employed in our business and operations, we may be subject to litigation by the owners of the content or

powered tools may not be subject to copyright protection, which may adversely affect our ability to

enforce the intellectual property rights in such content. In addition, the use of AI by other companies has

resulted in, and our use of AI may in the future result in, data breaches and cybersecurity incidents that

implicate the personal information of users of AI-powered tools. Any of the foregoing could adversely

affect our reputation and expose us to legal liability or regulatory risks, including with respect to third-

party intellectual property, privacy, publicity, contractual or other rights.

Regulation of AI is rapidly evolving worldwide as legislation and regulators are increasingly focusing on

these emerging technologies. The cost to comply with such laws or regulations could be significant and

KLARNA GROUP PLC13

may increase our operating expenses. For example, the European Union's Artificial Intelligence Act (the "AI

Act"), which entered into force on August 1, 2024, establishes, among other things, a risk-based

governance framework for regulating AI systems operating in the EU. This framework categorizes AI

systems, based on the risks associated with such AI systems' intended purposes, as creating

unacceptable or high risks, with all other AI systems being considered limited or low risk. There is a risk

that our current or future AI-powered tools, such as our ML-based risk scoring model, may obligate us to

comply with the applicable requirements of the AI Act, which may impose additional costs on us, increase

our risk of liability and fines or otherwise adversely affect our business, results of operations, financial

condition and future prospects.

Further, in the EU and the U.K., we are subject to the EU GDPR and the U.K. GDPR, respectively, which

regulate our use of personal data for automated decision-making that results in a legal or similarly

significant effect on an individual, and provides rights to individuals in respect of that automated decision-

making. Recent case law from the Court of Justice of the European Union has taken an expansive view of

the scope of the EU GDPR's requirements around automated decision-making and introduced uncertainty

in the interpretation of these rules. The legal obligations in this area may affect our use of AI (such as our

use of generative AI in customer support and ML in fraud prevention and AML/CFT screening) and our

ability to provide, improve or commercialize our solutions, products and services may require additional

compliance measures and changes to our operations and processes, and result in increased compliance

costs and potential increases in civil claims against us, any of which could adversely affect our business,

results of operations, financial condition and future prospects.

It is possible that new laws and regulations will be adopted in the United States and other jurisdictions,

or that existing laws and regulations may be interpreted in ways that could affect our use and provision of

AI in our products, services and business generally. We may not be able to adequately anticipate or

respond to these evolving laws and regulations, and we may need to expend additional resources to adjust

our products, solutions and services in certain geographies to such new requirements, in particular if

applicable legal frameworks are inconsistent across jurisdictions. Furthermore, the technologies

underlying AI are complex and rapidly developing and, as a result, it is not possible to predict all of the

legal, operational or technological risks related to our current or future use of AI.

Further, public and regulatory focus on ethical use and data privacy concerns regarding AI could lead

to reputational damage if we fail, or are perceived to fail, to align with societal expectations or regulatory

standards relating to the use of AI. Such scrutiny may result in financial or other penalties and may also

erode customer trust, which is crucial for our brand and long-term success. Although we have taken, and

continue to take, steps designed to mitigate the risks associated with the use of AI in our business,

including, among other things, engaging with regulatory bodies, investing in compliance infrastructure and

fostering transparent and ethical use of AI in our products, solutions and services, our use of AI may

present ethical, reputational, technical, operational, legal, competitive and regulatory risks, any of which

could adversely affect our business, financial condition, results of operations and future prospects.

**We may be unable to maintain our funding model based on consumer deposits or otherwise maintain, renew** 

**or replace our other funding arrangements.**

We believe that one of our main competitive advantages is our stable, low-cost and flexible funding

base. As a fully licensed bank with an investment grade credit rating, we have the ability to access a variety

of forms of funding, including retail deposits, debt or equity securities, credit facilities and asset-backed

securities. At the same time, we aim to take a conservative, deposit-based approach to liquidity. For

example, in the year ended December 31, 2025, 90% of funding was through utilizing consumer deposits,

which equaled $13 billion as of December 31, 2025.

Notwithstanding our current capital and liquidity positions, we are not insulated from various risks

associated with liquidity and funding. These risks may be exacerbated by market volatility, shifts in

customer or investor sentiment, regulatory changes or economic downturns, potentially affecting our

ability to attract and retain deposits or maintain or obtain other sources of funding. In addition, because

KLARNA GROUP PLC14

we primarily rely on consumer deposits to fund our business and operations, our funding costs are largely

dependent on the current market rates that we may be required to pay on such deposits to remain

competitive with other interest-bearing or fixed income investment options available in the geographies in

which we take deposits. From 2023 to the year ended December 31, 2025, our funding costs increased

from $297 million to $667 million, or from 0.32% to 0.52% of our GMV and from 3.1% to 5.1% of our deposits

over the same period. Our highly competitive deposit savings platform and bank license provide us greater

operational flexibility and a relatively lower funding cost compared to wholesale funding models. For

example, in the year ended December 31, 2025, 90% of our lending activities were funded from our

consumer deposits, 58% of which are fixed and longer-term than the average duration of the consumer

loans that we funded through such deposits.

Further, our other existing funding arrangements may not be renewed or replaced. Through our

subsidiaries, we enter into credit facilities and issue commercial paper, regulatory capital notes as well as

other debt securities, including senior and subordinated notes under our Euro and Swedish Medium Term

Note Program, as more fully discussed in the section of this report on Form 20-F titled "Management's

Discussion and Analysis of Financial Condition and Results of Operations―Liquidity and Capital

Resources―Indebtedness." We also sell loans that are originated through our network in forward flow

transactions. If our funding counterparties become constrained or unwilling to offer necessary capital due

to, for example, adverse conditions in the capital and credit markets, the general availability of credit, the

volume of trading activities, the overall availability of credit toward the financial services industry, our

credit rating and credit capacity, as well as the possibility that consumers or lenders may develop a

negative perception of our long- or short-term financial prospects, our business, results of operations,

financial condition and future prospects could be adversely affected.

In our forward flow agreements, we make numerous representations and warranties concerning the

characteristics of the loans we transfer and/or sell (depending on the type of facility), including

representations and warranties that the loans meet certain eligibility requirements of those facilities and

investors. If those representations and warranties are incorrect, we may be required to repurchase certain

of the loans that we sold to third-party investors. Failure to repurchase so-called "ineligible loans" when

required could constitute an event of default under our financing agreements and lead to the potential

termination of the applicable facility. We can also provide no assurance that we would have adequate cash

or other qualifying assets available to make such repurchases. In addition, we utilize securitization

structures and forward flow agreements to effectively manage our regulatory capital adequacy

requirements by lowering the risk-weighted exposure amounts that we carry on our balance sheet.

Consequently, if such arrangements are scaled back, suspended or terminated for any reason, we may be

required to raise additional capital, potentially by issuing ordinary shares or equity-linked instruments, to

remain in compliance with applicable capital adequacy requirements and such capital may not be

available to use on favorable terms or at all.

Disruptions, uncertainty or volatility in capital and credit markets may also limit our access to capital.

As a result, we may be forced to delay raising capital, reduce, cancel or postpone interest payments on our

other securities, issue capital of different types or under different terms than we would otherwise, or incur

a higher cost of capital than in a more stable market environment, each of which could adversely affect

our business, results of operations, financial condition and future prospects.

**The success of our business depends on our underwriting process and our ability to accurately price** 

**consumer credit risk.**

We believe that one of our core competitive advantages is our underwriting process, which is based on

our access to proprietary data, including third-party data. We provide Pay in Full, Pay Later and Fair

Financing payment options to our consumers. Pay in Full instantly settles purchases at the time of the

transaction. Pay Later enables consumers to purchase goods or services at the time of the transaction and

pay the full amount at a later date. Fair Financing allows consumers to pay for their purchase over a longer

duration. We have designed our short-term credit products to serve a wide range of consumers, including

those with varying credit histories and borrowing needs. Rather than targeting a specific credit segment,

KLARNA GROUP PLC15

our underwriting processes aim to responsibly provide our credit products across a broad customer base.

To that end, we provide a new, real-time underwriting decision for each transaction, leveraging our own

records, including Klarna history and purchase behavior of our active Klarna customers. We also leverage

merchant data, credit bureau reports and open banking data to understand the financial position of the

consumer at that point in time. Our underwriting process is fully automated, making decisions in real time,

and is designed to prevent potential fraud and abuse and to ensure compliance with applicable AML and

CTF laws and regulations while assessing the consumer's creditworthiness against our own internal risk

appetite.

Numerous factors, many of which can be unexpected or beyond our control, can adversely affect a

consumer's credit risk and therefore our exposure to it. There may be risks that exist, or that develop in

the future, including market risks, economic risks, including as a result of rising inflation or unemployment

rates or changes in international trade policies, such as imposition of new, or changes to existing, tariffs,

taxes and other restrictions on global trade, and other external events, that we have not appropriately

anticipated, identified or mitigated, such as risks from inadequate or failed processes, people or systems,

natural disasters, and compliance, reputational or legal matters, both as they relate directly to us as well as

that relate to third parties with whom we partner, contract or otherwise do business. We may update our

risk model for a number of reasons, including as new information becomes available to us, or to reflect our

corporate strategy and objectives. For example, in 2019, we strategically decided to expand our operating

model into additional geographies, with a particular focus on the United States, and in the following three

years expanded into 12 additional markets. As part of that growth strategy, we recalibrated our risk model

to reflect our higher risk appetite in those markets, which contributed to a rapid GMV growth and an

increase in the number of consumers and merchants on our network but also led to higher credit losses,

particularly in those new markets, and net losses on a consolidated basis. In mid-2022, while continuing to

enjoy rapid GMV growth, we decided to again adjust our underwriting process to reflect our strategic

recalibration to more balanced growth and shift towards profitability. Accordingly, we implemented a risk-

based down payment strategy to reduce transaction risk, introduced more stringent debt limit thresholds

and higher initial payments on higher-risk purchases, adopted a credit bureau-based derogatory remark

policy as part of our underwriting standards and accelerated the placement of overdue accounts with debt

collection agencies. These changes, together with our improved underwriting capabilities as we scaled and

matured our operations in the United States, led to a decrease in our provision for credit losses as a

percentage of GMV in that market from approximately 3.6% in 2021 to approximately 0.63% in 2025, all

while our GMV grew by approximately 213% over the same period.

There can be no assurance, however, that similar changes to our risk model and, by extension, our

underwriting process, will similarly lead to outcomes that align with our expectations and objectives. In

addition, changes to our risk model may be ineffective and the performance of our risk model may decline.

If our risk model does not effectively and accurately predict the credit risk of potential loans facilitated

through our network, greater than expected losses may result on such loans and, as a result, our business,

results of operations, financial condition and future prospects could be adversely affected.

In addition, if the risk model we use contains errors or is otherwise ineffective, our reputation and

relationships with customers, partners, including originating bank partners, and other funding sources

could be harmed, we may be subject to liability and our ability to access our funding sources may be

inhibited. Our ability to attract consumers to our network and to build trust in our network and products

and solutions depends on effectively evaluating consumer credit profiles and likelihood of consumer

default. If any of the credit risk or fraud models we use contain programming or other errors or are

ineffective or the data provided by consumers or third parties is incorrect or stale, or if we are unable to

obtain accurate data from consumers or third parties (such as credit reporting agencies), the loan pricing

and approval process through our network could be negatively affected, resulting in mispriced or

misclassified loans or incorrect approvals or denials of loans.

Additionally, if we make errors in the development, validation or implementation of any of the models

or tools used to underwrite loans that we subsequently securitize or sell to investors, those investors may

experience higher delinquencies and losses. We may also be subject to liability to those investors if we

KLARNA GROUP PLC16

misrepresented the characteristics of the loans sold because of those errors. Consequently, errors in our

models or tools or an inability to effectively forecast loss rates could inhibit our ability to enter into forward

flow loan sale arrangements or securitization transactions, otherwise sell loans to investors or utilize our

funding arrangements, which could adversely affect our business, results of operations, financial condition

and future prospects.

**We may fail to grow our advertising revenue.**

We have built advertising solutions based on the relationship we maintain with our consumers and

merchants and the data they entrust to us. While we target additional growth in our advertising revenue

over time as we improve our ability to match consumers and merchants on our network and continue to

grow and scale our advertising revenue model, there is no assurance that such model will continue to be

successful or that we will generate increasing advertising revenue. In addition, the pace of expansion of

our advertising offerings may fluctuate, slow down or stop entirely. To increase our advertising revenue, we

must attract new advertising partners or encourage existing partners to maintain or increase their

advertising spend on our network. To do this, we must further penetrate our existing verticals, channels

and geographies as well as increase the number of verticals, channels and geographies where we offer

digital advertising, attract new merchants and expand our relationships with existing merchants, and

acquire new consumers and increase the engagement of existing ones, all while increasing the breadth

and functionality of our digital advertising products to create more value for our merchants and advertising

partners. This includes new advertising formats, new measurement tools, increased brand awareness and

other capabilities to deliver attractive return on investment to merchants.

Further, expenditures by merchants tend to be cyclical, reflecting overall economic conditions and

budgeting and buying patterns. Adverse macroeconomic conditions have affected in the past, and may in

the future affect, the demand for advertising and cause brands to reduce the amounts they spend on

advertising. For example, during times of economic uncertainty we have observed, and may observe in the

future, reduced demand for advertising from brands that are exercising caution with their spending

budgets and either slowing or reducing their campaigns due to, among other things, macroeconomic

uncertainty, including from inflation, rising interest or unemployment rates, tariffs, taxes and other

restrictions on global trade, global supply chain disruptions, labor shortages, including shortages resulting

from changes in immigration policies or enforcement practices or global migration patterns, geopolitical

events, including the war in Ukraine and the Middle East, and reduced consumer confidence. In addition,

our brand partners' sales generated from digital marketing campaigns on Klarna may fail to meet their

expectations, which in turn may result in reductions in future brand partner digital marketing spend on our

network and related decreases in our advertising and other revenue in future periods.

Our advertising solutions compete with a number of products offered by various companies active in

the advertising industry, including large and established internet and technology companies, such as

Amazon, or large retail corporations, such as Walmart. With the introduction of new technologies and the

influx of new entrants to the advertising market, we expect competition to persist and intensify in the

future. Some of our existing competitors, in addition to having larger financial or operational resources or

longer operating history in the advertising industry, could also leverage their market position to make

changes to their web browsers, mobile operating systems, platforms, exchanges, networks or other

solutions or services, any of which could make it more difficult for our solutions to effectively compete

with the products offered by such companies.

Changes to our advertising policies and data privacy and cybersecurity practices, as well as our

contractual obligations and applicable laws, legislation or regulations, or the regulatory enforcement

thereof, may adversely affect the advertising solutions that we are able to provide to our merchants. For

example, we have in the past, and may in the future, be subject to regulatory enforcement action due to

breaches of marketing or financial promotions rules. In addition, actions by operating system network

providers or application stores such as Apple or Google may affect our offerings or services, including how

we collect, use, share and otherwise process data from end-user devices in connection with our

advertising offerings. For example, Apple implemented a requirement for applications using iOS, its mobile

KLARNA GROUP PLC17

operating system, to affirmatively (on an opt-in basis) obtain an end user's permission to track user activity

across apps or websites or access users' device advertising identifiers for advertising and advertising

measurement purposes, as well as other restrictions. In addition, in February 2022, Google announced its

Privacy Sandbox initiative for Android, a multiyear effort expected to restrict tracking activity and limit

advertisers' ability to collect app and user data across Android devices, which Google began rolling out in

early 2024.

Our ability to achieve, sustain or increase profitability depends in part on our advertising revenue. If we

are unable or choose not to expand our advertising markets, verticals, channels and geographies, develop

or pursue innovative advertising offerings or expand our relationships with current or new advertising

partners, merchants and consumers, we may not be able to maintain or grow our digital advertising

revenue. Any failure to maintain or grow our advertising revenue could in turn harm our business, results of

operations, financial condition and future prospects.

**If loans facilitated through our network do not perform, or significantly underperform, we may incur credit** 

**losses.**

Our consumers can use a number of payment methods to purchase products and services through our

network both online and offline. Our Pay Later and Fair Financing payment methods involve extending

consumer credit. As of December 31, 2025, our consumer lending credit exposure amounted to $15.2

billion, with $11.2 billion in consumer receivables and $4.0 billion of consumer loan commitments.

If the loans facilitated through our network do not perform as expected, we may be required to

increase our provisions for credit losses, which would negatively impact our profitability and financial

condition. This risk varies depending on our different lending products. For example, Fair Financing loans

are longer in duration than our other products and have higher take rates but also lead to higher

provisions for credit losses. In addition, our credit losses may also vary depending on the maturity of our

credit underwriting in a given market. For example, in the past we experienced higher credit losses in new

geographies in the first several years following our entry into such geography. As a result, if we decide to

expand into new markets, our credit losses may similarly increase. In addition, there can be no assurance

that our credit loss rates in the geographies in which we currently operate will not increase in the future.

Any significant increase in credit losses or underperformance of our loans could erode the confidence in

the soundness of our underwriting model and our business generally, potentially leading to increased

borrowing costs or reduced access to capital, any of which could have an adverse effect on our business,

results of operations, financial condition and future prospects.

**Our collection efforts on loans may be ineffective or unsuccessful.**

The financial and operational performance of our loan portfolio depends on our ability to effectively

manage and collect on our loans. In order to manage our credit risk, we seek to limit the concentration of

nonperforming loans and large single exposures in the consumer credit portfolio. This, together with the

dispersion of millions of consumers across multiple countries and continents and low AOV, makes our

consumer loan portfolio diversified.

At the same time, our collection efforts on loans that we have extended may be ineffective or

unsuccessful for a number of reasons, some of which may be beyond our control, including adverse

changes in economic conditions, increased unemployment or inflation levels, interest rates, declines in

property values, changes in consumer behavior, personal developments such as unemployment, change of

marital status, death, illness or personal bankruptcy, and legislative or regulatory interventions that restrict

our collection methods. Such ineffectiveness in collections could lead to higher than anticipated loan

losses and provisions for credit losses, adversely affecting our financial condition and results of

operations.

Moreover, our reputation may suffer if our collection practices are perceived as inadequate or overly

aggressive, potentially leading to increased regulatory scrutiny and legal challenges. The uncertain

economic outlook in many of our geographies, including fluctuations in unemployment or inflation rates,

KLARNA GROUP PLC18

consumer confidence and property values, adds to the challenges in predicting the effectiveness of our

loan collection efforts. A sustained period of economic downturn or a significant market event could

exacerbate the difficulties in collecting loans, leading to increased credit losses. Legislative or regulatory

changes could further limit our flexibility in managing delinquencies and collections, imposing additional

operational and financial burdens on our institution. Any significant underperformance in our collection

activities could materially impact our loan portfolio's performance, leading to increased provisions for

credit losses, which could adversely affect our business, results of operations, financial condition and

future prospects.

**Loans facilitated through our network are not secured, guaranteed, insured or backed by any governmental** 

**authority.**

Consumer credit products that we offer are not secured by any collateral, nor are they guaranteed or

insured by any third party nor backed by any governmental authority in any way. Consequently, the

financial risk associated with these loans is higher than compared to some other types of loans that

benefit from some or all of these features, for example, mortgages. If our consumers neglect their payment

obligations on loans facilitated through our network or choose not to repay their outstanding loan

obligations entirely, our business, results of operations, financial condition and future prospects could be

adversely affected.

**We may fail to successfully implement, maintain and improve our risk management policies, procedures and** 

**methods.**

Our operations and financial stability are significantly affected by a wide array of risks, including, but

not limited to, economic and market conditions, credit risks, operational risks, funding and liquidity risks,

reliance on third parties and exposure to interest rate and currency risks. As a result, the management of

risk is an integral part of our activities. While we employ a broad and diversified set of risk monitoring and

risk mitigation techniques, they may not be fully effective, if at all, in mitigating our risk exposure in all

economic market environments or against all types of risk, including risks that we may fail to properly

identify or timely anticipate. The broader economic and market conditions in the markets we serve play a

significant role in our operations. Factors such as consumer and business confidence, fiscal policies,

unemployment levels, inflation, interest rates, international trade policies and the state of credit markets

directly impact our financial performance. Additionally, geopolitical tensions, such as the war in Ukraine

and conflicts elsewhere in the world, public health crises, such as the COVID-19 pandemic, or changes in

immigration policies or migration patterns may introduce additional uncertainties that can affect the global

economy and, consequently, our operations.

Credit risk, including the potential for consumer default and associated credit losses, poses one of the

most significant threats to our financial stability. Our reliance on a complex, ML-powered underwriting

process carries the risk of inaccuracies in predicting future impairments and credit losses, especially in

our less mature markets. Operational risks related to our IT systems, data privacy and cybersecurity, and

the dependency on key personnel, are inherent in our business model. The digital nature of financial

services and our reliance on sophisticated technology infrastructure expose us to tracking and system

failures, data breaches and other cybersecurity incidents. Our ability to fund operations and meet

obligations as they fall due is critical to our liquidity and overall financial health. Risks associated with

funding, access to capital markets, cost of funding and statutory liquidity requirements can materially

affect our financial position. Our reliance on third parties for critical business systems and consumer

services introduces operational risk. Failures by these partners to perform in accordance with our policies,

terms of service, other procedures and standards, compliance failures or various types of fraud could

disrupt our operations, damage our reputation and result in regulatory penalties. Moreover, our exposure

to interest rate and currency risks arises from mismatches in the interest rates of our assets and liabilities

and our operations in various currencies, which could significantly impact our financial position.

The effective management of these various risks across our global operations and various products,

services and solutions is critical to our continued growth and long-term success. Failure to adequately

KLARNA GROUP PLC19

implement, maintain and improve our risk management policies and procedures, including our credit risk

management system, could adversely affect our business, results of operations, financial condition and

future prospects.

**Our results depend on prominent presentation, integration and support of our network by our merchants.**

We are dependent on the depth of integration, presentation and active support of our network by our

merchants. Our network is designed to be embedded into the online and physical retail environments of

our merchants. Our contractual arrangements with merchants specify the nature and scope of

presentation of our network at the merchant's online or offline locations, including at checkout.

Consequently, our success depends on our ability to both negotiate and enter into agreements with our

merchants providing for prominent presentation, integration and support of our network, in particular as

compared to other available payment methods accepted by such merchants, as well as to successfully

monitor and ensure compliance with such arrangements with our merchants. Our inability to negotiate and

enter into satisfactory agreements providing for such presentation, integration and support of our network,

or any failure by our merchants to effectively present, integrate and support our network in compliance

with their contractual obligations with us, could adversely affect our business, results of operations,

financial condition and future prospects.

**If our merchants fail to fulfill their obligations to consumers or comply with applicable laws and regulations,** 

**we may incur additional costs.**

Our business model is intricately linked with the performance of our merchants and their success at

growing, retaining and monetizing their customer bases through our network. Our success and reputation

are similarly dependent on our merchants' ability to fulfill their obligations to consumers, including the

timely delivery of goods and services, the quality of these goods and services and compliance with

applicable consumer agreements, terms of use, policies and consumer protection and other laws and

regulations.

Failure of our merchants to fulfill their obligations to consumers, including as a result of any financial

distress, bankruptcy, reorganization, receivership or similar proceedings, or their failure to comply with

applicable laws and regulations, could lead to consumer dissatisfaction, disputes and chargebacks. Under

our Buyers Protection Policy, we offer refunds to our consumers in a wide range of situations, including

when the goods they purchased using our network were never received or were damaged,

misrepresented, counterfeit or otherwise deficient. In addition, consumers may bring claims and defenses

against us directly or our originating bank partners under the Holder Rule or equivalent state laws. The

Holder Rule requires the inclusion of a specific notice in consumer credit contracts evidencing debts

arising from purchase money loan transactions. The notice provides that the holder of the consumer

credit contract is subject to all claims and defenses which the debtor could assert against the seller of

goods or services obtained with the proceeds of the consumer credit contract. In those cases, we may

decide that it is beneficial to remediate the situation, either through assisting the consumers to get a

refund, working with our originating bank partner to modify the terms of the loan or reducing the amount

due, making a payment to the consumer, or otherwise. In addition, consumers can bring private false-

advertising lawsuits, including class actions, against us, our merchants or advertising partners for any

material misrepresentations and/or deceptive or unsubstantiated claims (among other similar causes of

action) in promotional materials or other advertising presented on our network. Such events could result in

increased operational costs for us, including costs associated with handling disputes, issuing refunds and

managing chargebacks. Moreover, non-compliance with applicable laws and regulations by our merchants

could lead to regulatory investigations, sanctions and reputational damage, affecting our brand and

reputation and potentially leading to a loss of consumer trust and merchants.

We continually monitor our merchants to ensure compliance with their obligations to consumers and

applicable laws and regulations. However, despite such efforts, there can be no assurance that all our

merchants fulfill their obligations or remain compliant with all relevant laws and regulations. The failure of

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a significant number of our merchants to meet their obligations or comply with laws could materially and

adversely affect our business, results of operations, financial condition and future prospects.

**We rely on third parties and their systems for a variety of services, and these third parties' failure to perform** 

**these services adequately could materially and adversely affect our business.**

We utilize numerous third-party service providers in our operations, including card networks, banks,

PSPs, affiliate networks, credit bureaus, advertising partners, back-office and business process support, IT

production and support, internet connections, network access and cloud computing. For example, we use

Amazon Web Services ("AWS") as our primary third-party cloud infrastructure provider. We also partner

with Visa in issuing the Klarna card in select markets, with WebBank in offering our Fair Financing and

Klarna balance products in the United States, with Stripe in offering our payment methods across all of

Stripe's merchants globally, and with WooCommerce in offering our payment methods across all

merchants on the WooCommerce platform. A failure by a third-party service provider could prevent us

from providing contractual services to our consumers and merchants in a timely manner. Additionally, if a

third-party service provider is unable to provide certain services, we may incur significant costs to either

internalize some or all of such services or to find a suitable alternative. Importantly, certain third-party

service providers, including Visa and AWS, are the sole source or one of a limited number of sources of the

services they provide for us. It could be difficult and disruptive for us to replace certain third-party

vendors in a timely manner if they became unwilling or unable to provide us with these services in the

future (as a result of their financial or business conditions or otherwise), and our business, results of

operations, financial condition and future prospects could be adversely affected.

**The inability of our counterparties to meet their financial obligations or our inability to fully enforce our rights** 

**against our counterparties could adversely affect our results.**

In our business operations, we engage with a variety of counterparties, including financial institutions,

such as our bank partners, including originating bank partners, merchants and PSPs that are integral to the

seamless operation of our network. The financial health and operational reliability of these entities are

critical to us since their failure to meet their financial obligations towards us or our customers could lead

to financial losses. In particular, financial institutions and other participants in the payments ecosystem

are closely interrelated as a result of credit, trading, clearing, technology and other relationships.

Consequently, any significant adverse development (such as adverse regulatory changes or proceedings,

insolvency, bankruptcy or default) with respect to one of our counterparties may negatively affect other

participants in the market, including us and our other counterparties, thereby increasing the likelihood and

volume of our potential financial losses. Furthermore, our ability to enforce rights against these

counterparties in cases of noncompliance or disputes is influenced by legal and regulatory frameworks.

These frameworks vary across jurisdictions and are subject to change, making our recovery prospects

uncertain. The process of enforcing our contractual rights against our counterparties can be both time-

consuming and costly, and there is no guarantee of a favorable outcome. It may also attract public and

regulatory scrutiny, potentially affecting our reputation. Economic downturns, including as a result of rising

interest or unemployment rates, market volatility, including as a result of changes in international trade

agreements, practices or policies, geopolitical tensions and regulatory changes within the financial sector

heighten the risk of counterparty failures. These conditions can affect the creditworthiness and liquidity of

our counterparties, thereby increasing the likelihood of our financial losses.

**To support our network and operations, we partner with banks in different geographies. Our arrangements** 

**with them may be terminated and we may be unable to replace the commitments of our partner banks.**

To support our network and operations, including offering certain products and solutions in some

jurisdictions, we have arrangements in place with partner banks in different geographies. Such

arrangements are generally for two primary reasons: to expand our credit offerings into jurisdictions in

which we currently do not have necessary Authorizations and to support our deposit-taking activities. For

example, we partner with WebBank to offer our Fair Financing products in the United States. Under our

agreement with WebBank, WebBank originates such consumer loans, which we then purchase and service.

KLARNA GROUP PLC21

We pay WebBank a volume-based and fixed fee under our agreement. In Germany, we have outsourced

administration of a portion of our retail deposits to a local partner bank for a volume-based fee. In Sweden,

we had an agreement with Avanza Bank Holding AB ("Avanza"), through which we raised retail deposits via

their platform until January 2025 and paid Avanza a fee based on the volume of the deposits raised. In

January 2025, we ceased collecting new deposits through Avanza as part of our decision to prioritize

raising deposits directly through our platform.

Our agreements with partner banks are generally renegotiated every three years. However, they may

be terminated early or not be renewed on terms favorable to us or at all. Our agreements with partner

banks do not prohibit them from working with our competitors, and they could decide to enter into an

exclusive or more favorable relationship with one or more of our competitors. They could also offer

solutions competing with ours. For example, WebBank currently offers loan programs through other

competing networks. In addition, our partner banks may not perform as expected under our agreements.

We could in the future have disagreements or disputes with our partner banks, which could negatively

impact or threaten our relationship with such banks or other banks with whom we may seek to partner.

Our partner banks are subject to oversight and supervision by regulatory bodies in various jurisdictions

and must comply with applicable rules and regulations and examination requirements. Certain of our

partner banks have in the past been, and may in the future be, subject to adverse regulatory orders. While

such orders were unrelated to, and had no impact on, our relationship with such banks, including any

consumer credit products originated through our network, any future adverse orders or regulatory

enforcement actions, even if unrelated to Klarna, could impose restrictions on, or prohibit or otherwise

make it infeasible for our partner banks to continue to support, our network and operations.

If our existing arrangements with partner banks were limited, suspended or terminated, if any of our

partner banks ceased operations, or if our relationship with them were to otherwise terminate for any

reason (including, but not limited to, due to its failure to comply with regulatory orders or other actions), we

would need to implement a substantially similar arrangement with another bank, obtain additional licenses

or limit our operations. If we need to enter into alternative arrangements with a different bank to replace

our existing arrangements, we may not be able to negotiate a comparable alternative arrangement in a

timely manner or at all. For example, if we are unable to enter into an alternative arrangement with

different banks to replace or supplement our existing relationship with WebBank, we would potentially

need to obtain additional state licenses to enable us to offer our Fair Financing products, as well as comply

with other state and federal laws, which could be costly and time-consuming. There can be no assurances

that any such licenses could be obtained in a timely manner or at all. In the event that our existing

relationships with our partner banks were terminated and we were not able to replace them with another

partner bank in a timely manner, on comparable or more favorable terms, or at all, our business, results of

operations, financial condition and future prospects could be adversely affected.

**Our results may fluctuate significantly, due to, among others, strong seasonality trends, strategic** 

**transactions and other corporate actions, and may not fully reflect the underlying performance of our business.**

Our financial performance may fluctuate from period to period due to a number of factors, including

seasonality trends. For example, our results of operations are subject to variability based on seasonal

shopping patterns, exemplified by increased GMV and related revenue during holiday seasons, such as

Black Friday in late November and Christmas in late December, followed by periods of reduced activity.

Similarly, many advertisers devote a disproportionate amount of their advertising budgets to the fourth

quarter of the calendar year to coincide with such increased holiday purchasing, which may lead to

seasonal increases in our advertising revenue. In addition, other seasonal trends may develop, existing

seasonal trends may become more extreme and the existing seasonality and consumer and merchant

behavior that we experience may change or become more significant, which would contribute to

fluctuations in our results of operations. Our financial performance may also vary, or appear to vary, as a

result of strategic transactions and other corporate actions. For example, on October 1, 2024, we

completed the divestment of KCO, our online checkout solution, to a consortium of investors. As a result of

this disposition, our revenue and growth figures for the year ended December 31, 2025, or any period

KLARNA GROUP PLC22

thereof, may appear lower on a comparative basis as a result of this disposition. Accordingly, our results

may fluctuate significantly and our results in any given fiscal period may not fully reflect the underlying

performance of our business or be indicative of the results we may achieve in any other fiscal period.

**Changes in market and general economic conditions could adversely affect the financial performance of our** 

**merchants and decrease the demand for our solutions, products and services.**

The performance of our business is significantly influenced by general economic conditions in the

geographies where we operate. A downturn in the general economic environment or a slower pace of

economic growth, including as a result of changes in international trade policies, multilateral trade

agreements or imposition of new tariffs, taxes and other restrictions on global trade, or changes to

immigration policies or migration patterns, can lead to decreased consumer spending and adversely affect

the financial condition of our merchants. Factors such as changes in consumer trends, levels of

consumption, demographic patterns, consumer preferences and financial conditions all reflect the

broader macroeconomic climate in our geographies. Since our network relies heavily on consumer

engagement and transactions and the willingness of merchants to offer consumers the option to use our

financing products to pay for their products and services, any decrease in consumer confidence,

willingness to spend or a general deterioration in the macroeconomic environment could lead to a decline

in demand for our solutions, products and services. This could, in turn, negatively impact our business,

results of operations, financial condition and future prospects.

Further, high levels of unemployment, inflation and changes in interest rates in our markets could

reduce consumers' disposable income and willingness to spend, affecting the utilization of our network.

Such economic factors could also influence the ability and willingness of consumers to repay their loans

provided by us, potentially leading to higher credit losses and adversely affecting our financial condition

and results of operations.

Our ability to generate revenue, in particular merchant and advertising revenue, depends on sales of

products and services by our merchants utilizing our network. Our merchants' sales may decrease or fail

to increase as a result of factors outside of their or our control, such as the macroeconomic conditions

referenced above, or business conditions affecting a particular merchant, industry, vertical or geography.

Our merchants may face sharp and rapid decreases in their sales, including because of changes to

international trade policies, supply chain disruption, including inventory shortages, and other adverse

effects of macroeconomic conditions, which may force them to limit, suspend or terminate their use of our

network. We may not be successful in attracting new merchants to offset any such losses, particularly

amid adverse macroeconomic conditions, which could negatively impact our business, results of

operations, financial condition and future prospects.

**Any acquisition, partnership, joint venture, disposition or other strategic transaction that we make or enter** 

**into could disrupt and harm our business.**

We have in the past engaged, and may in the future engage, in acquisitions, partnerships, joint

ventures, dispositions or other strategic transactions for various reasons, including in an effort to enhance

our network's technological capabilities, expand our product and service offerings, enter new geographies

or simplify or optimize our operations. These strategic moves introduce significant risks, each of which

could adversely impact our business, results of operations, financial condition and future prospects. For

example, the process of integrating acquired companies and technologies or entering into partnerships

requires substantial financial investment and management attention, diverting resources from our existing

operations as well as other growth opportunities and strategic initiatives. Such endeavors may prove more

challenging and costly than anticipated, potentially leading to inefficiencies and disruptions. Moreover, we

may be unable to realize the expected benefits, synergies or developments that we initially anticipate from

such a strategic transaction for a number of potential reasons. Integration of new systems and business

processes may also expose us to potential data breaches and other cybersecurity incidents. Failure to

maintain data integrity and security during and after the integration could damage our brand and

reputation, erode consumer trust and result in significant financial liabilities. Additionally, combining

KLARNA GROUP PLC23

different corporate cultures and aligning management practices pose challenges that can impact

employee retention and undermine the anticipated synergies of such strategic moves. Moreover, these

strategic initiatives can significantly affect our liquidity and capital structure due to the substantial upfront

costs and possible assumption of debt. In connection with any such transaction, we may issue additional

equity securities that would dilute our shareholders, use cash that we may need in the future to operate

our business, incur debt on terms unfavorable to us or otherwise incur large charges or substantial

liabilities. In addition, we may also experience financial impairments related to goodwill and acquired

intangible assets or become subject to adverse tax consequences, substantial depreciation or deferred

compensation charges.

Furthermore, we may be unable to complete a proposed transaction if we or our shareholders are

unable to obtain required regulatory approvals in the various jurisdictions in which we or a potential

acquisition target or acquirer operate. Even if we and our shareholders (where applicable) are able to

obtain a required regulatory approval, such approval could be subject to various conditions, which could

prevent us from competing for certain customers or in certain lines of business. In addition, we may face

contingent liabilities in connection with our acquisitions and joint ventures, including, among others,

judicial or administrative proceedings or contingencies relating to the company, asset or business

acquired, including civil, regulatory, tax, labor, social security, environmental and intellectual property

proceedings or contingencies, and financial, reputational and technical issues, including with respect to

accounting practices, financial statement disclosures and internal controls, as well as other litigation or

regulatory or compliance matters, all of which we may not have identified as part of our due diligence

process and that may not be sufficiently indemnifiable under the relevant acquisition or joint venture

agreement. Finally, we have made in the past, and may in the future make, minority investments in other

companies, mostly in start-up companies or companies in their early stages of development. Such

investments entail inherently greater risks than investments in more established businesses and may

prove to be unsuccessful or not yield anticipated returns or any returns at all. If such investments are not

successful, we may be required to write down all or a portion of our equity investments in such companies,

which would result in financial losses.

Our success in these ventures may also rely on the performance and cooperation of third parties,

whose interests may not always align with ours. Disagreements or performance issues can adversely affect

the acquisition, joint venture, partnership or disposition outcomes. Given these considerations, there is no

guarantee that any future acquisition, partnership, joint venture, disposition or similar strategic transaction

will yield the expected benefits or enhance our competitive position. Failure to manage these risks

effectively could negatively impact our business, results of operations, financial condition and future

prospects.

**Our expansion efforts may not be successful or may subject us to increased risks.**

We have in the past expanded, and may in the future expand, our network by entering into new

geographies. We may also expand our operations in the jurisdictions in which we currently operate by

offering additional products and services. We may not be successful in our expansion efforts and our

products and services may not experience the same market adoption in such jurisdictions as we have

enjoyed in Sweden and our other more mature markets. Our expansion efforts could also materially alter

our product, merchant and market geographical mix, which, in turn, could impact our operating results,

including because of structural differences in each market, including regulatory environment, consumer

spending behaviors, take rates, consumer credit profiles, the maturity of our credit underwriting process

and varying processing costs.

Entering into new markets and geographies, or expanding our offerings in existing markets, increases

our exposure to regulatory and compliance risks, potentially requiring further investments or expenditures

to ensure compliance with applicable legal and regulatory requirements and standards, which could

increase our operational costs and negatively affect our operations. In particular, any new geographies

that we may enter in the future may have a distinct regulatory regime, including with respect to lending,

licensing, digital advertising, consumer protection, data privacy and AML/CFT. While we have established

KLARNA GROUP PLC24

policies and processes to ensure that our planned operations in new geographies, or introduction of

additional products and services in our existing ones, comply with applicable legal and regulatory

requirements, including by consulting with external legal counsel and with local authorities when

warranted, any failure or delay to comply with such laws and regulations can lead to penalties, suspension

of operations, legal challenges, regulatory scrutiny and reputational damage.

International expansion also brings additional distinct operational complexities. Efficiently managing

operations across various time zones, regulatory regimes, languages and cultural norms requires

significant investments in technology, human capital and building strong local partnerships. In addition, the

financial services industry in many geographies is characterized by intense competition from both local

players deeply entrenched in their markets and other global entities seeking to expand their presence into

such markets. Local competitors often possess a nuanced understanding of local consumer behavior,

regulatory requirements and market dynamics, potentially limiting our ability to capture or expand our

market share in such geographies. Failure to effectively navigate these complexities could obstruct our

expansion efforts and long-term success and adversely affect our business, results of operations, financial

condition and future prospects.

**Interest rate volatility and other interest rate changes, or discontinuation of interest rate benchmarks, may** 

**adversely affect us.**

We are subject to risks associated with fluctuations in market interest rates, yield curves and spreads.

Any changes in prevailing interest rates may lead to mismatches in the pricing of our variable rate assets

and liabilities, in particular consumer deposits. At the same time, in order to remain competitive, we need

to offer attractive interest rates on our deposits and, to a lesser extent, on our financing products

reflective of the broader market. This is particularly important in geographies where consumers are

offered multiple alternatives to our deposits and payment options. Any such changes in the interest rates

that we offer may adversely affect our financial condition and results of operations. For example, we

generated interest income of $937 million, $675 million and $508 million in 2025, 2024 and 2023,

respectively, while incurring interest expense of $453 million, $421 million and $268 million, respectively,

mostly due to the increase in the European Central Bank's deposit rate over that period.

Any increase in market interest rates may also increase the cost of our other funding sources,

including any variable rate debt securities that are currently outstanding or that we may issue in the future.

Increased interest rates may also adversely impact the spending levels of consumers and their ability and

willingness to borrow money, any of which could impact our consumers' willingness and ability to use our

network and utilize our solutions, products and services. Higher interest rates often lead to higher

payment obligations, which may reduce the ability of consumers to remain current on their obligations

and, therefore, lead to increased delinquencies, defaults, consumer bankruptcies and charge-offs, and

decreasing recoveries, any of which could have an adverse effect on our business.

We have implemented and maintain an interest rate hedging program designed to reduce our

exposure to changes in prevailing interest rates. However, there can be no assurance that the program will

be successful in eliminating all or some interest rate risks discussed above. If we fail to effectively manage

this risk amidst competitive pressures and changing economic conditions, our business, results of

operations, financial condition and future prospects could be adversely affected.

In addition, borrowings under certain of our funding arrangements, including under medium-term note

programs, bear an interest rate calculated by reference to certain benchmarks, including the Stockholm

Interbank Offered Rate ("STIBOR") and the Secured Overnight Financing Rate ("SOFR"). The

discontinuation, reform or replacement of STIBOR, SOFR or any other benchmark that we may use in our

funding arrangements could result in interest rate increases on our funding arrangements, which could

adversely affect our cash flows and operating results.

KLARNA GROUP PLC25

**We are exposed to exchange rate fluctuations in the international markets in which we operate.**

We operate in multiple international markets, including in Europe, North America and Australia, and

conduct and process transactions in various currencies such as SEK, EUR, USD, GBP, NOK and DKK. As a

result, we are subject to exchange rate fluctuations that can impact our financial performance and

position.

First, our revenues generated in foreign currencies need to be converted to the U.S. dollar, our

presentation currency. Significant fluctuations in exchange rates can result in substantial variations in the

U.S. dollar value of these revenues, even if the actual value in the original currency remains unchanged.

This introduces volatility into our financial results and may lead to increased fluctuations in our reported

financial performance. Second, our operating expenses, which are incurred in various currencies, may not

always be perfectly matched with our revenues in those currencies. This misalignment can lead to

exchange rate risk, where a depreciation of the revenue currency relative to the expense currency could

negatively impact our profitability. Furthermore, our financial assets and liabilities denominated in foreign

currencies are subject to revaluation, which can affect our balance sheet. For instance, monetary assets

and liabilities in foreign currencies are translated into U.S. dollars at the exchange rate at the end of the

reporting period. Any significant changes in exchange rates can thus impact our net financial position. Our

exposure to exchange rate fluctuations also arises from our lending operations in foreign currencies,

which have been increasing as we expand our global presence. This expansion accentuates our currency

risk, as we generate revenues and incur costs in an increasing number of currencies.

To manage these risks, we have in the past utilized, and may in the future utilize, financial derivatives

or currency hedging transactions. However, such measures may not fully, if at all, mitigate the impact of

exchange rate fluctuations and may introduce additional costs or counterparty risks. Furthermore, market

conditions or regulatory restrictions in certain jurisdictions may limit our ability to effectively hedge our

currency exposures, thereby increasing the potential impact of exchange rate volatility on our financial

performance.

**We may fail to accurately detect and prevent fraud.**

We are subject to the risk of fraudulent activity relating to the use of our network and our relationships

with customers, bank partners, PSPs and other third parties handling consumer information. Our network

is available in multiple markets and processes a large number of transactions involving millions of

customers every day. To support the operation of our network, we have built an underwriting process that

utilizes ML-based credit models to make credit decisions in a matter of seconds. The highly automated

nature of our network as well as the speed at which transactions facilitated through it take place and the

volume of such transactions make our network an attractive target for illegal or improper uses, including

fraudulent transactions involving identity theft, stolen or fabricated credit card or account numbers, or

other deceptive or malicious practices, all of which are becoming increasingly sophisticated. We have in

the past incurred, and may in the future incur, losses from various types of fraud. Our resources,

technologies and fraud prevention tools may be insufficient to accurately detect and prevent some or all

instances of fraud. We are obligated to repurchase the loans facilitated through our network in certain

cases, including in the case of identity theft. The level of fraud-related charge-offs on the loans facilitated

through our network could be adversely affected if fraudulent activity were to significantly increase.

We bear the risk of consumer fraud in a transaction involving us, a consumer and a merchant, and we

generally have no recourse to the merchant to collect the amount owed by the consumer. In addition, if a

transaction is made from a customer's account at Klarna Bank as a result of fraudulent activity, Klarna

Bank may be obligated to reimburse the customer for any loss of funds. Significant amounts of fraudulent

transactions, cancellations or chargebacks could adversely affect our business or financial condition. We

are also exposed to potential merchant fraud, including resulting from sales of counterfeited, damaged or

otherwise deficient goods and services through our network. High-profile fraudulent activity or significant

increases in fraudulent activity could also lead to regulatory proceedings or investigations, negative

publicity and the erosion of trust from our consumers and merchants, and could materially and adversely

KLARNA GROUP PLC26

affect our business, results of operations, financial condition and future prospects. Although we have

implemented measures to detect and reduce the occurrence of fraudulent activities, including as part of

our underwriting model and our merchant onboarding procedures, prevent bad customer experiences and

increase customer satisfaction, there can be no assurance that these measures will be effective. Any

additional measures to address fraud that we may implement in the future may prove ineffective or could

negatively affect the attractiveness of our network to consumers, harming our ability to attract new

customers or continue to engage current customers, cause reputational damage or decrease our brand

value or customer trust.

**Our business relies on the proper functioning of IT systems and networks, particularly at scale. Any failure of** 

**these systems or networks, including actual or perceived software errors, failures, bugs, defects or outages,** 

**could disrupt our business and impair our ability to effectively provide our services and products to consumers** 

**and merchants.**

Our success, continuous growth and operational efficiency depend on the reliability, security and

performance of our IT systems and networks. These systems and networks are necessary for us to

process a large number of complex payment transactions across different geographies and products in a

timely and efficient manner while maintaining high processing speeds, accurately evaluating credit risks

and applying our underwriting standards, implementing protective measures against fraud and delivering

high-quality customer service.

Our business model, which integrates complex AI-powered algorithms for real-time decision-making

and relies on the secure handling of large amounts of data, makes us susceptible to risks associated with

technological failures. Such failures could stem from internal software errors or bugs, natural

catastrophes, conversion errors due to system upgrades, data breaches or other cybersecurity incidents,

intentional bad acts, loss or corruption of data, hardware malfunctions, or external threats, including

sophisticated cyberattacks aimed at disrupting operations or cybersecurity, as well as the failure of

systems or networks of third parties upon which we rely for certain technology solutions and services,

such as credit and debit card transaction authorization providers, national financial system network

infrastructure providers, customer relationship management services, back-office and business process

support, IT production and support, internet and telephone connections providers, network access

providers, data center infrastructure services and cloud storage and computing services.

In addition, we source certain information from third parties. For example, our ML-powered

underwriting process incorporates certain information from third parties, including credit bureaus and

consumer reporting agencies. In the event that any third party from which we source information

experiences a service disruption, whether as a result of maintenance, natural disasters, terrorism or

security breaches, whether accidental or willful, or other factors, the ability to evaluate loan applications

through our network may be adversely impacted.

Any failure, attempted or successful data breach or other cybersecurity incident or significant

disruption in our IT infrastructure, or those of our third-party service providers, could lead to transaction

delays, compromised cybersecurity, inability to access critical services, and a failure to comply with the

applicable laws, regulations and standards governing financial transactions and cybersecurity. The

consequences of such disruptions could be severe, resulting in financial losses, loss of consumer trust,

regulatory fines, monetary damages or other penalties or fines, including revocation or suspension of

regulatory licenses or other Authorizations, as well as a tarnished reputation among customers, partners

and other third parties, any of which could adversely affect our business, results of operations, financial

condition and future prospects.

KLARNA GROUP PLC27

**We depend on cloud computing networks, data centers operated by third parties and third-party internet** 

**hosting providers. Any disruption to the operation of these facilities or networks or access to the internet would** 

**adversely affect our network.**

Our operations depend significantly on cloud computing networks, third-party data center hosting

facilities and third-party internet hosting providers. These networks and external facilities are crucial for

storing, managing and processing the large amounts of data essential for our operations, covering

customer transactions, data analytics and the delivery of our products and services, including our

advertising solutions, via continuous and uninterrupted access to the internet. The satisfactory

performance, reliability and availability of our technology and our underlying network and infrastructure

are critical to our operations and reputation and the ability of our network to attract new and retain

existing merchants and consumers.

Disruptions in the services provided by these third parties could arise from various causes, including

physical damage caused by natural disasters, data breaches and other cybersecurity incidents, viruses,

human or software errors, fraud, spikes in customer usage or operational failures. Such disruptions might

impede our ability to process transactions, manage data or conduct our business operations effectively

and without delays or interruptions. If our arrangement with a vendor is terminated, including because of

service disruptions, or if there is a lapse of service or damage to its systems or facilities, we could

experience interruptions in our ability to operate our network. We also may experience increased costs

and difficulties in replacing that vendor and replacement services may not be available on commercially

reasonable terms, on a timely basis or at all.

Our third-party cloud computing networks, data center hosting facilities and internet hosting providers

are ultimately responsible for maintaining their own network security and disaster recovery and system

management procedures, and such third parties do not guarantee that our customers' access to our

solutions will be uninterrupted, error-free or secure. In particular, we do not control the operation of third-

party data center hosting facilities, and such facilities are vulnerable to damage or interruption from

human error, intentional bad acts, power loss, hardware failures, telecommunications failures, improper

operation, unauthorized entry, data loss, power loss, data breaches and other cybersecurity incidents,

fires, wars, terrorist attacks, floods, earthquakes, hurricanes, tornadoes and natural disasters or similar

catastrophic events. Cloud computing is particularly dependent upon reliable access to electricity and an

internet connection in order to retrieve data. If a natural disaster, blackout or other unforeseen event were

to occur that disrupted the electrical grid or the ability to obtain an internet connection, we may

experience a slowdown, delay or other disruption in our operations. While we have business continuity and

disaster recovery plans in place, such preparations may be inadequate and may not effectively allow us to

continue operating in the event of any problems with respect to our systems and networks or those of our

third-party facilities. Further, our disaster recovery plan has not been tested under actual disaster

conditions, and we may not have sufficient capacity to recover all data and services in the event of an

outage. Additionally, the various insurance coverages that we maintain may not be sufficient to cover all

potential losses. Such an event could cause our operations to be impaired and our business, financial

condition and results of operations to be materially and adversely affected.

Furthermore, our reliance on third-party services exposes us to the risks associated with changes in

regulatory frameworks affecting the internet and cloud services, both regionally and globally. In addition,

the use of certain third-party services is subject to regulatory outsourcing rules. Any failure to comply with

such rules could result in legal sanctions, including financial penalties or revocation or suspension of

regulatory licenses or other authorizations. It could also damage our reputation, lead to a loss of consumer

trust and impact our relationships with key business partners. Regulatory changes could impose new

limitations on these services, affecting our operational capabilities. To the extent we use or are dependent

on any particular third-party data, technology or software, we may also be harmed if such data, technology

or software becomes non-compliant with existing regulations or industry standards, becomes subject to

third-party claims of intellectual property infringement, misappropriation or other violation, or

malfunctions or functions in a way we did not anticipate. Additionally, significant interruptions to the global

internet infrastructure, though beyond our direct control, could severely impact our service delivery.

KLARNA GROUP PLC28

Despite our efforts to mitigate these risks through various strategies and internal processes, we cannot

assure you that we will be successful in eliminating or adequately addressing all or any of such disruptions.

Any such failure may adversely affect our business, results of operations, financial condition and future

prospects.

**Our use of email and other messaging services may be subject to restrictions or we may fail to timely deliver** 

**such communications.**

Our business is dependent upon email and other messaging services, such as SMS, "push"

communications and mobile notifications, for communicating to our customers. If we are unable to

successfully deliver emails or other messages to our customers, or if customers decline to open our emails

or other messages, our business may be negatively impacted. Changes in how webmail applications

organize and prioritize email may reduce the number of actual and potential customers opening our emails

and, as a result, using our network, solutions or products. For instance, Google's Gmail service offers a

feature that organizes incoming emails into categories such as "Primary," "Social" and "Promotions." Such

categorization or similar inbox organizational features may result in our emails being delivered in a less

prominent location in our consumer's inbox or viewed as "spam" by them, and may reduce the likelihood of

that customer opening our emails. In addition, actions by third parties to block, impose restrictions on or

charge for the delivery of emails or other messages could adversely impact our business. From time to

time, internet service providers or other third parties may block bulk email transmissions or otherwise

experience technical difficulties that result in our inability to successfully deliver emails or other messages

to third parties. Changes in the laws, rules or regulations that limit our ability to send such communications

or impose additional requirements upon us in connection with sending such communications could

materially adversely impact our business. Our use of email and other messaging services to send

communications about our sites or other matters may also result in legal claims against us, which may

cause us increased expenses and, if successful, might result in substantial fines and orders with costly

reporting and compliance obligations or might limit or prohibit our ability to send emails or other messages.

**We may fail to integrate our solutions, products and services with a variety of operating systems, software** 

**applications, networks and hardware that are developed by third parties. As a result, our solutions, products and** 

**services may not operate effectively or become less marketable, less competitive or obsolete.**

Our ability to attract customers and merchants to our network heavily relies on our capacity to

seamlessly integrate our solutions, products and services with a broad array of operating systems,

software applications, networks and hardware developed and maintained by third parties. As a result, we

must continuously modify and enhance our offerings to adapt to changes in hardware, software,

networking, browser, blockchains and database technologies. Failure to maintain continuous and effective

integration with such technologies can adversely affect our business, results of operations, financial

condition and future prospects.

Changes to our network and technology made in response to updates in existing or development of

new third-party operating systems, software applications, networks and hardware may be costly, time-

consuming and ultimately unsuccessful. Any operational disruptions resulting from such changes could

adversely affect the quality and functionality of our network and solutions, products and services offered

through it, negatively impacting consumer and merchant experience. This could render our network less

competitive or even obsolete in certain circumstances, particularly in comparison to those of our

competitors who successfully achieve broader or more effective integration of their solutions, products

and services with new technologies.

Furthermore, we have developed our technology network to easily integrate with third-party

applications through the interaction of APIs. In general, we rely on providers of such software systems to

allow us to access their APIs to enable such integrations. To date, we generally have not relied on long-

term written contracts to govern our relationships with these providers. Instead, we are subject to the

standard terms and conditions for consumers of services of such providers, which govern the distribution,

operation and fees of such software systems, and which are subject to change by such providers from

KLARNA GROUP PLC29

time to time. Our business could be harmed if any provider of such software or other technologies or

systems discontinues or limits our access to their APIs, modifies its terms of service or other related

policies, including fees, establishes more favorable or exclusive relationships with one or more of our

competitors, or develops competitive offerings to our solutions, products and services.

Although we actively monitor our providers of software or other technologies, we cannot prevent such

providers from changing the features of their APIs, discontinuing their support of such APIs, restricting our

access to their APIs or altering the terms governing their use in a manner that is adverse to our business. If

our providers were to take such actions, our capabilities that depend on such APIs would be impaired until

we are able to find a replacement provider or develop an in-house solution, which could significantly

diminish the value of our network and harm our business, results of operations, financial condition and

future prospects.

**The loss of the services of our Co-Founder and Chief Executive Officer could materially and adversely affect** 

**our business, results of operations, financial condition and future prospects.**

Sebastian Siemiatkowski, our Co-Founder and Chief Executive Officer, has been the driving force

behind our success since Klarna's inception. The unexpected loss of Sebastian could severely disrupt our

operations and significantly impact our ability to continue executing our business strategy with the same

level of effectiveness. We believe that his unique blend of entrepreneurial insight, deep understanding of

the financial technology landscape and ability to forge critical industry relationships is unparalleled.

Finding a successor with a comparable vision and capability to maintain the momentum and direction

Sebastian has established for us would present a substantial challenge. Furthermore, Sebastian's

departure could lead to instability within Klarna, potentially affecting the morale and productivity of our

team, which has been crucial in our rapid growth and innovation. The potential uncertainty surrounding

such a leadership transition could also undermine confidence among our customers, partners and

investors as well as other stakeholders who are integral to our continued success and expansion. In the

highly competitive financial services industry, any perceived weakening of our leadership could be

exploited by our competitors. This could lead to a loss of market share and have a negative impact on our

financial performance. Given Sebastian's instrumental role in shaping our strategic direction, fostering our

innovative culture and securing our position as a leader in the financial technology space, his loss could

materially and adversely affect our business, results of operations, financial condition and future

prospects.

**We may be adversely affected by negative publicity about us, including our current or former directors,** 

**executive officers or major shareholders, or our industry.**

Negative publicity about us, including adverse publicity involving our current or former directors,

executive officers, employees or major shareholders, or negative perceptions of our industry, poses a

significant risk to our reputation and brand. This risk is particularly acute in the financial services industry,

where trust and consumer confidence are critical for maintaining and growing our consumer and merchant

base and partner relationships.

Sources of negative publicity for us could include, but are not limited to:

• the transparency, fairness, user experience, quality and reliability of our network or similar

networks in general;

• our ability to effectively manage and resolve complaints;

• effectiveness of our risk model;

• our capital adequacy, liquidity and general financial position and solvency;

• the impact, actual or perceived, of our financing products on our consumers' credit score;

KLARNA GROUP PLC30

• our ability to effectively screen our merchants and monitor their compliance with our ethical

merchant guidelines;

• our data privacy and cybersecurity practices;

• any litigation, investigations, regulatory or other proceedings or enforcement actions, examinations

or inquiries into us, our competitors, partners or our industry in general;

• any misconduct, or allegations thereof, by our current or former directors, executive officers or

employees, funding sources, originating bank partners, service providers or others in our industry;

• any threatened, alleged or ongoing disputes or disagreements between us and our shareholders or

among our shareholders, including any related litigation or similar proceedings;

• our business practices, mission, environmental, social and governance ("ESG"), sustainability and

ethical goals, policies and standards and their perceived adequacy by our customers and other

stakeholders; and

• the use of loan proceeds by consumers that have obtained loans facilitated through our network

or other lending networks for unethical or illegal purposes,

any of which could adversely affect our reputation and the confidence in, and the use of, our network,

which could harm our reputation and cause disruptions to our operations. Any such reputational harm

could further affect the behavior of consumers, including their willingness to utilize solutions offered

through our network or to make payments on their loans. The potential impact of negative publicity,

whether founded or unfounded, is magnified in the digital age, where information spreads rapidly,

especially through social media and other online networks.

**Increased scrutiny from regulators, investors and other stakeholders regarding our ESG or sustainability** 

**responsibilities, strategy and related disclosures could result in additional costs or risks and adversely impact** 

**our reputation, employee retention and willingness of consumers and merchants to use our network.**

Regulators, investor advocacy groups, certain institutional investors, investment funds, shareholders,

consumers and other market participants, particularly in the United States and the EU, have focused

increasingly on ESG or sustainability practices of public companies. These parties have placed increased

importance on the implications of the social cost of their investments. We may incur additional costs and

require additional resources as we evolve our ESG strategy, practices and related disclosures. We could

also incur additional costs and require additional resources to monitor, report and comply with various

ESG practices and regulations, which could adversely affect our business, results of operations, financial

condition and future prospects. In Sweden, we publish our ESG report annually in accordance with the

Annual Accounts Act for Credit Institutions and Securities Companies. In addition, we are required to

disclose climate-related information pursuant to the EU's Corporate Sustainability Reporting Directive,

which calls for the disclosure of information regarding a range of sustainability matters and expect that we

will be required to report on SEC rules relating to the disclosure of climate-related risks and California's

climate-related disclosure laws. If we elect or are required to report ESG- or sustainability-related

information and regulators, investors, consumers, merchants or other stakeholders view this information

as generic, lagging or inadequate, we may experience reputational damages or become subject to

regulatory proceedings or similar actions, any of which could adversely affect our business. In addition,

under certain laws and regulations, statements we make regarding the sustainability or carbon footprint of

our operations or their impact on the environment may subject us to disclosure requirements or expose us

to the risk of claims that the statements constitute "greenwashing." Certain nongovernmental

organizations and other private actors have filed lawsuits under various securities and consumer

protection laws alleging that certain ESG statements made by public companies in the United States with

respect to their goals or standards were misleading, false or otherwise deceptive. If our ESG strategy,

practices and related disclosures, including the impact of our business on climate change, do not meet (or

are viewed as not meeting) regulator, investor or other industry stakeholder expectations and standards,

KLARNA GROUP PLC31

which continue to evolve and may emphasize different priorities than the ones we choose to focus on, we

may similarly face increased litigation risks from private parties and governmental authorities and our

brand, reputation and employee retention may be negatively impacted.

In addition to any disclosure requirements, we have also set various internal ESG targets. Despite our

commitment to sustainability, we may not achieve these targets due to a number of factors, some of which

may be beyond our control, such as technological limitations or external economic conditions. In addition,

our ability to meet ESG expectations is also contingent on the actions of our partners and suppliers. We

rely on numerous third-party service providers for various aspects of our operations, including hosting our

cloud network, IT infrastructure and consumer service functions. Any failure—actual or perceived—by

these partners to adhere to our ESG standards or practices could adversely impact our reputation and

similarly expose us to litigation risks and potential regulatory sanctions.

**We are subject to both natural and man-made events that may unexpectedly disrupt our operations and** 

**adversely impact our business.**

Our operations and business are exposed to a wide array of risks arising from both natural and man-

made events. Natural events such as earthquakes, floods, fires, hurricanes and other extreme weather

conditions, including those exacerbated by climate change, can cause significant disruptions to our

operations. These disruptions can result in property damage, loss of critical data, operational downtimes

and financial losses. For instance, the increasing severity and frequency of extreme weather events may

adversely affect our operations in various geographies as well as operations of our merchants. Disruptions

caused by such events can impact our ability to process transactions and maintain service continuity,

thereby adversely affecting our financial performance and results of operations and damaging customer

trust.

Man-made events, including data breaches and other cybersecurity incidents, terrorism, strikes and

geopolitical unrest, also present significant risks. Our reliance on the complex and interconnected

technology systems that power our network makes us vulnerable to data breaches and other

cybersecurity incidents that could lead to service interruptions and financial losses. An incident of

significant magnitude could severely impact our operations, leading to loss of customer data, reputational

damage and regulatory penalties. In addition, our business operations could be affected by pandemics and

other health crises, as evidenced by the COVID-19 pandemic, which necessitated a shift to remote work in

a number of markets and increased our dependency on digital infrastructure. This shift introduced

operational and managerial challenges such as maintaining team cohesiveness and operational efficiency,

both of which are critical for our success. Furthermore, interruptions in our supply chain or those of our

merchants due to natural or man-made events could affect our GMV and other key financial and operating

metrics.

The occurrence of any such events could adversely affect our business, financial condition, results of

operations and prospects. The extent of the impact is uncertain and depends on the nature, severity and

duration of the disruptions caused by these events. There is no guarantee that our business continuity and

disaster recovery plans that are designed to mitigate these risks will be effective in every scenario or at all.

In addition, the varied insurance coverage that we maintain may not be sufficient to cover all potential

losses. As we continue to expand our network and enhance our technological infrastructure, the

complexity and interdependency of our systems may increase, amplifying the potential impact of such

events on our business, results of operations, financial condition and future prospects.

**The quantitative models or assumptions that we use may prove to be incorrect.** 

Klarna, like many financial institutions, relies heavily on quantitative models and assumptions to

understand and predict consumer behavior, a critical component in calculating market risks and

opportunities. The accuracy of our market calculations depends on the reliability of the underlying models

and assumptions. These models are constructed based on historical data, which, by its nature, may not be

fully indicative of future consumer behavior, especially in the face of unprecedented market conditions or

KLARNA GROUP PLC32

shifts in consumer preferences. An overreliance on historical data without adequate consideration for

potential future changes can lead to miscalculations, potentially impacting our ability to manage risks

effectively. Moreover, the quantitative models we employ are subject to the risk of oversimplification. In an

effort to make complex client behaviors comprehensible, we may inadvertently omit crucial variables or

interactions, leading to an incomplete understanding of market dynamics. This simplification, while

necessary for computational feasibility, increases the risk of significant discrepancies between model

predictions and actual outcomes.

Further, the assumptions underlying our models, particularly those related to client behavior, are

inherently speculative. These assumptions are influenced by a myriad of factors, including economic

conditions, regulation and competitive pressures, all of which are fluid and can evolve in unpredictable

ways. A failure to accurately anticipate or quickly adapt to these changes could render our models less

effective, which could adversely affect our business, results of operations, financial condition and future

prospects.

Finally, the potential for model failure or significant prediction errors poses a direct risk to our financial

stability. Any discrepancies between model forecasts and actual market outcomes can lead to unexpected

losses. Such situations could strain our financial resources, require us to obtain additional funding, which

may not be available on terms attractive to us, if at all, and negatively impact our ability to capitalize on

growth opportunities.

**The estimates of market opportunity, total addressable market and forecasts of market growth and other** 

**similar estimates or forecasts may prove to be inaccurate.** 

The estimates of market opportunity and forecasts of market growth included in this report on Form

20-F and our other filings with the SEC, for example, with respect to the total addressable market for

payments or digital advertising solutions, may prove to be inaccurate. Market opportunity estimates and

growth forecasts are subject to significant uncertainty and are based on assumptions and estimates that

may not prove to be accurate, including as a result of any of the risks described elsewhere in this report on

Form 20-F.

The variables that go into the calculation of our market opportunity are subject to change over time,

and there is no guarantee that any particular number or percentage of addressable consumers covered by

our market opportunity estimates will use our network at all or generate any particular level of GMV or

revenue for us. In addition, our ability to expand into new verticals, channels and geographies as well as

adjacent categories depends on a number of factors, including the cost, performance and perceived value

associated with our solutions, products and services and those of our competitors. Even if the markets in

which we compete meet the size estimates and growth forecasted in this report on Form 20-F and our

other filings with the SEC, our business could fail to grow at similar rates, or at all. Our growth and operating

results, including take rates and transaction margin dollars, are impacted by geographical mix, product and

channel mix, and merchant vertical mix, each of which is subject to many risks and uncertainties.

Accordingly, the forecasts of market growth or other similar projections or forecasts included in this report

on Form 20-F and our other filings with the SEC should not be viewed as indicative of our future

performance.

**Determining our allowance for credit losses requires many assumptions and complex analyses. If our** 

**estimates prove incorrect, we may incur net charge-offs in excess of our reserves, or we may be required to** 

**increase our provision for credit losses.**

In the process of determining our allowance for credit losses, we employ a range of assumptions and

complex analyses that are inherently subject to uncertainties and contingencies, many of which are

beyond our control. These estimations and judgments affect the reported amounts of assets, liabilities,

revenues and expenses, as well as the disclosures of contingent assets and liabilities in our financial

statements. Consequently, if our estimates prove incorrect, we may incur net charge-offs in excess of our

KLARNA GROUP PLC33

reserves, or we may be required to increase our provision for credit losses, either of which could adversely

affect our business, results of operations, financial condition and future prospects.

Our credit loss allowance estimation process considers a wide array of factors, including historical loan

loss experience, current loan portfolio characteristics, observable data indicating the impact of current

economic and market conditions on our consumers' ability to repay their loans and forecasts of future

economic conditions. Changes in any of these factors could significantly impact the level of future credit

losses and the necessary allowance for credit losses.

Moreover, our business model and operations subject us to various credit risks, including the risk of

default or fraudulent consumers using our payment services for shopping, as well as credit risks from

defaulting merchants, partners and financial institutions with which we cooperate. We utilize a self-

developed scoring model for credit assessments, which collects specific data and is adapted for each

country in which we operate, considering local regulations, accessibility to credit checks and consumer

behavior differences. However, there is a risk that estimates on which models for calculating future

potential impairments and credit losses are based are inaccurate, which could lead to increased credit

losses and impairments. This, in turn, would adversely affect our financial position.

The process of determining the allowance for credit losses is highly judgmental and subject to

significant uncertainties. Future changes in economic conditions, consumer behavior or regulatory

environment could necessitate adjustments to our allowance for credit losses. An increase in the

allowance for credit losses would result in a corresponding increase in our provision for credit losses,

negatively impacting our results of operations. Conversely, if our allowance for credit losses proves to be

excessive, it may result in an unnecessary allocation of financial resources that could have been utilized

more effectively elsewhere within our operations.

**We previously identified a material weakness in our internal control over financial reporting, which our** 

**management has concluded was remediated as of December 31, 2025. We can give no assurance that additional** 

**material weaknesses will not be identified in the future.**

Effective internal control over financial reporting and disclosure controls and procedures are critical to

our success as a public company. Internal control over financial reporting is a process designed to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial

statements for external purposes in accordance with applicable accounting principles. Similarly,

disclosure controls and procedures are designed to ensure that information required to be disclosed by us

in reports filed under the Securities Exchange Act is recorded, processed, summarized and reported

within the time periods specified in the SEC's rules and forms, and that such information is accumulated

and communicated to our management as appropriate to allow timely decisions regarding required

disclosure.

As previously disclosed in our registration statement on Form F-1, in connection with the preparation

of our consolidated financial statements, we previously identified a material weakness in our internal

control over financial reporting related to our IT general controls for information systems that are relevant

to the preparation of our consolidated financial statements, related to (i) user access controls, including

management of privileged access, (ii) change management with respect to monitoring segregation of

duties, and (iii) IT operations controls with respect to certain third-party service providers. We

implemented certain measures to address the material weakness which we have concluded is remediated

as of December 31, 2025.

We remain committed to maintaining and improving our internal control over financial reporting, but we

can give no assurance that the measures we have taken and plan to take in the future will remediate the

material weakness in our internal control over financial reporting or that they will prevent or avoid

potential future material weaknesses in our internal control over financial reporting. In addition, our

current internal control over financial reporting and disclosure controls and procedures, and any new

internal control over financial reporting and disclosure controls and procedures that we develop, may

KLARNA GROUP PLC34

become inadequate because of changes in our business, operations and other factors, some of which may

be beyond our control.

We are not required, pursuant to Section 404 of the Sarbanes-Oxley Act ("Section 404"), to furnish a

report by management on, among other things, the effectiveness of our internal control over financial

reporting until the year following our first annual report required to be filed with the SEC. This assessment

will need to include disclosure of any material weaknesses identified by our management in our internal

control over financial reporting. At that time, our management may conclude that our internal control over

financial reporting remains not effective. In addition, our independent registered public accounting firm will

be required to attest to the effectiveness of our internal control over financial reporting starting with our

second annual report required to be filed with the SEC. Even if our management concludes that our

internal control over financial reporting is effective, our independent registered public accounting firm,

after conducting its own independent testing, may disagree with our assessment and may issue a report

that contains an adverse opinion if, in their evaluation, there are deficiencies that, individually or in

combination, result in one or more material weaknesses.

Our compliance with Section 404 will require that we incur substantial expenses and expend

significant management efforts. During the course of implementing, documenting and testing our internal

control over financial reporting, in order to satisfy the requirements of Section 404, we may identify other

weaknesses and deficiencies in our internal control over financial reporting and disclosure controls and

procedures. Further, despite our efforts to implement and maintain effective internal control over financial

reporting and disclosure controls and procedures, we may not be able to detect or prevent all errors or

instances of fraud and additional weaknesses in our internal control over financial reporting may be

identified in the future. A material weakness in our internal control over financial reporting, failure to

maintain effective disclosure controls and procedures or any difficulties encountered in their

implementation or improvement could lead to errors in our financial statements or restatements of

previously issued financial statements, any of which could adversely affect our business, results of

operations, financial condition and future prospects. Such failures could also lead to a loss of investor

confidence in the accuracy and completeness of our financial reports, which in turn could have a negative

impact on the market price of our ordinary shares.

**As a holding company, we are dependent for liquidity on payments from our subsidiaries, many of which are** 

**subject to regulatory and other restrictions on their ability to pay dividends or transact with affiliates.**

Klarna Group plc is a holding company and relies on distributions from its operating subsidiaries to

meet its financial obligations. Many of such subsidiaries are subject to extensive regulation, including

Klarna Bank, our banking subsidiary, and its branches. Various laws and regulations, as well as regulatory

expectations, may limit the amount of dividends that our banking or other regulated subsidiaries may pay.

These restrictions are designed to ensure that our regulated subsidiaries maintain adequate capital

buffers and are able to meet their obligations to creditors and consumers before distributing funds up the

corporate structure. For instance, Klarna Bank is required to maintain certain capital and liquidity ratios,

and any intercompany distributions, including to Klarna Group plc, may be prohibited in order to comply

with these regulatory requirements. In certain jurisdictions, regulatory approvals may be necessary before

any significant distributions can be made, adding another layer of complexity and potential delay to the

transfer of funds to Klarna Group plc.

Changes in regulation applicable to our regulated subsidiaries, in particular Klarna Bank, including, but

not limited to, more stringent capital requirements, can severely impact the ability of such subsidiaries to

distribute dividends to Klarna Group plc or otherwise transact with affiliates. Our failure to successfully

manage these risks could adversely affect our business, financial condition, results of operations and

future prospects.

KLARNA GROUP PLC35

**We could be subject to additional tax liabilities due to changes in tax laws, tax audits or our growth, which** 

**could affect our profitability and increase our effective tax rate.** 

We are subject to complex tax laws of multiple jurisdictions in which we operate, which are subject to

uncertain interpretation. Our interpretation and application of these laws and regulations as well as

compliance with specific tax filing requirements, payment obligations and transfer pricing regulations

require significant judgment and the use of assumptions and estimates. Our effective tax rate and tax

filings reflect our interpretation of such tax laws. As a result, we are exposed to the risk that tax authorities

in any of these jurisdictions could disagree with our interpretations of the applicable tax laws or our tax

calculations' methodologies, including the classification of our revenues, the pricing of our intercompany

transactions or the determinations of the jurisdictions to which profits are attributed. For example, a tax

authority could challenge whether our supplies are taxable or exempt for VAT purposes, or could

challenge our input VAT recovery methodology. We, including certain of our material subsidiaries, are

subject to ongoing tax audits and other similar proceedings with tax authorities in a number of

jurisdictions. In certain cases, the applicable tax authority has challenged one or more tax positions that

we have taken. We are working to resolve each of these audits in an efficient manner, including, where

appropriate, through arbitration and/or court proceedings. These audits and other similar proceedings,

when resolved, could result in additional taxes, including interest and penalties, which could, in turn,

adversely affect our business, financial condition, results of operations and future prospects.

Furthermore, our effective tax rate could materially increase as a result of changes in tax law, tax

treaties or the interpretation thereof, such as those introducing a tax for credit institutions with liabilities

above certain thresholds. Moreover, changes to withholding tax rules, or how they apply to us, may impact

our ability to repatriate profits from our operating subsidiaries in various jurisdictions. Our tax liability may

also increase significantly if we are required to pay additional taxes (including "minimum" taxes, VAT, other

indirect taxes and employment taxes) in any jurisdiction as a result of a growth of our business. For

example, depending on the amount of income we generate in the United States and certain other factors,

we may be subject to the U.S. Base Erosion and Anti-Abuse Tax (BEAT) if certain payments we make to

related non-U.S. persons exceed applicable thresholds.

In addition, in response to an effort led by the Organization for Economic Co-Operation and

Development ("OECD") and the G20 Group to reform the international tax system under a 'two pillar'

system, many countries around the world have introduced new, and amended existing, tax laws applicable

to corporate multinationals, such as Klarna, and other countries may take similar steps. These new and

amended tax laws are designed to ensure that multinational companies that meet an annual revenue

threshold pay an effective minimum tax rate of 15% in all jurisdictions where they operate. We have

assessed the potential impact of these new and amended tax laws on us and we currently do not expect to

incur material tax liability as a result of such laws. If the existing tax laws are amended or clarified or new

tax laws are enacted, or if the relevant facts change, in one or more jurisdictions where we operate, we

may be required to pay additional taxes, which would increase our effective tax rate and adversely affect

our financial results. We will continue to assess the future impact of these tax laws. In particular, we will be

evaluating the Administrative Guidance published by the OECD on January 5, 2026, in relation to the 'side-

by-side' package (directed mainly at US-parented groups) and other matters, including a new permanent

safe harbor and a one-year extension of the transitional Country-by-Country Reporting safe harbor that

may be relevant to the Company. The Company continues to monitor these developments but does not

expect a material change to its Pillar Two liability. Additionally, on July 4, 2025, the bill referred to as the

One Big Beautiful Bill Act (the "OBBBA") was enacted into law in the United States. The OBBBA resulted in

significant changes to the Code, including changes to the taxation of businesses. We continue to assess

the potential impact of the OBBBA on us.

In sum, any changes in tax laws or regulations, or in their interpretation by the relevant authorities, the

outcome of any tax audits or changes to our taxation as a result of any expansion or modification of our

network, operations or corporate structure, could adversely affect our business, financial condition,

results of operations and future prospects.

KLARNA GROUP PLC36

**We may not be able to utilize our loss carryforwards, deferred interest deductions and other tax attributes.**

We have significant carried forward losses, deferred interest expense and other similar tax attributes,

most of which are currently unrecognized within our consolidated financial statements, that arise under

the tax laws of the jurisdictions in which we operate, including Sweden, Germany, the United States and

Australia. It is possible that we will not generate sufficient taxable income in those jurisdictions or

otherwise will be unable to fully utilize these losses, deferred interest expense and other tax attributes. In

addition, the utilization of our tax attributes to reduce our taxable income may be subject to limitations

under the applicable laws of the jurisdictions in which we operate. For example, under U.S. federal income

tax laws, net operating losses arising in tax years beginning after 2017 generally can be carried forward

indefinitely, but their deductibility in any taxable year is limited to 80% of taxable income for that year, and

the utilization of all net operating losses, regardless of the year in which they arose, may be subject to

further limitations as a result of certain ownership changes, including future changes in the ownership of

our ordinary shares that may be outside our control.

For each accounting reporting period, we assess the likelihood of our carried forward losses, deferred

interest expense and other similar tax attributes offsetting future taxable income. We only recognize such

attributes as assets on our consolidated balance sheet if there is sufficient likelihood that these tax

attributes will be utilized by us in the foreseeable future. The assessment of the recoverability of carried

forward losses, deferred interest expense and other similar tax attributes, and therefore the level of

deferred tax asset recognition, requires us to exercise judgment based on facts and estimates that may

change over time. Accordingly, the value of tax attributes recognized on our consolidated balance sheets

for any fiscal period may change over time and may not be indicative of the actual amount of tax attributes

that we will be able to utilize in future periods to offset our taxable income. Any limitation on the use of, or

the changes to, our tax assets to offset taxable income, including as a result of changes in applicable tax

laws or our ownership changes, could result in increased tax liabilities and, as such, could adversely affect

our business, financial condition, results of operations and future prospects.

**Some of our social security payroll taxes will fluctuate in the future by reference to our external share price.** 

We have in the past issued, and expect to issue in the future, RSUs, options and warrants to our

employees in various jurisdictions. Upon vesting of such RSUs and the exercise of options and warrants,

we are required to pay employer social security payroll taxes in many jurisdictions in which we operate.

For example, in the year ended December 31, 2025, we incurred $9 million in expenses related to employer

social security taxes in connection with such vesting of RSUs and exercises of our options and warrants. In

a number of jurisdictions, employer social security payroll taxes are uncapped and calculated by

reference to the fair market value of the shares received by the employee at the time of vesting of their

RSUs or exercise of their options or warrants. Consequently, our social security costs will fluctuate by

reference to the market price of our ordinary shares and may materially increase in future periods, which

could adversely affect our business, financial condition, results of operations and future prospects.

**We may require additional capital in the future, which may not be available on acceptable terms or at all.**

In the future, we may need to raise additional capital for a variety of reasons, including, but not limited

to, funding our ongoing operations, developing new or enhanced services or products or responding to

competitive pressures, complying with regulatory capital adequacy requirements or funding our expansion

into new verticals, channels and geographies or adjacent categories (organically or through strategic

acquisitions, joint ventures or partnerships). Such financing may not be available on terms favorable to us

or at all. If adequate funds are not available or are not available on acceptable terms, we may not be able

to fund our operations, improve our network, develop new, or enhance our existing, products, services or

solutions, or respond to competitive pressures or take advantage of acquisition opportunities, each of

which could adversely affect our business, financial condition, results of operations and future prospects.

If we raise additional funds through the issuance of equity or convertible debt securities, our

shareholders will experience dilution and the securities that we issue may have rights, preferences and

KLARNA GROUP PLC37

privileges senior to those of our ordinary shares, and the market price of our ordinary shares could

decline. Depending on our credit ratings and general market conditions, any additional funds raised

through debt financing may require us to agree to observe restrictive covenants that impose operating and

financial restrictions on us, including restrictions on our ability to incur additional indebtedness, create

liens, make acquisitions, dispose of assets and make restricted payments, among others. In addition, such

indebtedness may require us to maintain certain financial ratios. These restrictions may limit our ability to

obtain future financings, to withstand a future downturn in our business or the economy in general or to

otherwise fund our operations and meet contractual obligations. A breach of any such covenant would

likely result in a default under the applicable credit agreement or debt instrument, which, if not waived,

could result in acceleration of the indebtedness outstanding.

**We are involved in legal proceedings and disputes.**

From time to time, we are involved in various legal, arbitration and administrative proceedings arising in

the ordinary course of our business or from extraordinary corporate, tax or regulatory events, involving our

current or former directors, executive officers, employees, shareholders, customers or suppliers, or

environmental, competition, tax or other regulatory matters. These may include supervisory matters,

commercial litigation matters, insurance matters, privacy and cybersecurity disputes, intellectual property

disputes, contract disputes, corporate governance matters, financial services matters, consumer

protection matters, antitrust matters, securities law matters and employment matters. Given the nature

and scope of our operations, we expect to continue to be involved in such proceedings and disputes in the

future. In addition, during market downturns, the volume of legal claims and amount of damages sought in

litigation and regulatory proceedings against financial services companies have historically increased. We

currently face and may continue to face in the future additional legal claims against us as a result of our

increased corporate profile following our initial public offering and additional regulatory regimes applicable

to us as a listed company in the United States. Finally, we may become party to, or otherwise become

involved in, disputes with or among our shareholders relating to, among others, our corporate governance

structure and practices, business strategy or long-term vision.

Given the inherent difficulty of predicting the outcome of any legal matter, particularly where the

claimants seek very large or indeterminate damages, or where the cases present novel legal theories,

involve a large number of parties or are in the early stages of investigation or discovery, we cannot provide

any assurances as to the outcome of any matter to which we currently are, or may in the future be, party.

An unfavorable resolution of any such matter may result in settlements, awards, injunctions, fines and

penalties and, as such, have a material adverse effect on our business, results of operations, financial

condition and future prospects. In addition, any insurance coverage that we may have may not cover all

claims that may be asserted against us or damages and other monetary awards awarded to the claimants.

Further, the amount of reserves in respect to these matters that we may take in any fiscal period may be

substantially less than our ultimate monetary liability, which, in turn, could adversely affect our results of

operations for that period and, as such, negatively impact the market price of our ordinary shares. Finally,

regardless of their outcome, any legal proceedings brought against us may require substantial

management attention, time and legal expenses or could cause us significant reputational harm.

Certain of our consumer agreements, including our terms of service that the consumers are required

to agree to use our network, contain arbitration provisions with class action waiver provisions that may

limit our exposure to consumer class action litigation. While in the past we have been successful in certain

jurisdictions in arguing that such arbitration provisions are valid and binding on our consumers, there can

be no assurance that we will be successful in enforcing these arbitration provisions, including the class

action waiver provisions, in the future or in any given case. Legislative, administrative or regulatory

developments may directly or indirectly prohibit or limit the use of pre-dispute arbitration clauses and

class action waiver provisions. Any such prohibitions or limitations on, or discontinuation of the use of,

such arbitration or class action waiver provisions could subject us to additional lawsuits, including

additional consumer class action litigation, and significantly limit our ability to avoid exposure from

consumer class action litigation.

KLARNA GROUP PLC38

**Misconduct of our employees, consultants or third-party service providers could harm us by impairing our** 

**ability to attract and retain customers and subjecting us to legal liability and reputational harm.**

Misconduct, fraud or illegal activities by our employees, consultants or third-party service providers

could have severe consequences for us. Such behavior could include fraudulent actions, breaches of

applicable laws, rules and regulations or failure to adhere to our policies and procedures or those of our

partners and other counterparties, including unauthorized disclosure of confidential, privileged or

proprietary information. The financial services industry, particularly companies like Klarna that collect

sensitive financial information and processes or facilitate financial transactions, is highly susceptible to

the risks associated with employee or third-party misconduct. In addition, our reliance on third-party

service providers for various critical functions, including certain banking operations, technology

infrastructure and customer service, increases the risk of such misconduct. For example, we outsource

certain aspects of our deposit-taking business in various geographies, including Sweden and Germany,

which may expose us to additional risks of misconduct of our counterparties.

Any incident of misconduct, whether internal or involving third-party service providers, could result in

legal or regulatory actions or proceedings as well as monetary losses, fines and other penalties. Further,

our insurance premiums may increase and the cost of capital may rise as a result of damaged investor

confidence. In addition to financial and operational impacts, misconduct can have severe reputational

consequences. We believe that our brand is associated with trust, innovation and reliability. Any publicized

incident of misconduct can erode this trust, leading to consumer or merchant attrition, difficulty in

acquiring new consumers or merchants and strained relationships with our other partners. The

competitive nature of the financial services industry means that even isolated incidents of misconduct

may materially and adversely affect our business, financial condition, results of operations and future

prospects.

**Our operations could be adversely affected by labor actions, disputes and other labor-related disruptions in** 

**the countries in which we operate.**

We are subject to various international, national, federal, state and municipal labor laws and

regulations of the countries in which we operate. Labor laws and regulations are complex, broad in scope

and often vague and differ vastly across states, countries and businesses and may require us to interpret

such laws and regulations, which may involve assumptions, estimates or judgments. Further, these laws

and regulations are subject to continuing and evolving interpretation by regulatory agencies,

administrative law judges and courts. New or different interpretations of existing requirements, new laws

or regulations or the enforcement of existing or new laws and regulations could subject our current

practices to allegations of impropriety or illegality, lead to labor actions and disputes with our employees,

or require us to make changes in our operations, facilities, equipment, personnel, compensation services

or operating expenses to comply with evolving requirements. We cannot guarantee that we will be able to

make any such changes in a cost-efficient manner or at all.

We have in the past, and may in the future, experience strikes, work stoppages and other forms of

labor disruption in various jurisdictions in which we have employees. In November 2023, in connection with

ongoing negotiations of a collective bargaining agreement, certain of our employees in Sweden threatened

to initiate a strike. Before the strike began, we reached an agreement with several trade unions regulating

certain rights of our employees in Sweden. In addition to Sweden, we also have other employees, mostly in

various European countries, who are covered by collective bargaining agreements. Any future strikes, work

stoppages or similar labor actions, including those initiated by labor unions or similar organizations or

otherwise related to collective bargaining agreement negotiations, could lead to additional costs, distract

management or otherwise harm our business, financial condition, results of operations and future

prospects.

KLARNA GROUP PLC39

**Our insurance policies may not be sufficient to cover all claims.**

As part of our risk management strategy, we maintain various insurance policies intended to protect

against significant losses from operational and other risks. These policies cover a range of potential

events, including, but not limited to, data breaches, operational failures, legal claims and other liabilities

inherent in our business operations. However, these insurance policies, by their nature, contain exclusions

and limitations on coverage. There is a risk that not all claims will be covered or that the amount of a claim

may exceed our policy limits.

Furthermore, the cost of securing adequate insurance coverage has been increasing, influenced by

the evolving risk landscape, particularly in the technology and financial services sectors. Such increases in

insurance costs could adversely affect our operating results and financial position. There is no guarantee

that we will be able to maintain our current coverage on favorable terms or at all. Additionally, as our

operations expand and evolve, we may be forced to pay significantly higher premiums or encounter

difficulties in obtaining sufficient insurance coverage for new risks on acceptable terms, if at all.

In the event of a significant loss or liability that is not fully covered by our insurance policies, or in

scenarios where insurance coverage is disputed by insurers, we may be exposed to substantial financial

losses. Such financial exposure could adversely affect our business, results of operations, financial

condition and future prospects. Moreover, the occurrence of a significant uninsured loss could damage

our reputation among customers, partners and current and prospective investors. It could also lead to

increased scrutiny from regulators and other stakeholders, further adversely impacting our business and

growth prospects.

While we endeavor to manage our risks effectively through a combination of insurance coverage and

operational risk management practices, there can be no assurance that our insurance policies will be

sufficient to protect us against all possible claims or losses. Any actual or potential inadequacy of

insurance coverage could adversely affect our business, financial condition, results of operations and

future prospects.

**Risks Related to Our Regulatory Environment** 

**Our business is subject to extensive, complex and changing laws and regulations and related supervision,** 

**inquiries and examination.**

We are subject to extensive regulation, supervision, inquiries and examination by multiple

governmental authorities in the United States, the EU, the U.K., Sweden and other jurisdictions in which we

operate under various and complex international, national, state and local laws and regulations. In

particular, as a licensed bank, Klarna Bank must comply with applicable international, EU and Swedish

banking regulations, including applicable capital adequacy and liquidity requirements, including, but not

limited to, the Capital Requirements Directive 2013/36/EU (as amended, "CRD IV") and the Capital

Requirements Regulation (EU) 575/2013 (as amended, "CRR"); the Swedish Banking and Financing Business

Act (the "Swedish Banking Act"), which governs, among other aspects of our business, internal governance

and control, risk management, credit operations, banking secrecy, outsourcing, remunerations and

financial soundness; and the Swedish Payment Services Act (2010:751) (the "PSA"), which implemented

Directive 2015/2366/EU on payment services in the internal market (the "PSD2"), which governs Klarna

Bank's provision of payment services, together with any supplementing regulations and recommendations

issued by the SFSA or other authorities as applicable over time. We are subject to similar laws governing

the issuance of electronic money and the provision of payment, money transmission, credit origination,

credit brokering and lending services in other jurisdictions in which we operate. Because we offer various

financial products and services to individual consumers through our network, we are also subject to

extensive consumer protection laws, including consumer lending laws. We are also required to comply with

economic sanctions imposed in the United States and in the other jurisdictions in which we operate,

including the EU and the U.K. Moreover, we are subject to the Foreign Corrupt Practices Act (the "FCPA") in

the United States and similar laws in other countries that generally prohibit companies and those acting on

KLARNA GROUP PLC40

their behalf from making improper payments to foreign government officials for the purpose of obtaining

or retaining business. We are also required to observe laws and regulations relating to the processing of

personal information, including personally identifiable information as well as the security of our network

and information systems supporting our operations, including Regulation 2022/2554/EU on digital

operational resilience for the financial sector ("DORA"). DORA establishes a harmonized and

comprehensive digital operational resilience framework across the whole EU financial sector by requiring a

wide range of financial institutions, including banks, to manage their ICT risks in a robust and effective way

through internal governance, control and risk frameworks. DORA also requires financial institutions to

report major ICT-related incidents to regulatory authorities and undertake digital operational resilience

testing.

The substantial costs and uncertainties related to complying with applicable laws and regulations

continue to increase, and changes to our network, introduction of new products or services, expansion of

our business in certain jurisdictions or subindustries, acquisitions of other businesses that operate in

similar regulated spaces or other actions that we may take may subject us to additional laws, regulations

or other government or regulatory scrutiny. New laws or regulations could also require us to raise

additional capital, which may not be available to us on favorable terms, if at all, and incur significant

expenses and devote significant management attention and internal resources to establish, implement and

monitor policies and procedures necessary to ensure compliance. The application of various regulatory

requirements to our business model is not always clear, and government authorities may challenge our

interpretation of applicable legal regimes and, as a result, request or require that we obtain additional

regulatory licenses or other authorizations in the future, which may subject our business to new

restrictions or requirements and result in additional costs and expenses. For example, we are currently

closely monitoring in multiple jurisdictions proposed and upcoming changes in the regulation of "buy now,

pay later" or similar products. In particular, we expect new legislation to be enacted in the coming years,

with changes expected to be enacted in the U.K., Australia and New Zealand, which may represent a

significant change in the regulatory treatment of certain of our payment options and, as such, may require

us to obtain additional licenses and comply with additional regulatory requirements. In addition, we may

independently determine that we should obtain additional regulatory licenses or other Authorizations in

the future, which may result in greater regulatory scrutiny of our past operations and actions, potentially

leading to regulatory and/or governmental investigations, enforcement actions, fines and other penalties.

Further, we may not be able to respond quickly or effectively to regulatory, legislative and other

developments, particularly as compared to our competitors, which may adversely affect our market

position. For example, it is uncertain how recent changes in the U.S. government's policies and priorities

may impact our business going forward. These include the impact of tariffs, immigration reform and

changes at the agencies that regulate us or our banking partners, including the modification, rescission,

withdrawal or changes to the approach and enforcement of, rules and guidance relating to business

models like ours. While we have developed policies and procedures designed to assist in maintaining

compliance with applicable laws and regulations, no assurance can be given that such policies and

procedures will be effective or adequate, particularly if relevant laws and regulations evolve or become

construed or applied in a new manner. Any failure to comply, or to ensure that our employees, partners

and third-party service providers comply, with these laws or regulations may result in increased

supervisory and public scrutiny, loss of consumer trust, litigation or enforcement actions, which may in

turn lead to suspension or revocation of our licenses and other regulatory Authorizations, regulatory

inquiries or enforcement actions for non-compliance, fines and other monetary penalties as well as civil

and criminal liability. We may also be required to implement changes to our operations and the terms of

our financing solutions and other products and services, which, in turn, may lead to reduced repayments

from our consumers (for example, due to an inability of us or our originating bank partners (as defined

herein) to export interest rates across national or state lines), permanent forgiveness of some or all of their

indebtedness, or our inability to, directly or indirectly, collect all or a part of the principal of or interest on

the loans originated through our network, any of which could adversely affect our business, results of

operations, financial condition and future prospects.

KLARNA GROUP PLC41

We are similarly subject to extensive regulatory supervision, inquiry and examination in the

geographies in which we operate. Klarna Bank, including certain of its branches, is subject to supervision

by the SFSA in Sweden. In Germany, Klarna Bank, German Branch is subject to supervision by the German

Federal Financial Supervisory Authority ("BaFin"). Klarna Bank also has branches in France, Ireland, Italy

and Denmark, which are under the supervision of the relevant local governmental authority, and operates

in Switzerland on a cross-border basis using its Swedish banking license. KFSUK, our U.K. subsidiary,

operates as an electronic money institution with payment services permissions and a consumer credit firm

under the supervision of the U.K. Financial Conduct Authority (the "FCA"). In the United States, our

operating subsidiary holds primarily money transmission, collection and lending licenses on the state and

territorial levels and, as such, is subject to supervision in each of the states and territories where it has a

license. As a facilitator, servicer, originator or acquirer of consumer credit and provider of other consumer

credit financial services, we are subject to the regulatory and enforcement authority of the CFPB as well as

other governmental and regulatory bodies. We are also regulated by many international, national and state

governmental and regulatory authorities through licensing and other supervisory or enforcement

authorities, which includes regular examination by international and U.S. federal, state and local

governmental authorities on a variety of topics, including our compliance with laws and regulations

concerning AML/CFT or financial disclosures. We also hold regional licenses to offer consumer credit

services in certain regions in Canada, and we are in the process of registering as a retail payment activity

PSP under the new Retail Payment Activities Act. Finally, we are also currently pursuing, and expect to

continue to pursue in the future, additional licenses and other Authorizations in multiple jurisdictions, as a

result of which we could become subject to regulation, supervision or enforcement by additional national

and local authorities.

We have been in the past, are currently, and may in the future be, subject to regulatory inspections,

examinations, inquiries or investigations in the jurisdictions in which we operate or into which we provide

our services. Any such regulatory engagement could involve substantial time and expense to review and

respond to and divert management's attention and other resources from operating our business. It may

also result in the identification of matters that may require remediation activities on our part and lead to

public enforcement actions or lawsuits, result in fines, penalties, injunctive relief, consumer remediation or

increased compliance costs, limit our ability to offer certain products or services or engage in certain

business practices or result in the need to obtain additional licenses that we do not currently possess, and

there can be no assurance that future adverse findings (or any associated remediation work required to be

performed by us to address them) will not materially impact our business and operations. Further, in some

cases, regardless of the substantive defenses or arguments that may be available to us, it may be less

time-consuming or costly to settle such matters rather than litigate them to the fullest extent possible or

pursue alternative resolutions. Our involvement in such matters, whether tangential or otherwise, even if

the matters are ultimately determined in our favor, could also cause significant harm to our reputation,

lead to additional investigations and enforcement actions from other agencies or litigants and further

divert management attention and resources from the operation of our business, any of which could

adversely affect our business, results of operations, financial condition and future prospects.

**Changes to capital adequacy, liquidity and similar regulatory requirements may adversely affect us.**

We are subject to extensive capital adequacy and liquidity requirements, including, among others, the

Basel III framework (including its recent reforms known as "Basel IV"), CRD IV and CRR. CRD IV and CRR are

supplemented and complemented by a set of binding technical standards developed by the European

Banking Authority (the "EBA"). The capital adequacy framework specifies minimum amounts and types of

capital, including common equity tier 1 ("CET1") capital, additional tier 1 ("AT1") capital and tier 2 capital,

that we need to maintain. In addition to the mandatory capital requirements that apply under Pillar I of the

Basel III framework, we may be subject to binding Pillar II capital requirements and leverage ratio

requirements. CRD IV also provides for further capital buffer requirements that are required to be satisfied

with CET1 capital. Additional capital buffers may be applicable to us as determined by the SFSA. We are

also subject to liquidity requirements as a credit institution supervised by the SFSA, including a statutory

requirement to maintain sufficient liquidity to meet our financial obligations as they become due.

KLARNA GROUP PLC42

Capital adequacy, liquidity and similar regulatory requirements applicable to us are subject to change,

both as a result of potential amendments to, or implementation of, applicable laws and regulations,

including the Basel III framework and related EU and Swedish law regulations, and changes to our business

practices and the scope of our operations. For example, if we are designated as a systemically important

financial institution (Sw. *systemviktig bank*) by the SFSA or the Swedish National Debt Office (Sw.

*Riksgäldskontoret*) following an assessment by the SFSA that, due to the size of our operations and their

importance to the banking system in Sweden, we would become subject to additional and more stringent

capital adequacy and liquidity requirements, as well as additional rules regarding resolution under the

Swedish Resolution Act (2015:1016) (the "Resolution Act"). In addition, if some or all of our existing

securitization and forward flow arrangements are amended, suspended or terminated, we may become

subject to more stringent capital adequacy requirements resulting from an increase in the risk profile of

our assets.

Any failure, particularly a serious or continuing one, to meet applicable capital adequacy or liquidity

requirements could result in one or more of our regulators placing limitations or conditions on our

operations or growth initiatives, including any acquisitions, partnerships or joint ventures, or restricting the

commencement of new activities, including introduction of new products or services, or could affect our

brand and reputation and customer and investor confidence, increase our funding costs, limit the ability of

our regulated subsidiaries to distribute funds to us or our ability to pay dividends in the future on our

ordinary shares. We may not be able to raise required additional capital in the future on terms favorable to

us, if at all, for a number of reasons, some of which may be beyond our control, including our financial

condition, results of operations, any necessary government or regulatory approvals, regulatory changes or

general market conditions for capital raising activities, which could adversely affect our business, results

of operations, financial condition and future prospects.

**We are subject to various consumer protection laws.**

We must comply with various consumer protection laws and regulatory requirements in the

jurisdictions in which we operate or into which we provide our solutions or services, including

requirements applicable to consumer credit transactions. In the EU, we are subject to complex consumer

protection and payment services regimes established by numerous EU regulations that are directly

applicable across the EU as well as EU directives that are implemented in each EU member state through

local legislation. Under these regimes, consumer protection offices, bureaus or agencies, such as the

Swedish Consumer Agency (Sw. *Konsumentverket*) (the "SCA"), supervise many aspects of our network

and operations, including marketing and selling practices, advertising, general terms of business and

collection operations. For example, the SCA has conducted an ongoing investigation relating to marketing

requirements and our compliance with the Swedish Marketing Act (2008:486) (the "SMA"). The

investigation was completed without any further action in May 2025. In the United States, we are subject to

complex consumer protection and consumer financial services regimes established by numerous federal,

state and local regulations that are applicable across various United States jurisdictions. We must comply

with various U.S. federal, state and local consumer protection regimes, both as a counterparty or a service

provider to our bank partners, including our originating bank partners, and as a loan originator with respect

to loans we may originate directly, as well as a provider of other consumer financial services. We are also

subject to the regulatory and enforcement authority of the CFPB as a facilitator, servicer, originator or

acquirer of consumer credit and provider of other consumer financial services. As such, the CFPB has in

the past requested and may in the future request reports or other information concerning our

organization, business conduct, markets and activities. Further, the CFPB and other governmental and

regulatory authorities may also initiate inquiries and consultations relating to our industry. For example, in

2022, we voluntarily participated in the CFPB-initiated consultations addressed to providers of "buy now,

pay later" products and solutions in the United States. In addition, depending on future regulatory changes

and further development of our network and the products and services that we offer through it, the CFPB

or other prudential regulators may begin to supervise us in the future. This supervision would allow

regulators to, among other things, conduct comprehensive and rigorous examinations to assess our

compliance with consumer financial protection laws, which could result in investigations, enforcement

KLARNA GROUP PLC43

actions, regulatory fines and mandated changes to our network, operations, products and services,

policies and procedures. In addition, state attorneys general have indicated that they will take a more

active role in enforcing consumer protection laws, including by relying on the Dodd-Frank Act provisions

that authorize state attorneys general to enforce certain provisions of federal consumer financial laws and

obtain civil money penalties and other relief available to the CFPB.

Participants in the consumer finance industry have been the subject of putative class action lawsuits

and federal and state regulatory and enforcement actions, including actions relating to alleged unfair,

deceptive or abusive acts or practices, violations of state lending laws and interest rate limits, actions

alleging discrimination on the basis of race, ethnicity, gender or other prohibited bases, and allegations of

noncompliance with various state and federal laws and regulations relating to origination and servicing

consumer loans. We cannot assure you that we will not become subject to such actions or similar actions,

and there is no assurance that these regulatory matters or other factors will not affect how we conduct

our business and, in turn, adversely affect our business. In particular, legal proceedings and enforcement

actions brought under state consumer protection statutes or under several of the various federal

consumer financial services statutes subject to the jurisdiction of the CFPB and FTC may result in a

separate fine for each violation of the statute, which, particularly in the case of class action lawsuits, could

result in damages in excess of the amounts we earned from the underlying activities.

International and supranational bodies, national governments, states and provinces may pass new laws

or regulations, or amend or change their interpretation or application of existing ones, to further regulate

the consumer finance industry or products or solutions of the type provided through our network, or to

reduce the finance charges or other fees that may be imposed with respect to consumer financing

products, which could adversely affect our business, results of operations, financial condition and future

prospects. One example is the amended PSA, which took effect in July 2020. Since then, the PSA has

required PSPs to ensure adequate presentation of available payment methods for online transactions at

checkout. Although the amendments to the PSA have been in force for some time, there are still

uncertainties as to how the PSA should be interpreted in some cases, including with respect to the

application of its provisions in light of the SMA governing undue market practices. Another example of

consumer protection law changes that may affect our operations is Directive 2023/2225/EU on credit

agreements for consumers ("CCD2"). CCD2 establishes strict rules governing the marketing and advertising

of credit products to consumers, policies and procedures safeguarding consumer understanding of credit

products, sound underwriting and creditworthiness assessments and other consumer protection

measures, including forbearance mechanisms and interest rate caps. The extent and complexity of the

new rules, and their impact on our operations, remain uncertain as it will largely depend on the

implementation of CCD2 into the national legal systems of the EU member states in which we operate, in

particular Sweden and Germany.

While we have developed policies, processes and procedures designed to assist in compliance with

applicable consumer protection laws and regulations, no assurance can be given that our compliance

policies and procedures will be effective and we have in the past been, and may in the future be, subject

to findings of breach of consumer protection requirements. For example, while we have adapted the

Consumer Duty across our regulated products in the U.K. and put in place procedures to ensure

compliance with applicable FCA requirements, given the broad principles-based nature of the regime, no

assurance can be given that such procedures will be deemed adequate or will not require future revision.

Failure to comply with these laws and regulatory requirements applicable to our network, products and

services, including our consumer financing products, could make it impossible or more difficult for us to

enforce contractual terms or collect debts owed to us, or subject us to damages, revocation or suspension

of licenses and other Authorizations, class action lawsuits, administrative enforcement actions, loss of

customer trust, reputational damage and civil and criminal liability, any of which could adversely affect our

business, results of operations, financial condition and future prospects.

KLARNA GROUP PLC44

**We are required to comply with AML/CFT laws and regulations.**

Our global operations are subject to various AML/CFT laws and regulations. In the EU, we are required

to implement measures against money laundering and terrorist financing under Directive 2015/849/EU on

the prevention of the use of the financial system for the purpose of money laundering and terrorist

financing (as amended, "4AMLD") and its implementing national legislation, including the Swedish Money

Laundering and Terrorist Financing (Prevention) Act (2017:630) (the "Swedish AML Act"), the Swedish Anti-

Money Laundering and Terrorist Financing Prevention Regulation (2009:92), the SFSA's regulation

regarding measures against money laundering and terrorist financing (2017:11), the Swedish Act on

Registration of Beneficial Owners (2017:631), and the German Anti-Money Laundering Act

(*Geldwäschegesetz* or the "GwG") together with any applicable regulation issued by the SFSA or other

authorities, as applicable over time. Further, we are required to comply with Regulation 2015/847/EU on

information accompanying transfers of funds (the "Wire Transfer Regulation"), which establishes

information requirements with respect to payers and payees for the purpose of preventing, detecting and

investigating money laundering and terrorist financing. In addition, in the United States, we are subject to

the Bank Secrecy Act of 1970 (as amended from time to time, the "BSA"), as amended, and its

implementing regulations, and the FCPA. In addition, we are subject to the Bribery Act 2010 in the U.K.

We maintain an enterprise-wide program designed to ensure compliance with applicable AML/CFT

laws and regulations, as well as various sanctions regimes (the "AML/CFT compliance program"). The AML/

CFT compliance program is based on Swedish AML/CFT standards (which are largely aligned with

European AML/CFT standards and The Financial Action Task Force (FATF) rules) and supplemented by

local adjustments where required by local laws or regulations. Our AML/CFT compliance program includes

policies, procedures, processes and other internal controls designed to identify, monitor, manage and

mitigate money laundering, terrorist financing and other illicit financial crimes risks. In particular, our AML/

CFT compliance program includes procedures and processes that govern the detection and reporting of

potentially suspicious transactions; identification, verification and ongoing due diligence on customers;

customer risk scoring methods; diligence on merchants' ownership structures; sanctions screening;

responses to requests from law enforcement; termination and blocking of consumers; and ongoing

transaction monitoring, recordkeeping and reporting. We cannot provide any assurance that our AML/CFT

compliance program will be effective in ensuring compliance with all applicable AML/CFT laws and

regulations. Any failure to comply with AML/CFT laws and regulations could result in public enforcement

actions or lawsuits, fines, penalties, including revocation or suspension of regulatory licenses or other

Authorizations, increased compliance costs or a breach or termination of our existing arrangements with

our bank partners, any of which could adversely affect our business, results of operations, financial

condition and future prospects. In December 2024, we received a remark (Sw. *anmärkning*) and were fined

SEK 500 million (approximately $47 million) by the SFSA following an investigation (the "SFSA

investigation") relating to Klarna Bank's compliance with applicable AML/CFT regulations. The investigation

did not identify any transactions conducted on our network that were in violation of applicable AML/CFT

regulations, but concluded that our methods and thresholds for know-your-customer ("KYC") and

customer due diligence ("CDD") checks, our risk classification procedures and policies, distribution

channel risk considerations, analysis of suspicious activity reports and model risk management, as well as

our AML/CFT process, were nevertheless insufficient in light of the requirements of the Swedish AML Act.

In response to the investigation and its conclusions, we began integrating additional information, including

data from our internal Suspicious Activity Reports ("SARs") and additional information relating to our

relationships with MoRs, into our AML/CFT risk assessment process. We also began utilizing an expanded

definition of "business relationships" for the purposes of our KYC procedures, as prescribed by the SFSA,

and are in the process of expanding our CDD checks to cover additional transactions transacted on our

network. Finally, to enhance our AML processes, we established an AML model validation routine aimed to

ensure that our AML models are appropriately defined and evaluated as well as that they operate as

designed. These enhancements will be further reviewed by our internal audit team and while we believe

that these actions appropriately address the issues observed by the SFSA or self-identified by us in

connection with the SFSA investigation, the SFSA may as part of its routine supervisory activities review

these enhancements and may disagree with our conclusions and the actions taken by us. We could

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therefore become subject to additional investigative or enforcement actions or be found in violation of

other AML/CFT regulations. We could also become subject to additional investigative or enforcement

actions or be found in violation of other AML/CFT regulations in the future that are unrelated to the SFSA

investigation. Any of the foregoing could adversely affect our business, results of operations, financial

condition and future prospects.

**We are subject to regulatory requirements to facilitate the orderly resolution of large financial institutions,** 

**which may negatively affect our operations, the value of our outstanding debt securities and the value of your** 

**investment in our ordinary shares.**

We are subject to the EU special resolution regime for credit institutions established by the Bank

Recovery and Resolution Directive (as amended, "BRRD"). BRRD requires EU credit institutions, including

Klarna Bank, to prepare and maintain recovery plans specifying steps to be taken to restore the long-term

viability of the credit institution in the event of a material deterioration of its financial condition. Credit

institutions are also required under BRRD to meet a capital requirement for own funds and eligible

liabilities (the "MREL Requirement") determined by the relevant resolution authority, which in Sweden is

the Swedish National Debt Office (Sw. *Riksgäldskontoret*), acting in accordance with the Resolution Act.

BRRD also contains several resolution tools and powers which may be used by the applicable

resolution authority under certain conditions. Such tools and powers (which may be used alone or in

combination with others) include, among others, a general power to write down all or a portion of the

principal amount of, or interest on, certain eligible liabilities, whether subordinated or unsubordinated, of

the institution in resolution and/or to convert certain unsecured debt claims, including senior and

subordinated notes, into other securities, which could then also be subject to the general bail-in

provisions.

As a resolution tool, bail-in provisions permit the applicable resolution authority to recapitalize EU

credit institutions (such as Klarna Bank) and financial holding companies (such as Klarna Holding) that

meet the conditions for resolution to ensure it can continue to operate by writing-down debts or

converting debt securities into equity. The purpose of the bail-in tool is to ensure that the losses of failing

EU credit institutions and financial holding companies are borne principally by their shareholders and

creditors. Through our subsidiaries, we issue commercial paper, regulatory capital notes as well as other

debt securities, including senior and subordinated notes under our Euro and Swedish Medium Term Note

Programs, as more fully discussed in the section of this report on Form 20-F titled "Management's

Discussion and Analysis of Financial Condition and Results of Operations―Liquidity and Capital

Resources―Indebtedness." Accordingly, our debt securities, including those issued under our Euro and

Swedish Medium Term Note Programs, may be subject to write-down or conversion into equity following

any application of the bail-in tool, which may result in holders of our debt securities losing some or all of

their investment.

In addition, the resolution authority has the power to take control of the credit institution in distress

and, for example, facilitate its sale to private investors or to a publicly controlled entity pending a private

sector arrangement. Such actions of the relevant resolution authority can be taken without any prior

shareholder (or other) approval. It is not possible to predict exactly which of the powers and tools granted

to the Swedish National Debt Office by BRRD and the Resolution Act may be used in particular instances of

our financial distress. Accordingly, it is possible that you may lose a part of or all of your investment in our

ordinary shares as a result of the application of the BRRD regime, including the bail-in provisions, to us.

**If our originating bank partner model is successfully challenged or deemed impermissible, we could be found** 

**to be in violation of licensing, interest rate limit, lending and similar brokering laws.**

In the United States, a portion of the loans facilitated through our network are originated through

WebBank and we rely on our originating bank partner model to comply with various federal and state laws.

If the legal structure underlying our relationship with WebBank or any future originating bank partners

(together, our "originating bank partners") was successfully challenged, we may be found to be in violation

KLARNA GROUP PLC46

of state licensing requirements and state laws regulating interest rates and other aspects of consumer

lending. In the event of such a challenge or if our arrangements with our originating bank partners were to

change or terminate for any reason, we would need to rely on an alternative bank relationship or on our

existing licenses, obtain new state licenses, pursue a federal or state bank charter and/or be subject to

the interest rate limitations and loan product requirement limitations of certain states. There are three

examples of claims that have been raised in the United States that could each, separately or jointly, result

in this outcome in some or all states. The first of these is a challenge to whether an interest rate that was

"valid when made," i.e., valid on the date of origination in light of the location of the originating bank, will

remain applicable to the loan if such loan changes ownership. The second and third challenges relate to

determining which entity is the "true lender" for a loan and the location in which a loan is made, both of

which have bearing on what state or local laws apply to the terms of the loan or the conduct of the lender.

Any litigation or enforcement action with respect to a loan facilitated through our network, whether

based on a challenge to the true lender, the legal interest rate or another theory, against us, any successor

servicer, prior owners or subsequent transferees of such loans, including our originating bank partners,

could subject them to claims for damages, disgorgement or other penalties or remedies. The potential

consequences of an adverse determination could include the inability to collect loans at the interest rates

contracted for, licensing violations, the loans being found to be unenforceable or void, or the reduction of

interest or principal, or other penalties or damages. Third-party purchasers of loans facilitated through our

network also may be subject to scrutiny or similar litigation, whether based upon the inability to rely upon

the "valid when made" doctrine or because a party other than the originating bank is deemed the true

lender.

In addition, certain states have adopted, or are considering adopting, laws that subject us to the state's

lending licensing regime, maximum interest rate requirements and other lending laws if we have a

predominant economic interest in the loan or other material relationship with the borrower or loan, even if

such loans are originated by our originating bank partners. In such circumstances, we would be required to

comply with applicable state licensing requirements, interest rate limitations and other lending laws with

respect to those loans, which may result in significant operational and compliance costs and may prevent

us from providing certain products and services. There can be no assurance that these regulatory matters

or other factors will not affect how we operate our network, which, in turn, could have an adverse effect on

our business, results of operations, financial condition and future prospects.

**Loans extended by us under our licenses may be found to violate applicable interest rate limits or other** 

**provisions of applicable lending and other laws.**

The loans originated by our originating bank partners may not be subject in certain jurisdictions,

including in the United States, to licensing and interest rate restrictions. However, the loans we may

originate through our network pursuant to our existing licenses are subject to licensing and interest rate

restrictions, as well as numerous state requirements regarding consumer protection, interest rate,

disclosure, prohibitions on certain activities and loan term lengths. If the loans we originate pursuant to our

licenses were deemed to be in violation of certain consumer finance or other laws, we could be subject to

fines, damages, injunctive relief (including required modification or discontinuation of our business in

certain areas), other penalties, private or public litigation and other negative consequences, and the loans

could be rendered void or unenforceable in whole or in part, any of which could have an adverse effect on

our business, results of operations, financial condition and future prospects.

**Our relationships with bank partners in the United States may subject us and our partners to additional** 

**regulatory scrutiny.**

Prudential banking regulators in the United States, including the FDIC, have recently increased their

scrutiny of bank partnerships with third-party financial service providers through the release of

statements, requests for information and proposed regulations. For example, on July 25, 2024 the Federal

Reserve Board, the OCC and FDIC (collectively, the "Federal Banking Agencies") issued a joint statement

that discussed their view on the risks faced by banks arising from their partnerships with financial

KLARNA GROUP PLC47

technology companies ("bank-fintech arrangements"). In particular, the statement noted that bank-fintech

arrangements may create heightened or novel risks for banks relative to the risks associated with more

traditional third-party vendor relationships. The key risks outlined by the Federal Banking Agencies include

increased balance sheet growth for bank partners, compliance issues that may arise when banks rely on

third parties to conduct compliance functions, misrepresentation of when deposit pass-through insurance

coverage applies, monitoring third-party governance and risk management systems, and operational and

compliance risks. The Federal Banking Agencies also issued a request for information (the "RFI") on the

nature of partnerships between banks and financial technology companies, such as Klarna, and effective

risk management practices associated with such partnerships. The Federal Banking Agencies also

indicated that they were considering whether additional steps, such as enhancements to supervisory

guidance, could help ensure that banks effectively manage risks associated with various types of bank-

fintech arrangements. While to date the RFI has not led to any proposed regulatory changes by any of the

Federal Banking Agencies, the RFI and related statements suggest that the Federal Banking Agencies may

expect financial institutions involved in such arrangements, including our partner banks, to change their

risk management and compliance practices in order to ensure compliance with applicable laws and

regulations. These releases, including the RFI, coincided with a significant increase in the number of

enforcement actions relating to banks' third-party arrangements. These and other regulatory initiatives by

U.S. federal or state prudential banking regulators may constrain the operations of our partner banks in

the United States, including those with which we may partner in the future either in addition to or in lieu of

our existing arrangements. Such banks may be prohibited from partnering with us, or may terminate our

relationship once established, as a result of increased regulatory scrutiny or changes to applicable laws

and regulations.

Our relationship with partner banks may also subject us to additional regulatory scrutiny, requirements

and supervision. For example, we are a service provider to WebBank, and as such, we are subject to audit

by WebBank in accordance with FDIC guidance related to management of vendors. We are also subject to

the examination authority of the FDIC under the Bank Service Company Act as a result of our relationship

with WebBank. To the extent that we enter into similar relationships with other partner banks, either in lieu

of or in addition to our relationship with WebBank, we may become subject to additional regulatory

requirements imposed indirectly by the partner bank or directly by U.S. federal or state prudential banking

regulators. Additional regulatory requirements may adversely affect us or our bank partners, including our

originating bank partners, and, therefore, our business, results of operations, financial condition and future

prospects.

**The highly regulated environment in which our bank partners operate may indirectly impact our business** 

**relationships.**

Our bank partners, including our originating bank partners, are, like us, subject to extensive supervision

and regulation. Banking laws, along with tax and accounting laws, regulations, rules and standards, may

limit their operations significantly and control the methods by which they conduct business. In addition,

compliance with laws and regulations can be difficult and costly, and changes to laws and regulations can

impose additional compliance requirements. Regulatory requirements affect our bank partners' lending

and investment practices, among other aspects of their businesses, and restrict transactions between us

and our bank partners. These requirements may constrain the operations of our bank partners, and the

adoption of new laws and changes to, or repeal of, existing laws may have a further impact on our

business.

In choosing whether and how to conduct business with us, current and prospective bank partners may

take into account the legal, regulatory and supervisory regime that applies to them, including potential

changes in the application or interpretation of regulatory standards, licensing requirements or supervisory

expectations. Regulators may elect to alter the standards, or their interpretation of them, used to measure

regulatory compliance or to determine the adequacy of liquidity, certain risk management or other

operational practices for financial services companies in a manner that may adversely impact our current

and prospective bank partners. Furthermore, regulatory agencies have extremely broad discretion in their

interpretation of applicable laws and regulations as well as the quality of our bank partners' loan portfolios

KLARNA GROUP PLC48

and other assets. If any regulatory agency's assessment of the quality of our bank partners' assets,

operations, lending practices, investment practices or other aspects of their business changes, it may

reduce our bank partners' earnings and capital ratios and, as a result, negatively affect their operations

and limit, prohibit or otherwise make infeasible, their ability to partner with us. Bank holding companies,

banks and other financial institutions are extensively regulated and currently face an uncertain regulatory

environment. Applicable laws, regulations, interpretations, including licensing laws and regulations,

enforcement policies and accounting principles, have been in the past, and may be in the future, subject

to significant changes. We cannot predict with any degree of certainty the substance or effect of pending

or future legislation or regulation or the application of laws and regulations to our current and prospective

bank partners. Future changes may adversely affect our bank partners, including our originating bank

partners, and, therefore, our business, results of operations, financial condition and future prospects.

**Our use of vendors and our other ongoing third-party relationships are subject to increasing regulatory** 

**requirements and attention.**

We regularly use vendors and subcontractors as part of our business to ensure smooth and seamless

operation of our network. We also depend on our substantial ongoing business relationships with our

merchants, bank partners and other third parties. These types of third-party relationships, particularly with

our originating bank partners, are subject to increasingly demanding regulatory requirements and

oversight by bank regulators (such as the SFSA in Sweden or the Federal Reserve Board, OCC and FDIC in

the United States) and consumer protection authorities. In the United States, the CFPB has enforcement

authority with respect to the conduct of third parties that provide services to financial institutions. The

CFPB has made it clear that it expects non-bank entities to maintain an effective process for managing

risks associated with vendor relationships, including compliance-related risks. In connection with this

vendor risk management process, we are expected to perform due diligence reviews of potential vendors,

review their policies and procedures and internal training materials to confirm their focus on compliance

matters, include enforceable consequences in our agreements with vendors governing failures to comply

with consumer protection requirements and take prompt action, including terminating the relationship, if

our vendors fail to meet our expectations or applicable legal or contractual requirements.

We expect that regulators will hold us responsible for deficiencies in our oversight and control of third-

party relationships and in the performance of the parties with which we have these relationships, including

where our arrangements with service providers constitute regulated outsourcing, which may be subject to

prescriptive regulatory requirements. As a result, if our regulators conclude that we have not exercised

adequate oversight and control over vendors and subcontractors or other ongoing third-party business

relationships or that such third parties have not performed appropriately, we could be subject to

enforcement actions, including civil money penalties or other administrative or judicial penalties or fines,

as well as be required to compensate our customers for any losses they incurred as a result of our

oversight, any of which could adversely affect our business, results of operations, financial condition and

future prospects.

**Regulatory agencies and consumer advocacy groups are increasingly focused on potential discrimination** 

**resulting from the use of ML and "black-box" algorithms.**

One or more variables included in our credit underwriting model may be deemed a proxy for a

protected characteristic such as race, ethnicity or sex in violation of the Equal Credit Opportunity Act (the

"ECOA") or other anti-discrimination and equal credit opportunity laws. As a result, we may be required to

make changes to our underwriting process, which could result in lower approval rates or affect our ability

to effectively navigate credit risks or evaluate credit losses. We may also be required to support the

variables used in our loan decisioning model with documented, legitimate business justifications in the

event the model results in a disproportionate effect on applicants or consumers of certain demographic

groups or to refute claims that the model is a "black box" that is inconsistent with our obligations under the

ECOA and similar state and local laws. In addition, our use of ML in our underwriting model could

inadvertently result in a "disparate impact" on protected groups, which could require an extensive, costly

and time-consuming review and revision of the model's underlying data and algorithms. While we may

KLARNA GROUP PLC49

review our underwriting model and process for potential disparate impact (including review of selected

variables by our Legal and Compliance teams and post-implementation testing to identify and mitigate any

potentially discriminatory impacts), we may be unable to identify and eliminate all practices or variables

causing the disparate impact, resulting in risks of violating applicable fair lending and other laws and

regulations.

**Risks Related to Intellectual Property, Data Privacy and Cybersecurity** 

**We may fail to comply with our obligations under license and technology agreements.** 

Our business and network rely on intellectual property and proprietary rights and technology that we

license from, or that are otherwise made available to us by, third parties. The agreements governing these

licenses and technologies typically impose various obligations on us, such as the maintenance of the

confidentiality of the licensed technology, and adherence to the terms and conditions of use.

If we breach or otherwise fail to meet these obligations, the licensors of the technology or intellectual

property may have the right to terminate these licenses. This could lead to legal disputes and potentially

significant financial damages, which may adversely affect our financial position and operations.

Additionally, the loss of any of such licenses could impair our ability to continue to operate our network

and provide our services, hinder our product development, or force us to obtain alternative technologies,

which may not be available to us on commercially reasonable terms or at all. Further, our business may

suffer if the licensors or other counterparties fail to abide by the terms of the license or other applicable

agreement, if the licensed intellectual property rights are found to be invalid or unenforceable, or if we are

unable to enter into necessary licenses or otherwise receive grants of adequate rights on acceptable

terms.

Although we maintain certain critical IT systems, conduct diligence on key licensors and have

agreements requiring third-party service providers to meet specific standards and requirements, our

reliance on these technologies exposes us to risks related to their quality and reliability. Additionally, we

may have limited control over the maintenance and support of these technologies.

Our strategic growth initiatives, including the development of new products, services or solutions,

could be jeopardized by the loss of certain licensed technologies. In addition, if we decide to expand our

network into additional geographies, we may face increased risks associated with compliance with diverse

and evolving regulatory environments that govern the use of technology and intellectual property in such

jurisdictions. These regulations can vary significantly by jurisdiction, and noncompliance could result in

substantial fines and penalties. In sum, any failure to comply with our obligations under the agreements

governing our use of third-party intellectual property and technology, or any loss of rights to use these

technologies, could adversely affect our business, results of operations, financial condition and future

prospects.

**Some aspects of the technology supporting our network include open source software.**

Certain key components of our technology that supports our network, including certain of our AI

models, are developed using open source software and, as a result, we are subject to the terms of open

source licenses. These licenses may contain requirements that, if not complied with, could lead to legal

actions or require us to publicly release our proprietary software, which could undermine our competitive

advantage. The terms of various open source licenses have not been interpreted by U.S. courts and, as

such, there is a risk that such licenses could be construed in a manner that imposes unanticipated

conditions or restrictions on our network. In such an event, we could be required to reengineer all or a

portion of our technologies, seek licenses from third parties in order to continue offering our solutions,

products and services, discontinue the use or the offering of our products, services, solutions or related

technologies in the event reengineering cannot be accomplished, or otherwise be limited in the licensing

of our technologies, each of which could reduce the value of our network to our consumers or merchants.

If portions of our proprietary software or AI models are determined to be subject to an open source

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license, we could also be required to, under certain circumstances, publicly release or license, at no cost,

our products, services or solutions that incorporate the open source software or the affected portions of

our source code, which could allow our competitors or other third parties to create similar products,

services or solutions with lower development effort, time and costs, and could ultimately result in a loss of

GMV and revenue for us. While we have open source usage policies and procedures in place, we cannot

ensure that these policies and procedures will prove effective in all instances, if at all, and that we have

not incorporated open source software in our software or AI models in a manner that is inconsistent with

the terms of the applicable license or our current policies, and we may inadvertently use open source

software in a manner that we do not intend or that could expose us to claims for breach of contract or

intellectual property infringement, misappropriation or other violation. If we fail to comply, or are alleged to

have failed to comply, with the terms and conditions of our open source licenses, we could be required to

incur significant legal expenses defending such allegations, be subject to significant financial liabilities, be

enjoined from the sale of our products and services, and be required to comply with onerous conditions or

restrictions on our solutions, products and services, any of which could be disruptive to our business.

In addition to risks related to license requirements, use of open source software can lead to greater

risks than use of third-party commercial software because open source licensors generally do not provide

warranties or other contractual protections regarding infringement, misappropriation or other legal,

regulatory or contractual violations, the quality of code or the origin of the software. Many of the risks

associated with the use of open source software cannot be eliminated and could adversely affect our

business, results of operations, financial condition and future prospects. For instance, open source

software is often developed by different groups of programmers that collaborate with each other on

projects and are beyond our control. As a result, open source software may have security vulnerabilities,

defects or errors of which we may not be aware. While we have open source usage policies and

procedures in place designed to mitigate such security vulnerabilities, defects or errors, we cannot ensure

that these policies and procedures will prove effective in all instances. Even if we become aware of any

security vulnerabilities, defects or errors, it may take a significant amount of time for either us or the

programmers who developed the open source software to address such vulnerabilities, defects or errors.

Such a delay could negatively impact our solutions, products and services, including by adversely affecting

the market's perception of our solutions, products and services, impairing their functionality, delaying the

launch of new products, services and solutions, or resulting in their failure, any of which could result in

liability to us, our vendors and service providers.

**We may be unable to sufficiently obtain, maintain, protect or enforce our intellectual property and other** 

**proprietary rights.**

Our success depends in part on our ability to obtain, maintain, protect and enforce our intellectual

property and other proprietary rights, including those in our proprietary technology powering our solutions,

products and services. We rely on a combination of patent, trademark, copyright, trade secret and other

intellectual property laws in the United States and certain foreign jurisdictions as well as contractual

arrangements, to establish and safeguard these rights. While it is our policy to protect and defend our

rights to our intellectual property, we cannot predict with certainty whether the steps we take will be

adequate to prevent infringement, misappropriation or other violation of our intellectual property rights, or

that we will be able to successfully enforce our rights. Our failure to obtain or maintain adequate

protection of our intellectual property rights for any reason could adversely affect our business, results of

operations, financial condition and future prospects.

We may not be able to obtain adequate protection for all of our intellectual property in the

geographies in which we operate. For example, it is possible that third parties, including our competitors,

may obtain patents relating to technologies that overlap or compete with our technology. If third parties

obtain patent protection with respect to such technologies, they may assert that our technology infringes

their patents and seek to charge us a licensing fee or otherwise preclude the use of our technology.

Further, despite our efforts, unauthorized third parties, including competitors, may duplicate, mimic,

reverse engineer, access, obtain or use the proprietary aspects of our technology, processes, products or

KLARNA GROUP PLC51

services without our permission. Our competitors and other third parties may also design around or

independently develop similar technology, or otherwise duplicate or mimic our services or products, such

that we may not be able to successfully assert our intellectual property or other proprietary rights against

them. While we take steps designed to enforce our intellectual property rights, we cannot guarantee that

others will not independently develop technology with the same or similar functions to any proprietary

technology we rely on to conduct our business and differentiate ourselves from our competitors.

We cannot assure that any future patents or trademark or service mark registrations will be issued for

our pending or future applications, or that any of our current or future patents, copyrights, trademarks or

service marks (whether registered or unregistered) will be valid, enforceable or sufficiently broad in scope,

provide adequate protection of our intellectual property or other proprietary rights, or provide us with any

competitive advantage.

Our trademarks, trade names and service marks have significant value, and our brand is an important

factor in the marketing of our products and services to consumers and merchants. We rely on both

registrations and common law protections for our trademarks. However, we may be unable to prevent

competitors or other third parties from acquiring or using trademarks, service marks, or other intellectual

property or proprietary rights that are similar to, infringe upon, misappropriate, dilute or otherwise violate

or diminish the value of our trademarks and service marks and our other intellectual property and

proprietary rights. The value of our intellectual property and other proprietary rights could diminish if

others assert rights in or ownership of our intellectual property or other proprietary rights or in trademarks

or service marks that are similar to ours, which could harm our corporate or brand identity and lead to

customer confusion. There is a risk that our trademarks and other intellectual property rights may not be

adequate to protect our brand or proprietary technology, or may conflict with the registered trademarks or

other intellectual property rights of other companies. This could require us to rebrand our solutions,

products and services (which could result in loss of goodwill and brand recognition and require additional

advertising and marketing expenditures), obtain costly licenses, defend against third-party claims, or

substantially change our products, services or solutions. If such risks manifest, we may not be able to

compete effectively and may be required to expend considerable resources, including by diverting the

attention of our management, any of which could adversely affect our business, results of operations,

financial condition and future prospects.

While our software and other proprietary works of authorship may be protected under copyright laws,

we have not registered any copyrights in these works. While registration is not necessary to benefit from

copyright protection, registration provides additional benefits in certain jurisdictions, and is required to

bring a copyright infringement lawsuit in the United States. Accordingly, the remedies and damages

available to us for unauthorized use of our software may be limited in certain jurisdictions.

We rely in part on trade secrets, proprietary know-how and other confidential information to maintain

our competitive position. We require our employees and third parties who develop intellectual property on

our behalf to enter into confidentiality and invention assignment agreements and third parties with whom

we share confidential or proprietary information to enter into nondisclosure and confidentiality

agreements or to be bound by professional, fiduciary or other contractual obligations requiring the

applicable third party to protect our trade secrets, proprietary know-how and other confidential or

proprietary information, including those related to our material proprietary AI models. However, we cannot

guarantee that we have entered into agreements containing such obligations with each party that has

been involved in the development of intellectual property for us or that has, or may have had, access to

trade secrets, proprietary know-how and other confidential or proprietary information. Our contractual

arrangements may be breached or may otherwise not effectively prevent disclosure of, or control access

to, our trade secrets, proprietary know-how and other confidential information, or may fail to provide an

adequate remedy in the event of an unauthorized disclosure or misuse of such information. Any

unauthorized disclosure or use of our trade secrets, proprietary know-how or other confidential or

proprietary information could make it more expensive to operate our network, erode any competitive

advantage we have and result in a pricing pressure on our solutions, products and services, any of which

could adversely affect our business, results of operations, financial condition and future prospects.

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The measures we have put in place may not prevent misappropriation, infringement or other violations

of our intellectual property or other proprietary rights or information, and any resulting loss of competitive

advantage. We may be required to litigate to protect our intellectual property or other proprietary rights or

information from misappropriation, infringement or other violations by others, which is expensive, could

cause a diversion of financial, managerial, operational and other resources, and may not be successful

even when our rights have been infringed, misappropriated or otherwise violated. Our efforts to enforce

our intellectual property and other proprietary rights may be met with defenses, counterclaims and

countersuits attacking the validity and enforceability of our intellectual property and other proprietary

rights. If such defenses, counterclaims or countersuits are successful, it could diminish or we could

otherwise lose valuable intellectual property and other proprietary rights. Due to the significant amount of

discovery required in connection with intellectual property litigation, our confidential information could

also be compromised by disclosure during litigation.

In addition, while in some cases a third party may have agreed to indemnify us for costs associated

with intellectual property-related litigation, such indemnifying third party may refuse or be unable to

uphold its contractual obligations. In other cases, our insurance may not cover potential claims of this type

adequately or at all, and we may be required to pay monetary damages, which may be significant.

Changes in the law or adverse court rulings may also negatively affect our ability to prevent others

from using our technology. In addition, changes in the law or adverse court rulings in countries where we

conduct research and development may affect our intellectual property rights, including with respect to

ownership, distribution and use of such intellectual property, or increase the costs of protecting or

defending our intellectual property rights. Further, the laws of some foreign countries may not be as

protective of intellectual property and other proprietary rights as those in the EU or the United States, and

the mechanisms for enforcement of intellectual property and other proprietary rights may be inadequate.

Any of the foregoing could adversely affect our business, results of operations, financial condition and

future prospects.

**Third parties may claim that we infringe, misappropriate or otherwise violate their intellectual property** 

**rights.** 

Our success depends in part on our ability to develop and commercialize our solutions, products and

services without infringing, misappropriating or otherwise violating the intellectual property or other

proprietary rights of third parties. Third parties have from time to time alleged, and may allege in the

future, that our products and services infringe, misappropriate or otherwise violate third-party intellectual

property or other proprietary rights. We may also, from time to time, become involved in disputes, including

actual or threatened litigation, concerning these rights. Relatedly, competitors or other third parties may

allege that service providers or other third parties retained or indemnified by us infringe on,

misappropriate or otherwise violate such competitors' or other third parties' intellectual property or other

proprietary rights. In addition, to the extent we hire personnel from competitors, we may be subject to

allegations that such personnel have divulged proprietary or other confidential information to us.

Claims of infringement, misappropriation or other violation may be extremely broad, and it may not be

possible for us to operate our network and conduct our operations in such a way as to avoid all such

alleged violations of such intellectual property or other proprietary rights. We also may be unaware of

third-party intellectual property or other proprietary rights that cover or otherwise relate to some or all of

our products and services.

Any claims of intellectual property infringement, misappropriation or other violation against us,

regardless of merit, may:

• require us to spend significant amounts of time and other resources to defend against the claim

(even if we ultimately prevail);

• result in significant monetary damages, loss of revenue or the payment of substantial royalty or

license fees, settlement payments or other damages;

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• require us to indemnify our customers or third-party service providers;

• result in the loss of access to, and use of, relevant systems, processes, technologies or other

intellectual property, temporarily or permanently;

• require us to cease offering certain products, services or solutions;

• require us to obtain additional licenses, which may not be available on commercially reasonable

terms or at all; or

• require us to redesign or reengineer aspects of our network, products, services, solutions or

functionality therein,

any of which could be costly, time-consuming or not technically or economically feasible.

Moreover, the volume of intellectual property-related claims and the mere specter of threatened

litigation could distract our management from the daily operations of our business. Some of the

aforementioned risks of infringement, misappropriation or other violation, in particular with respect to

patents, are potentially heightened due to the nature of our business, industry and intellectual property

portfolio. For instance, it has become common in recent years for certain third parties in the United States

to purchase patents or other intellectual property assets for the sole purpose of making claims of

infringement, misappropriation or other violation in an attempt to extract settlements from companies

such as ours. Relatedly, we do not currently have a large patent portfolio, which could otherwise assist us

in deterring patent infringement claims from third parties through our ability to bring patent infringement

counterclaims using our own patent portfolio. In addition to the previously mentioned impacts of

intellectual property-related litigation, while in some cases a third party may have agreed to indemnify us

for costs associated with intellectual property-related litigation, such indemnifying third party may refuse

or be unable to uphold its contractual obligations. In other cases, our insurance may not cover potential

claims of this type adequately or at all, and we may be required to pay monetary damages, which may be

significant.

**We are subject to complex and evolving laws, regulations, rules, standards, contractual obligations and other** 

**requirements regarding data privacy and cybersecurity.**

In connection with the operation of our business, we collect, use, store, disclose, transfer and

otherwise process information that relates to individuals and/or constitutes "personal data," "personal

information," "personally identifiable information" or similar terms under applicable data privacy laws,

including from and about actual and prospective customers, as well as our employees and business

partners. We also depend on a number of third-party vendors in relation to the operation of our business, a

number of which process personal information on our behalf. The complexity of the evolving data privacy

and cybersecurity regulatory environment presents various material risks to our operations, as more fully

described below.

We and our vendors operate in a complex and evolving regulatory environment with regard to data

privacy and cybersecurity and are subject to a variety of data privacy and cybersecurity laws, rules,

regulations, standards and other requirements, including those that apply generally to the handling of

personal information and those that are specific to certain industries, sectors, contexts or locations. These

requirements, and their application, interpretation and amendment, are constantly evolving. Failure to

comply with the laws, regulations, rules, standards, contractual obligations and other requirements to

which we are subject could expose us to liability and/or reputational damage. Compliance with these laws,

regulations, rules and standards, as well as any new laws, regulations, rules and standards and other

requirements or amendments to or changes in interpretations of existing laws, regulations, rules and

standards and other requirements, may, from time to time, require us to update our policies, procedures

and technology for data privacy and cybersecurity, which could, among other things, make us vulnerable

to operational failures and to monetary penalties for breach of such laws, regulations, rules and standards.

KLARNA GROUP PLC54

For example, we are subject to the EU GDPR, the U.K. GDPR, the California Consumer Privacy Act, as

amended by the California Privacy Rights Act (collectively, the "CCPA"), the Gramm-Leach Bliley Act (the

"GLBA") and the PCI-DSS. In addition to the various data privacy and cybersecurity laws and regulations

already in place, many jurisdictions are increasingly adopting laws and regulations adopting

comprehensive data privacy and cybersecurity obligations, which may be more stringent, broader in scope

or offer greater individual rights with respect to personal information than existing laws and regulations,

and such laws and regulations may differ from each other, which may complicate compliance efforts and

increase compliance costs.

In addition, federal, state and international governmental authorities continue to evaluate the data

privacy and cybersecurity implications inherent in the use of third-party "cookies" and other methods of

online tracking for behavioral advertising and other purposes. In the United States, we are subject to

evolving privacy laws, regulations and standards covering cookies, tracking technologies and e-marketing.

Numerous class-action suits under federal and state laws have been filed recently against companies that

utilize third-party tracking technologies, alleging violations of consumer protection laws and invasions of

privacy due to lack of adequate notice and/or consent prior to use of such technologies. In the EU and

U.K., informed consent is required for the placement of certain cookies or similar tracking technologies on

an individual's device and for direct electronic marketing. The EU GDPR and U.K. GDPR impose conditions

on obtaining valid consent for cookies, including a prohibition on pre-checked consents and a requirement

to obtain separate consents for each type of cookie or similar technology. Recent European court and

regulator decisions are driving increased attention to cookies and similar tracking technologies. As a

result, we may have to develop alternative means to determine our customers' behavior, customize their

online experience or efficiently market to them if customers block cookies or if additional barriers to

collecting data via cookies or other tracking technologies are introduced via laws, regulations, or providers

of consumer devices or web browsers. The regulation of the use of these cookies and other current online

tracking and advertising practices or a loss in our ability to make effective use of services that employ

such technologies could increase our costs of operations and limit our ability to acquire new customers on

cost-effective terms and, consequently, adversely affect our business, financial condition, results of

operations and future prospects.

The implementation of these laws and regulations requires continuous updates to our data

management practices, systems and processes to ensure compliance and, as a result, we may not at all

times be fully and technically compliant with such regulations. We have in the past, and may in the future,

receive complaints or notifications from third parties alleging that we have violated applicable data privacy

and cybersecurity laws and regulations. Noncompliance, or perceived noncompliance, with these laws has

in the past, and may in the future, lead to regulatory investigations, legal actions and proceedings against

us by governmental entities, consumers, data subjects or others, penalties and reputational damage. For

example, in 2025, we received 33 reprimands from the Swedish Data Protection Authority in relation to our

failure to handle data subject rights requests and ensure security of personal data in accordance with EU

GDPR requirements, and in 2022, we were fined SEK 7.5 million ($0.7 million) by the Swedish Data

Protection Authority for inadequacies in our privacy notice, which allegedly resulted in violations of data

subjects' right to information under the EU GDPR. In addition, we are presently subject to two ongoing

investigations by the Swedish Data Protection Authority relating to, in one case, our processes for verifying

an individual's identity when a data subject access request is submitted and, in the other case, our use of

tracking technologies to pre-fill forms for returning customers. As a result of these ongoing investigations,

we may be subject to reputational harm, regulatory fines or other penalties, or orders to cease or change

our data processing activities in a manner that would be adverse to our business or require us to incur

substantial costs.

As our network and operations continue to expand, we must adapt to a diverse array of data privacy

and cybersecurity laws and regulations, each with its own requirements and enforcement practices. This

diversity leads to increased compliance costs and operational risks, as well as potential consumer

confusion and reluctance to provide necessary data. In addition, compliance with obligations imposed by

data privacy and cybersecurity legislation requires investment in appropriate technical or organizational

KLARNA GROUP PLC55

measures designed to safeguard the rights and freedoms of data subjects. Such investment may result in

significant costs to our business and may require us to modify certain of our business practices. Moreover,

enforcement actions, investigations and the imposition of substantial fines and penalties by regulatory

authorities as a result of data privacy and cybersecurity violations have increased over the past several

years. For instance, violations of the EU GDPR or U.K. GDPR can result in fines up to €20.0 million/£17.5

million or 4% of annual global revenue, whichever is higher. Since we are under the supervision of relevant

data protection authorities in both the EEA and the U.K., we may be fined under both the EU GDPR and U.K.

GDPR for the same violation. In addition to fines, a breach of the EU GDPR or U.K. GDPR may result in

regulatory investigations, reputational damage, orders to cease or change our data processing activities,

enforcement notices, assessment notices for a compulsory audit and/or civil claims, including class

actions.

While we strive to publish and prominently display privacy policies that are accurate and

comprehensive, and enter into data processing agreements with all third-party providers who process

personal information on our behalf in compliance with applicable laws, regulations, rules and standards,

these laws, regulations, rules and standards are in some cases relatively new and the interpretation and

application of these laws, regulations, rules and standards are uncertain, and we cannot ensure that our

privacy policies, data processing agreements and other statements regarding our practices will be

sufficient to protect us from claims, proceedings, liability or adverse publicity relating to data privacy or

cybersecurity. In addition, although we endeavor to comply with our privacy policies and ensure that our

third-party providers comply with our data processing agreements, as applicable, we may at times fail to

do so or be alleged to have failed to do so. The publication of our privacy policies and other

documentation that provide promises and assurances about data privacy and cybersecurity can subject

us to potential government or legal action if they are found to be deceptive, unfair or not representative of

our actual practices. Any concerns about our data privacy and cybersecurity practices, even if unfounded,

could damage our reputation and adversely affect our business.

Any failure or perceived failure by us or our third-party providers to comply with our privacy policies,

or applicable data privacy and cybersecurity laws, regulations, rules, standards or contractual obligations,

or any compromise of security that results in unauthorized access to, or unauthorized loss, destruction,

use, modification, acquisition, disclosure, release or transfer of personal information, may result in

requirements to modify or cease certain operations or practices, the expenditure of substantial costs, time

and other resources, proceedings or actions against us, legal liability, governmental investigations,

enforcement actions, claims, fines, judgments, awards, penalties, sanctions and costly litigation, including

class actions. Any of the foregoing could harm our reputation, distract our management and technical

personnel, increase our costs of doing business, adversely affect the demand for our solutions, products

and services, cause the loss of customer trust and result in legal liability, any of which could adversely

affect our business, financial condition, results of operations and future prospects.

**We or our third-party providers may fail to protect confidential information, including personal information,** 

**and/or experience data breaches and other cybersecurity incidents.**

We rely on computer systems, hardware, software, technology infrastructure and online sites and

networks for both internal and external operations that are critical to our business (collectively, "IT

Systems"). We own and manage some of these IT Systems but also rely on third parties for a range of IT

Systems and related products and services. We and certain of our third-party providers engage in the

collection, storage, transmission and other processing of customers' personal information, including

names, addresses, identification numbers, account numbers, account balances and loan positions, as well

as proprietary information belonging to our business, such as trade secrets (collectively, "Confidential

Information"). Although we devote considerable efforts, time and resources to our cybersecurity program,

including adhering to industry-recognized frameworks and standards, employing regular IT Systems

monitoring and audits and providing training to our employees, we cannot eliminate all risks from data

breaches and other cybersecurity incidents or provide assurances that we have not experienced in the

past, or will not experience in the future, an undetected data breach or other cybersecurity incident.

KLARNA GROUP PLC56

We face numerous and evolving cybersecurity risks that threaten the confidentiality, integrity and

availability of our IT Systems and Confidential Information. Our IT Systems have in the past been, and in

the future may be, vulnerable to data breaches and other cybersecurity incidents, and third parties may

be able to access our customers' Confidential Information, including card data, that is stored on or

accessible through those systems. These data breaches and cybersecurity incidents have included, or

may in the future include, among other things: viruses, malware or other malicious code, ransomware,

software bugs, deceptive social engineering campaigns (also known as "phishing" or "spoofing"), credential

stuffing, account takeovers, loss or theft of assets, employee errors or malfeasance, third-party errors or

malfeasance, as well as system and network failures and other similar cybersecurity events, which could

result in the loss of, unauthorized access to or disclosure of, or the misuse or misappropriation of,

Confidential Information. In addition, our security measures have in the past been breached, and may in

the future be breached, due to human error, accidental technological failures, system errors or

vulnerabilities or other irregularities. Further, many of our employees regularly work remotely or in

coworking shared spaces, which has caused, and may cause in the future, heightened vulnerability to data

breaches and other cybersecurity incidents. Additionally, integration of AI in our or any of our service

providers' operations, products, services or solutions is expected to pose new or unknown cybersecurity

risks and challenges. If our or our third-party providers' protection efforts are unsuccessful and our

systems or product, services or solutions are compromised, our business, financial condition and results of

operations may be adversely affected. Because our solutions, products and services may be integrated

with our customers' systems and processes, circumvention or failure of our cybersecurity defenses or

measures could compromise the confidentiality, integrity and availability of our customers' own IT Systems

and/or our customers' Confidential Information.

An increasing number of organizations, including large customers and businesses, other large financial

technology companies and financial and government institutions, have disclosed data breaches and other

cybersecurity incidents, some of which have involved sophisticated and highly targeted attacks, including

on portions of their websites, networks or infrastructure, or those of third parties who provide services to

them. Cybersecurity risks for financial and technology companies such as ours have significantly

increased recently, in part because of new technologies, the use of the internet and telecommunications

technologies (including mobile devices) to conduct financial and other business transactions, and the

increased sophistication and activities of organized crime, hackers, terrorists and other external parties,

including foreign state and state-supported actors.

The techniques used to obtain unauthorized, improper or illegal access to our systems, our data or our

customers' data, to disable or degrade service, or to sabotage systems are constantly evolving, may be

difficult to detect quickly and often are not recognized until launched against a target. Such threats may

see their frequency increased and effectiveness enhanced by the use of AI. Unauthorized parties may

attempt to gain access to our systems or facilities through various means, including, among others,

hacking into our systems or those of our customers, partners or vendors, attempting to fraudulently induce

our employees, customers, partners, vendors or other users of our systems to disclose usernames,

passwords, payment card information or other sensitive information, which may in turn be used to access

our IT Systems, or installing malicious software. Certain efforts may be supported by significant financial

and technological resources, making them even more sophisticated and difficult to detect. As a result, we

may be unable to detect, investigate, remediate or recover from future attacks or incidents, or to avoid an

adverse impact to our IT Systems, Confidential Information or business. Further, these risks may be

heightened in connection with ongoing global conflicts such as Russia's invasion of Ukraine or the conflict

in Israel and the Gaza Strip. As these threats continually evolve, we may be required to devote substantial

additional resources to modify or enhance our operational or security systems and networks and our

cybersecurity program. We believe that we are likely to continue to be a target of such threats and attacks.

For example, we have been subject to incidents relating to human errors that have resulted in the

accidental disclosure of personal information to third parties, and third-party cyberattacks on our and our

vendor IT Systems. Although these incidents have not materially impacted our reputation, business,

financial condition or results of operations, we cannot guarantee that such a cyberattack or incident will

not occur in the future and have a material impact on our business. Due to the size and complexity of our

KLARNA GROUP PLC57

technology network and services, the amount of personal information and other data that we store and the

number of customers, merchants, partners, employees and third-party providers with access to personal

information and other data, we may be the target of a variety of intentional and inadvertent cybersecurity

incidents and threats, which could adversely affect our reputation, business, financial condition, results of

operations and future prospects.

We have developed systems and processes that are designed to protect our networks, applications,

accounts and the confidentiality, integrity and availability of data and our IT Systems and to prevent data

loss and other cybersecurity incidents and we expect to continue to expend significant additional

resources to bolster these protections. At the same time, these security measures cannot provide

absolute security and there can be no assurance that our safety and security measures (and those of our

third-party providers) will detect or prevent a data breach, other cybersecurity incident or other instances

of unauthorized disclosure of confidential information, or be effective in protecting our IT Systems and

Confidential Information.

Any actual or perceived data breaches, other cybersecurity incidents or similar incidents of

unauthorized disclosure of confidential information experienced by us or our third-party service providers

could interrupt our operations, result in our systems or services being unavailable, result in the loss,

compromise corruption or improper disclosure of data, including personal information, subject us to

regulatory or administrative investigations and orders, litigation (including class actions), disputes,

sanctions, indemnity obligations, damages for contract breach or penalties for violation of applicable laws

or regulations including restoration or remediation costs, impair our ability to provide our solutions and

meet our customers' requirements, materially harm our reputation and brand, result in significant legal and

financial exposure (including customer claims), lead to loss of customer confidence in, or decreased use

of, our products and services, and adversely affect our business, financial condition and results of

operations. In addition, data breaches and other cybersecurity incidents at our customers, merchants,

partners or third-party service providers (including data center and cloud computing providers) could have

similar negative effects. We could be forced to expend significant financial and operational resources in

response to a cybersecurity incident, including repairing system damage, increasing security protection

costs by deploying additional personnel and modifying or enhancing our protection technologies,

investigating and remediating any information security vulnerabilities and defending against and resolving

legal and regulatory claims, all of which could divert resources and the attention of our management and

key personnel and materially and adversely affect our business, financial condition, results of operations

and future prospects.

Specifically, because we leverage third-party providers, including cloud, software, data center and

other critical technology vendors to deliver our solutions to our customers, we rely heavily on the

cybersecurity technology practices and policies adopted by these third-party providers. Such third-party

providers have access to personal information and other data about our customers and employees, and

some of these providers in turn subcontract with other third-party providers. While we generally perform

cybersecurity diligence on our key third-party providers, we do not control our third-party providers, and

our ability to monitor their cybersecurity measures is limited. Some of our third-party providers may store

or have access to our data and may not have effective controls, processes, or practices to protect our

information from data breaches or other cybersecurity incidents. A vulnerability in a third-party provider's

software or systems, a failure of our third-party providers' safeguards, policies or procedures, or a breach

of a third-party provider's software or systems could result in the compromise of the confidentiality,

integrity or availability of our systems or the data housed in our third-party solutions. Due to applicable

laws and regulations or contractual obligations, we may be held responsible for data breaches or other

cybersecurity incidents attributed to our service providers as they relate to the information we share with

them.

Many jurisdictions have enacted laws requiring companies to notify individuals, regulatory authorities

and others of cybersecurity incidents involving certain types of data or IT systems or of other instances of

unauthorized or inadvertent disclosure of confidential information, including personal information.

Assessing our notification obligations following such incidents may require costly investigative resources

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and complicated decision-making based on incomplete information, often within limited periods of time.

We experienced in the past, and may experience in the future, cybersecurity incidents or other instances

of unauthorized or inadvertent disclosure of confidential information after which we notified affected

individuals, regulatory authorities or other authorities based on the information available at the time.

Although we strive to comply with our notification obligations following such incidents, we may fail, or be

alleged to have failed, to do so in the prescribed manner and/or timeframe, or at all. Any such actual or

alleged failure may expose us to increased liability or negative publicity. Cybersecurity incidents or other

instances of unauthorized or inadvertent disclosure of confidential information experienced by us, our

customers, third-party service providers or other companies in our industry may similarly lead to public

disclosures and widespread negative publicity, which, in turn, could erode customer confidence in the

effectiveness of our security measures or those employed by our counterparties or our industry in general.

This, in turn, could negatively impact our ability to attract new customers, cause existing customers to

elect not to renew or expand their use of our network, services and products or subject us to third-party

lawsuits, regulatory fines or other actions or liabilities, any of which could adversely affect our business,

financial condition, results of operations and future prospects.

Likewise, agreements with our bank partners, service providers and other third parties may require us

to notify them in the event of a cybersecurity incident. Such mandatory disclosures are costly, could lead

to negative publicity, may cause our customers to lose confidence in the effectiveness of our security

measures and require us to expend significant capital and other resources to respond to and alleviate

problems caused by the actual or perceived cybersecurity incident. Further, a data breach or other

cybersecurity incident impacting us or one of our critical vendors, or system unavailability or damage due

to other circumstances, may give rise to a merchants', partners' and other third parties' right to terminate

their contract with us. In these circumstances, it may be difficult or impossible to cure such a breach in

order to prevent third parties from potentially terminating their contracts with us. Furthermore, although

our third-party contracts typically include limitations on our potential liability, we cannot guarantee that

such limitations of liability would be adequate or enforceable.

Additionally, although we maintain insurance policies covering cybersecurity incidents, such policies

may not be adequate to reimburse us for losses caused by cybersecurity incidents, and we may not be

able to collect fully, if at all, under these policies. We cannot ensure that such insurance will continue to be

available to us on commercially reasonable terms, or at all, or that our insurers will not deny coverage with

respect to any particular incident. The successful assertion of one or more large claims against us that

exceed available insurance coverage, or the occurrence of changes in our insurance policies, including

premium increases in or the imposition of large deductible or coinsurance requirements, could adversely

affect our business, financial condition, results of operations and future prospects.

**Risks Related to the Ownership of Our Ordinary Shares** 

**An active trading market for our ordinary shares may not be sustained.** 

It is possible that an active trading market for our ordinary shares will not be sustained, which would

make it difficult for you to sell your ordinary shares at an attractive price or at all.

**The market price of our ordinary shares may be volatile.** 

The market price of our ordinary shares may be highly volatile and could be subject to wide

fluctuations. In addition, the trading volume in our ordinary shares may fluctuate and cause significant

price variations to occur. Securities markets worldwide experience significant price and volume

fluctuations. Such market volatility, as well as general economic, market and political conditions, and/or

the short selling of our stock could reduce the market price of our ordinary shares in spite of our operating

performance. In addition, our results of operations could be below the expectations of public market

analysts and investors due to a number of potential factors, including variations in our results of

operations, additions or departures of key management personnel, the loss of key funding sources or

merchants and changes in our earnings estimates (if provided). Also, the publication of research reports

KLARNA GROUP PLC59

about our industry, litigation and government investigations, changes or proposed changes in laws or

regulations or differing interpretations or enforcement thereof affecting our business, adverse market

reaction to any indebtedness we may incur or securities we may issue in the future, changes in market

valuations of similar companies or speculation in the press or the investment community with respect to

us or our industry, adverse announcements by us or others and developments affecting us,

announcements by our competitors of significant contracts, acquisitions, dispositions, strategic

partnerships, joint ventures or capital commitments, actions by institutional shareholders and increases in

market interest rates that may lead investors in our ordinary shares to demand a higher yield could result

in the significant decrease of the market price of our ordinary shares. As a result, you may be unable to

resell your ordinary shares at or above the price you paid for them or at all.

These broad market and industry factors may decrease the market price of our ordinary shares,

regardless of our actual operating performance. The stock market in general has, from time to time,

experienced extreme price and volume fluctuations. In addition, following periods of volatility in the overall

market and the market price of our ordinary shares, securities class action litigation has been instituted

against us, and may in the future be instituted against us. Such litigation could result in substantial costs

and a diversion of our management's attention and resources.

**The multi-class structure of our share capital has the effect of concentrating voting control with those** 

**shareholders who held our share capital immediately prior to the Company's initial public offering, including our** 

**Co-Founder and Chief Executive Officer, which will limit your ability to influence the outcome of matters** 

**submitted to our shareholders for approval, may result in additional future dilution of your voting and economic** 

**power and may adversely affect the value of your ordinary shares.**

Each ordinary share is entitled to one vote per share and to ratably participate in dividends that we

may pay in the future as well as our assets remaining upon our liquidation, dissolution or winding up. Each

Class B share is entitled to ten votes per share but has no dividend or other effective economic rights. We

may also issue Class C shares to Sebastian Siemiatkowski, our Co-Founder and Chief Executive Officer,

and to certain related and affiliated persons of Mr. Siemiatkowski, their respective nominees and a

depositary service. Each Class C share will be entitled to ten votes per share and to ratably participate in

dividends and our assets remaining upon our liquidation, dissolution or winding up but only to half the

extent of one ordinary share (on a per share basis). We will not issue any Class C shares in the number that

would make the voting rights corresponding to all such Class C shares outstanding at any time exceed 15%

of the voting rights corresponding to all of our shares outstanding immediately prior to our initial public

offering. Our Class C shares cannot be transferred, other than in specified circumstances to certain

related and affiliated persons of Mr. Siemiatkowski, their respective nominees and a depositary service.

Class C shares can also be issued upon the exercise of Class C options that have been, and may in the

future be, granted to Mr. Siemiatkowski. Mr. Siemiatkowski may elect to acquire, in his discretion, either

ordinary shares or Class C shares upon the exercise of such Class C options.

In addition, Class C shares will be redesignated into ordinary shares and deferred shares: (i) at the

election of the holder; (ii) if they are transferred (other than in permitted circumstances); (iii) if Mr.

Siemiatkowski and his related or affiliated persons cease to beneficially own the relevant Class C shares;

(iv) if Mr. Siemiatkowski ceases to provide services to us; and (v) in other specified circumstances. All Class

C shares will also automatically redesignate after 20 years from the Company's initial public offering. In

each case, every two Class C shares will redesignate into one ordinary share and one deferred share.

As of December 31, 2025, the Company has a multi-class share capital structure consisting of ordinary

shares and Class B shares. The Class B shares carry ten votes per share, while the ordinary shares carry

one vote per share. As a result of this voting structure, holders of Class B shares exercise a

disproportionate level of voting control relative to their economic ownership.

As of December 31, 2025, the Company's shareholders holding Class B shares collectively represent

approximately 98.65% of the combined voting power of the Company's outstanding ordinary shares and

Class B shares. In addition, the Company's directors, executive officers, and holders of 5% or more of any

KLARNA GROUP PLC60

class of the Company's voting securities, together with their respective affiliates, collectively hold

approximately 51.22% of the combined voting power of the Company's outstanding ordinary shares and

Class B shares. The release from lock-up of Klarna's ordinary shares on March 9, 2026 may result in a

significant portion of B shares being redesignated, thereby increasing the relative control of the remaining

shareholders holding B shares.

Due to the ten-to-one voting ratio between the Class B shares and the ordinary shares, holders of

Class B shares are able to control a majority of the combined voting power of the Company's share capital

and therefore have the ability to control the outcome of matters submitted to shareholders for approval,

including the election of directors and significant corporate transactions.

Based on the number of ordinary shares and Class B shares outstanding as of December 31, 2025, and

assuming no issuances of additional ordinary shares or Class C shares after that date, approximately

90.4% of the ordinary shares currently held by shareholders who also hold Class B shares would need to

be sold or otherwise transferred in transactions that result in the corresponding forfeiture of Class B

shares for such shareholders to collectively cease to hold a majority of the Company's voting power.

In addition, future issuances of Class C shares (including following the exercise of Class C options) to

Mr. Siemiatkowski and his related and affiliated parties may further concentrate control in the hands of

shareholders who held our shares prior to the Company's initial public offering. This concentrated control

may limit or preclude your ability to influence corporate matters for the foreseeable future, including the

election of our directors, amendments of our organizational documents, and any merger, consolidation,

sale of all or substantially all of our assets or other major corporate transaction requiring shareholder

approval. In addition, our multi-class share capital structure may prevent or discourage unsolicited

acquisition proposals or offers for our share capital that you may feel are in your best interests as one of

our shareholders.

Certain transfers of interests in our ordinary shares by holders of our Class B shares or their affiliates

will result in a related number of Class B shares converting to deferred shares with no voting or effective

economic rights, subject to limited exceptions noted above and set forth in our amended and restated

articles of association. The conversion of our Class B shares to deferred shares will have the effect, over

time, of increasing the relative voting power of those holders of our Class B shares who retain their

ordinary shares in the long term. Consequently, it is possible that one or more of the persons or entities

holding our Class B shares could gain significant voting control as other holders of our Class B shares sell

their ordinary shares. In addition, future issuances of Class C shares (including following the exercise of

options to acquire Class C shares) to Mr. Siemiatkowski and his related and affiliated parties would further

increase his relative voting power, in particular following the redesignation of Class B shares held by our

other shareholders. Any concentrated control in the hands of one or several of our shareholders, including

Mr. Siemiatkowski, may have the effect of delaying, preventing or deterring a change in control of our

company, could deprive our shareholders of an opportunity to receive a premium for their ordinary shares

as part of our sale and might ultimately affect the market price of our ordinary shares. Further, the

separation between voting power and economic interests could cause conflicts of interest between our

pre-IPO shareholders, including Mr. Siemiatkowski, and our other shareholders, which, subject to

applicable law, may result in our pre-IPO shareholders undertaking, or causing us to undertake, actions

that would be desirable for them but would not be desirable for our other shareholders. Finally, future

issuances of Class C shares, including following the exercise of Class C options, would also dilute the

economic and voting rights of our then-existing shareholders.

**As a foreign private issuer, we are subject to different U.S. securities laws and rules than a domestic U.S.** 

**issuer, which may limit the information publicly available to our shareholders.**

As a foreign private issuer, we are subject to different disclosure and other requirements than

domestic U.S. registrants and non-emerging growth companies. For example, as a foreign private issuer, in

the United States, we are not subject to the same disclosure requirements as a domestic U.S. registrant

under the Exchange Act, including the requirements to prepare and issue quarterly reports on Form 10-Q

KLARNA GROUP PLC61

or to file current reports on Form 8-K upon the occurrence of specified significant events, the proxy rules

applicable to domestic U.S. registrants under Section 14 of the Exchange Act or short-swing profit rules

applicable to domestic U.S. registrants under Section 16 of the Exchange Act. In addition, we intend to rely

on exemptions from certain U.S. rules which will permit us to follow U.K. legal requirements rather than

certain of the requirements that are applicable to U.S. domestic registrants.

Furthermore, foreign private issuers are required to file their annual report on Form 20-F within 120

days after the end of each fiscal year, while U.S. domestic issuers that are large accelerated filers are

required to file their annual report on Form 10-K within 60 days after the end of each fiscal year. Foreign

private issuers are also exempt from Regulation Fair Disclosure, aimed at preventing issuers from making

selective disclosures of material information. As a result of the above, even though we are required to file

reports on Form 6-K disclosing the limited information which we have made or are required to make public

pursuant to English law, or are required to distribute to shareholders generally, and that is material to us,

you may not receive information of the same type or amount that is required to be disclosed to

shareholders of a U.S. company.

Moreover, we are not required to file periodic reports and financial statements with the SEC as

frequently or within the same timeframes as U.S. companies with securities registered under the Exchange

Act. We currently prepare our financial statements in accordance with IFRS. We will not be required to file

financial statements prepared in accordance with or reconciled to U.S. GAAP so long as our financial

statements are prepared in accordance with IFRS as issued by the IASB. We cannot predict if investors will

find our ordinary shares less attractive because we will rely on these exemptions. If some investors find

our ordinary shares less attractive as a result, the market for our ordinary shares may be less active or

more volatile.

We are subject to various change-in-control or similar regimes, which may require investors or us to

obtain certain regulatory approvals prior to completing changes in our shareholdings, control or corporate

structure.

Investors may be required to obtain various regulatory consents or permissions, or comply with

additional requirements and procedures, before acquiring significant interest in, or control over, directly or

indirectly, certain of our regulated subsidiaries, including Klarna Bank. It is generally expected that any

investor proposing to acquire more than 9.99% of our ordinary shares or voting power, directly or

indirectly, or proposing to increase its existing holdings above any of the thresholds of 10%, 20%, 30% or

50%, would likely be required, by virtue of us controlling a number of regulated entities, to obtain approval

from multiple regulators in different jurisdictions, including from regulators that may not currently

supervise us or any of our subsidiaries (as a result of, for example, changes in applicable laws and

regulations, internal reorganization, our future expansion into additional geographies or offerings, or

acquisitions of new regulated entities). For example, the Financial Services and Markets Act of 2000

generally provides that prior approval from the FCA must be obtained in connection with any transaction

resulting in a person or an entity holding, directly or indirectly, 10% or more of the equity or voting power of

a U.K. authorized person or the parent of a U.K. authorized person. Therefore, for so long as we remain the

parent entity of KFSUK, our U.K. authorized subsidiary subject to the FCA supervision, any person wanting

to acquire 10% or more of our shares will need to first obtain authorization from the FCA. Any failure to do

so could subject the acquirer to various penalties, including criminal ones. Similar restrictions and

limitations also apply to us because we control a number of licensed entities in the United States and in

the EEA that are subject to regulatory oversight and supervision by various regulatory agencies in such

jurisdictions. At the same time, the restrictions discussed above may limit our flexibility in managing our

corporate structure, including with respect to disposition of our regulated subsidiaries, which could

adversely affect our business, financial condition, results of operations and future prospects.

KLARNA GROUP PLC62

**We may lose our foreign private issuer status, which would then require us to comply with the Exchange** 

**Act's domestic reporting regime and cause us to incur additional legal, accounting and other expenses.**

In order to maintain our current status as a foreign private issuer, either (a) more than 50% of the

voting power of all our outstanding classes of voting securities (on a combined basis) must be either

directly or indirectly owned of record by nonresidents of the United States or (b)(1) a majority of our

executive officers or directors must not be U.S. citizens or residents, (2) more than 50% of our assets

cannot be located in the United States and (3) our business must be administered principally outside the

United States. In addition, the SEC has recently undertaken a review and consultation regarding the

definition of "foreign private issuer" and the regulatory framework applicable to such issuers. As part of

this review, the SEC has indicated that it is evaluating whether the current eligibility criteria appropriately

reflect the characteristics of issuers that qualify for foreign private issuer status and whether

modifications to the definition or related requirements may be warranted. Any changes to the applicable

rules or interpretive guidance, including changes that narrow the availability of foreign private issuer status

or impose additional conditions on eligibility, could result in our loss of such status, even if our current

ownership, governance and operational profile were to remain substantially unchanged. If we lose this

status, we would be required to comply with the Exchange Act reporting and other requirements

applicable to U.S. domestic issuers, which are more extensive than the requirements for foreign private

issuers. We may also be required to make changes in our corporate governance practices in accordance

with various SEC and NYSE rules. The regulatory and compliance costs to us under U.S. securities laws if

we are required to comply with the reporting requirements applicable to a U.S. domestic issuer may be

significantly higher than the costs we will incur as a foreign private issuer. These costs will relate to, among

other things, the obligation to present our financial information in accordance with U.S. GAAP in the future.

**The rights of our shareholders may differ from the rights typically offered to shareholders of a U.S.** 

**corporation.**

We are incorporated under the laws of England and Wales. The rights of holders of our ordinary shares

are governed by English law, including the provisions of the Companies Act, and by our articles of

association. As a result, the rights of our shareholders and the responsibilities of members of our board of

directors may be different from the rights of shareholders and responsibilities of directors in companies

governed by the laws of U.S. jurisdictions.

**As an English public limited company, certain capital structure decisions will require shareholder approval,** 

**which may limit our flexibility to manage our capital structure.**

We are a public limited company incorporated under the laws of England and Wales. English law

provides that, subject to certain exceptions (including the allotment of shares, or the grant of rights to

subscribe for or convert any security into shares, in pursuance of an employees' share scheme), a board

of directors of a public limited company may only allot shares (or grant rights to subscribe for or convert

any security into shares) with the prior authorization of shareholders, such authorization stating the

aggregate nominal amount of shares that it covers and being valid for a maximum period of five years,

each as specified in the articles of association or relevant ordinary shareholder resolution passed by

shareholders at a general meeting.

English law also generally provides shareholders with preemptive rights when new shares are issued

for cash, except that such rights do not apply to the allotment of equity securities that would, apart from

any renunciation or assignment of the right to their allotment, be held under or allotted or transferred

pursuant to an employees' share scheme. However, it is possible for the articles of association, or for

shareholders to pass a special resolution at a general meeting, being a resolution passed by at least 75% of

the votes cast, to disapply preemptive rights. Such a disapplication of preemptive rights may be for a

maximum period of up to five years from the date of adoption of the articles of association if the

disapplication is contained in the articles of association, or from the date of the shareholder special

resolution, if the disapplication is by shareholder special resolution, but not longer than the duration of the

authority to allot shares to which the disapplication relates. In either case, this disapplication would need

KLARNA GROUP PLC63

to be renewed by our shareholders upon its expiration (i.e., at least every five years). We have obtained

authority from our shareholders to disapply preemptive rights for a period expiring on at the conclusion of

our annual general meeting to be held in 2026 (or, if earlier, on June 30, 2026), which disapplication will

need to be renewed upon expiration, but may be sought more frequently for additional five-year terms (or

for any shorter period). English law also generally prohibits a public company from repurchasing its own

shares without the prior approval of shareholders by ordinary resolution, being a resolution passed by a

simple majority of votes cast and other formalities. Such approval may be for a maximum period of up to

five years.

As a foreign private issuer we are permitted under New York Stock Exchange listing standards to follow

certain English home-country corporate governance practices in lieu of certain requirements applicable to

U.S. domestic issuers, which may result in our shareholders not receiving the same governance

protections as shareholders of companies subject to all NYSE corporate governance requirements.

The corporate governance rules of the NYSE require listed companies to have, among other things, a

majority of independent directors and independent director oversight of executive compensation,

nomination of directors and corporate governance matters. As a foreign private issuer, we are permitted to

follow home country practice in lieu of the above requirements. For as long as we choose to rely on the

foreign private issuer exemption to certain of the NYSE corporate governance standards, our board of

directors' approach to governance may be different from that of a board of directors of a U.S. domestic

company, and, as a result, the management oversight of our company may be more limited than if we were

subject to all of the NYSE corporate governance standards. While a majority of the directors on our board

of directors are independent directors, as long as we rely on the foreign private issuer exemption to

certain of the NYSE corporate governance standards, a majority of the directors on our board of directors

may not be required to be independent directors.

In addition, while we expect to voluntarily follow most NYSE corporate governance rules, we intend to

take advantage of certain exemptions, including, but not limited to, exemptions from:

• the requirement to obtain shareholder approval for certain issuances of securities, including

shareholder approval of equity compensation or purchase plans or other equity compensation

arrangements. We will follow English law with respect to any requirement to obtain shareholder approval in

connection with such issuances;

• the requirement that there be regularly scheduled meetings of only the independent directors at

least twice a year. There is no similar requirement under English law. As a result, our independent directors

may choose to meet in executive session at their discretion;

• the requirement to disclose within four business days any determination to grant a waiver of the

Code of Conduct (as defined herein) to directors and officers. While we intend to disclose any

amendments to our Code of Conduct, or waivers of its requirements, on our website or in public filings

under the Exchange Act, English law does not prescribe a specific timeline for such disclosure; and

• the quorum requirements applicable to meetings of shareholders. Such quorum requirements are

not prescribed by English law. In accordance with generally accepted business practice, our amended and

restated articles of association and the Companies Act provide alternative quorum requirements that are

generally applicable to meetings of shareholders.

We may utilize these exemptions for as long as we continue to qualify as a foreign private issuer.

Accordingly, our shareholders do not have the same protection afforded to shareholders of companies

that are subject to all of the NYSE corporate governance standards, and the ability of our independent

directors to influence our business policies and affairs may be reduced.

KLARNA GROUP PLC64

**Forum selection provisions included in our articles of association could limit investors' ability to obtain a** 

**favorable judicial forum for disputes with us or impose additional litigation costs on our shareholders.**

Our articles of association provide that the courts of England and Wales are the exclusive forum for

resolving all shareholder complaints other than shareholder complaints asserting a cause of action arising

under the Securities Act and the Exchange Act, and that the U.S. federal district courts are the exclusive

forum for resolving any shareholder complaint asserting a cause of action arising under the Securities Act

and the Exchange Act. Any person or entity purchasing or otherwise acquiring or holding any interest in

any of our securities shall be deemed to have notice of and consented to these provisions. However,

shareholders will not be deemed to have waived our compliance with U.S. federal securities laws and the

rules and regulations thereunder. These choice of forum provisions may limit a shareholder's ability to

bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other

employees, which may discourage such lawsuits. In particular, the courts of England and Wales and U.S.

federal district courts may also reach different judgments or results than would other courts, including

courts where a shareholder considering bringing a claim may be located or would otherwise choose to

bring the claim, and such judgments may be more or less favorable to us than our shareholders.

At the same time, similar forum provisions in other companies' organizational documents have been

challenged in legal proceedings and there is uncertainty as to whether courts would enforce the exclusive

forum provisions in our amended and restated articles of association. If a court were to find either choice

of forum provision contained in our articles of association to be inapplicable or unenforceable in an action,

we may incur additional costs associated with resolving such action in other jurisdictions, which could

adversely affect our business, financial condition, results of operations and future prospects.

**It may be difficult for you to obtain or enforce judgments or bring original actions against us or the members** 

**of our board of directors in the United States.**

The ability of holders of our ordinary shares to bring an action against us or the members of our board

of directors may be limited under law. We are a public limited company incorporated in England and Wales.

The rights of holders of our ordinary shares are governed by English law and by our articles of association.

The rights of holders of our ordinary shares differ from the rights of shareholders in typical U.S.

corporations and some other non-U.K. companies. In particular, English law currently significantly limits the

circumstances under which the shareholders of English companies may bring derivative actions. Under

English law, in most cases, only the company may be the proper plaintiff for the purposes of maintaining

proceedings in respect of wrongful acts committed against it and, generally, neither an individual

shareholder, nor any group of shareholders, has any right of action in such circumstances. English law

does not afford appraisal rights to dissenting shareholders in the form typically available to shareholders

in a U.S. company. In addition, it may not be possible for holders of the ordinary shares outside the United

Kingdom to enforce any judgments in civil or commercial matters or any judgments in securities laws of

countries other than the United Kingdom against some or all of our directors or executive officers who are

resident in the United Kingdom or countries other than those in which judgment is made.

In addition, most of our assets are not located in the United States. If proceedings are brought in the

courts of England or Wales seeking to enforce our obligations in respect of our ordinary shares, we may

not be required to discharge our obligations in a currency other than pounds. Under England and Wales

change control laws, an obligation in England and Wales to pay amounts denominated in a currency other

than pounds may only be satisfied in England and Wales currency at the exchange rate in effect on the

date the judgment is obtained, and such amounts are then typically adjusted to reflect exchange rate

variations and monetary restatements through the effective payment date. The then-prevailing exchange

rate may not afford non-English or non-Welsh investors with full compensation for any claim arising out of

or related to our obligations under our ordinary shares.

KLARNA GROUP PLC65

**Substantial future sales of our ordinary shares in the public market could cause the trading price of our** 

**ordinary shares to fall.**

Sales of a substantial number of our ordinary shares in the public market, or the perception in the

market that the holders of a large number of ordinary shares intend to sell their ordinary shares, could

decrease the market price of our ordinary shares and could impair our ability to raise capital through the

sale of additional equity securities. As of the date of this annual report, we have 377,507,910 ordinary

shares outstanding. 335,521,212 ordinary shares are currently restricted as a result of securities laws or

lock-up agreements but will become eligible to be sold on or after March 9, 2026.

All ordinary shares that have been issued since our initial public offering under our equity

compensation plans are registered under a registration statement on Form S-8. They can be freely sold in

the public market upon issuance, subject to volume limitations applicable to affiliates and any the lock-up

agreements.

All of the potential sales described above could cause the trading price of our ordinary shares to fall

and make it more difficult for you to sell ordinary shares.

**The issuance by us of additional equity securities, including Class C shares, may dilute your ownership and** 

**adversely affect the market price of our ordinary shares.**

Our articles of association authorize us to issue ordinary shares and rights relating to our ordinary

shares for the consideration and on the terms and conditions established by our board of directors in its

sole discretion, whether in connection with acquisitions, partnership agreements with merchants, or

otherwise. In addition, for five years following our initial public offering, we may issue to Mr. Siemiatkowski

(and his related and affiliated parties) Class C shares, including as a result of the exercise of Class C

options pursuant to which he can elect to acquire, in his discretion, either ordinary shares or Class C

shares upon the exercise of such Class C options. Any ordinary shares or Class C shares that we issue,

including under any equity incentive plans that we may adopt in the future, would dilute the percentage

ownership held by other investors.

In the future, we may attempt to obtain financing or to further increase our capital resources by issuing

additional ordinary shares or securities convertible into our ordinary shares or offering debt or other

securities. We could also issue our ordinary shares or securities convertible into our ordinary shares or

debt or other securities in connection with acquisitions or other strategic transactions. Issuing additional

ordinary shares, Class C shares or securities convertible into our ordinary shares or debt or other

securities may dilute the economic and voting rights of our then-existing shareholders and would likely

reduce the market price of our ordinary shares. Upon liquidation, holders of debt securities and preferred

shares, if issued, and lenders with respect to other borrowings would receive a distribution on our

distributable assets prior to the holders of our ordinary shares. Debt securities convertible into equity

securities could be subject to adjustments in the conversion ratio pursuant to which certain events may

increase the number of equity securities issuable upon conversion. Preferred shares, if issued, could have

a preference with respect to liquidating distribution or preferences with respect to dividend payments that

could limit our ability to pay dividends to the holders of our ordinary shares. Our decision to issue

securities in any future offering will depend on market conditions and other factors beyond our control,

which may adversely affect the amount, timing and nature of our future offerings. As a result, holders of

our ordinary shares bear the risk that our future offerings may reduce the market price of our ordinary

shares and dilute their shareholdings in us.

Furthermore, if any of our outstanding warrants are exercised or outstanding RSUs are vested, if we

issue awards to our employees under our equity incentive plans, or if we otherwise issue additional

ordinary shares, you could experience further dilution.

KLARNA GROUP PLC66

**We may not pay any cash dividends in the foreseeable future.**

We have never declared or paid cash dividends on our capital shares. Under current English law, a

company's accumulated realized profits, so far as not previously utilized by distribution or capitalization,

must exceed its accumulated realized losses so far as not previously written off in a reduction or

reorganization of capital duly made (on a nonconsolidated basis), before dividends can be paid. Therefore,

we must have distributable profits before issuing a dividend. In the future, our board of directors may

decide, in its discretion, whether dividends may be declared and paid. As a result, capital appreciation, if

any, on our ordinary shares may be your sole source of gains, and you will suffer a loss on your investment

if you are unable to sell your ordinary shares at or above the price paid when acquiring them. We currently

intend to retain any future earnings to finance the operation and expansion of our business, and we do not

expect to declare or pay any dividends for the foreseeable future.

**Requirements associated with being a public company in the United States will require significant resources** 

**and management attention.**

As a public company in the United States, we have incurred, and expect to continue to incur,

significant legal, accounting, reporting and other expenses that we have not incurred to date, including

costs associated with public company reporting requirements. We also have incurred, and will continue to

incur, costs associated with compliance with the rules and regulations of the SEC, the listing requirements

of the NYSE and various other costs of a public company. The expenses generally incurred by public

companies for reporting and corporate governance purposes have been increasing. These rules and

regulations may increase our legal and financial compliance costs and make some activities more time-

consuming and costly, although we are currently unable to estimate these costs with any degree of

certainty. Our management will need to devote a substantial amount of time to ensure that we comply with

all of these requirements. These laws and regulations also could make it more difficult and costly for us to

obtain certain types of insurance, including director and officer liability insurance, and we may be forced

to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or

similar coverage. These laws and regulations could also make it more difficult to attract and retain

qualified persons to serve on our board of directors and board committees and serve as executive

officers. Furthermore, if we are unable to satisfy our obligations as a public company, we could be subject

to delisting of our ordinary shares, fines, sanctions and other regulatory action and potentially civil

litigation.

**The multi-class structure of our share capital may adversely affect the trading market for our ordinary** 

**shares.**

Certain stock index providers have excluded companies with multiple classes of shares from being

added to their stock indices. Accordingly, the multi-class structure of share capital would make us

ineligible for inclusion in indices with such restrictions and, as a result, mutual funds, exchange-traded

funds and other investment vehicles that attempt to passively track those indices may not invest in our

ordinary shares. In addition, several stockholder advisory firms and large institutional investors have been

critical of the use of multi-class structures. Such advisory firms may publish negative commentary about

our corporate governance practices or our capital structure, which may dissuade large institutional

investors from purchasing our ordinary shares. These actions could make our ordinary shares less

attractive to other investors and may adversely affect the market for our ordinary shares, including their

price.

**If securities and industry analysts do not publish research or publish inaccurate or unfavorable research** 

**about our business, the price and trading volume of our ordinary shares could decline.**

The trading market for our ordinary shares depends, in part, on the research and reports that

securities and industry analysts publish about us and our business. While we are currently covered by

several securities and industry analysts, they may cease to do so in the future . If securities and industry

analysts do not cover our company, the price of our ordinary shares would likely be negatively impacted. In

KLARNA GROUP PLC67

the event securities or industry analysts initiate coverage, if one or more of the analysts who cover us

downgrade our ordinary shares or publish inaccurate or unfavorable research about our business, the

price of our ordinary shares would likely decline. If one or more of these analysts cease coverage of our

company or fail to publish reports on us regularly, demand for our ordinary shares could decrease, which

might cause the price and trading volume of our ordinary shares to decline.

**There can be no assurance that we will not be a passive foreign investment company for U.S. federal income** 

**tax purposes ("PFIC") for the current or any future taxable year, which could subject U.S. investors in our** 

**ordinary shares to significant adverse U.S. federal income tax consequences.**

We will be a PFIC for any taxable year in which (i) 75% or more of our gross income consists of passive

income or (ii) 50% or more of the value of our assets (generally determined on a quarterly average basis)

consists of assets that produce, or are held for the production of, passive income. For purposes of these

tests, passive income generally includes dividends, interest (including interest-equivalent income or other

amounts treated as interest), gains from the sale or exchange of investment property and certain rents and

royalties. Cash and cash equivalents are generally passive assets for these purposes. In addition, for

purposes of the above calculations, a non-U.S. corporation that directly or indirectly owns at least 25% by

value of the shares of another corporation is treated as holding its proportionate share of the assets, and

receiving directly its proportionate share of the income, of such other corporation.

Based upon the estimated value of our assets, the nature and composition of our income and assets

and the application of an exception applicable to certain banks (under which interest, income equivalent

to interest and certain other types of income earned by certain banks are treated as active for purposes of

the PFIC rules), we do not believe we were a PFIC with respect to our taxable year ended December 31,

2025. However, our PFIC status for any taxable year is an annual determination that cannot be made until

after the end of that year and will depend on the composition of our income and assets and the value of

our assets from time to time, as well as our qualification for the active banks exception described above,

which is pursuant to proposed Treasury regulations. Although under current IRS guidance these proposed

Treasury regulations can be relied upon prior to their finalization, there is no assurance that such

proposed Treasury regulations will be finalized in their current form. In addition, the qualification of certain

of our income and assets as active under the active banks exception is not entirely clear, and there is no

assurance that the IRS will agree with our classification of such items as active, in which case we may be

treated as a PFIC. Furthermore, we may be a PFIC if in the future we generate a significant amount of

interest income, or other income treated as interest for U.S. federal income tax purposes, other than

through Klarna Bank. Moreover, the total value of our assets (including goodwill and other intangibles) may

be determined, in part, by reference to the market price of our ordinary shares from time to time, which

may fluctuate. Accordingly, if our market capitalization declines while we hold a substantial amount of

cash, cash equivalents or other passive assets for any taxable year, we may be a PFIC for that taxable

year. The extent to which the value of our goodwill and other intangible assets should be treated as active

is also not entirely clear. For these reasons, we can give no assurance that we will not be a PFIC for our

current or any future taxable year. Due to the factual nature of the determination of our PFIC status, our

U.S. counsel expresses no opinion with respect to our PFIC status for any taxable year.

If we are a PFIC for any taxable year during which a U.S. investor owns our ordinary shares, the U.S.

investor may be subject to adverse tax consequences (even if we cease to be a PFIC in subsequent

taxable years), including an increased tax liability on dispositions of our ordinary shares or receipt of

certain distributions, as well as additional reporting requirements. For a more detailed discussion of the tax

consequences of a PFIC classification to U.S. investors, see the section of this annual report titled

"Material U.S. Federal Income Tax Considerations for U.S. Holders—Passive Foreign Investment Company

Rules."

KLARNA GROUP PLC68

**If our ordinary shares are not eligible for deposit and clearing within the facilities of DTC, then transactions in** 

**our ordinary shares may be disrupted.**

The facilities of DTC are a widely used mechanism that allow for rapid electronic transfers of securities

between the participants in the DTC system, which include many large banks and brokerage firms. While

our ordinary shares are eligible for deposit and clearing within the DTC system, DTC has discretion to

cease to act as a depository and clearing agency for the ordinary shares, including to the extent that any

changes in U.K. tax law change the stamp duty or stamp duty reserve tax ("SDRT") position in relation to

our ordinary shares. If DTC determined that the ordinary shares were not eligible for continued deposit

and clearance within its facilities, then our ordinary shares may not be eligible for continued listing on a

U.S. securities exchange and trading in the ordinary shares would be disrupted. While we would pursue

alternative arrangements to preserve our listing and maintain trading, any such disruption could adversely

affect the market price of our ordinary shares and our access to the capital markets.

**Transfers of our ordinary shares outside DTC may be subject to stamp duty or SDRT, in the United Kingdom,** 

**which would increase the cost of dealing in our ordinary shares.**

Our ordinary shares admitted for trading on the exchange are held by a nominee for DTC, and

corresponding book-entry interests credited in the facilities of DTC. Trading of our shares on the exchange

takes place through the transfer of book-entry interests in the shares. Under current law, no charges to

U.K. stamp duty or SDRT are expected to arise on transfers of book-entry interests in ordinary shares

within DTC's facilities.

However, a transfer of title in our ordinary shares from within the DTC system to a purchaser out of

DTC (for example, if a purchaser wished to purchase the shares in certificated form) and any subsequent

transfers that occur entirely outside the DTC system will generally result in a charge to stamp duty at a

rate of 0.5% (rounded up to the nearest £5) of any consideration, which is payable by the transferee of the

ordinary shares. Any such duty must be paid, and the relevant transfer document, if any, confirmed as duly

stamped by HMRC, before the transfer can be registered in our books. However, if those ordinary shares

are redeposited into DTC, the redeposit will generally attract stamp duty or SDRT at the prevailing rate

(currently, 1.5%) to be paid by the transferor, subject to any applicable exemptions or reliefs.

We have put in place arrangements to require that any of our ordinary shares held outside the DTC

system cannot be transferred into the DTC system (for example, in connection with a redeposit into DTC

described above) until the transferor has first delivered the ordinary shares to a depositary specified by us

so that stamp duty (and/or SDRT), if applicable, may be collected in connection with the initial delivery to

the depositary. Before the transfer can be registered in our books, the transferor will also be required to

put funds in the depositary to settle the resultant liability to stamp duty (and/or SDRT), which will be

charged at a rate of 1.5% of the value of our ordinary shares.

KLARNA GROUP PLC69

**MATERIAL TAX CONSIDERATIONS**

**Material U.K. Tax Considerations for U.K. Holders**

The following is intended as a general guide to material U.K. tax considerations relevant to U.K. Holders

(as defined below) based on current U.K. tax law and HMRC practice applying as at the date of this report

(both of which are subject to change at any time, possibly with retrospective effect) relating to the holding

of ordinary shares. It does not constitute legal or tax advice and does not purport to be a complete

analysis of all U.K. tax considerations relating to the holding of ordinary shares, or all of the circumstances

in which holders of ordinary shares may benefit from an exemption or relief from U.K. taxation. It is written

on the basis that the company does not (and will not) directly or indirectly derive 75% or more of its

qualifying asset value from U.K. land, and that the company is and remains solely resident in the U.K. for

tax purposes and will therefore be subject to the U.K. tax regime and not the U.S. tax regime save as set

out below under "—Material U.S. Federal Income Tax Considerations for U.S. Holders." The rates and

allowances stated in this section reflect the current law or, if different, announcements made by the U.K.

Government in the Autumn Budget 2025 published on November 26, 2025.

Except to the extent that the position of non-U.K. resident persons is expressly referred to, this guide

relates only to persons who are resident for tax purposes solely in the U.K. and to whom split year

treatment does not apply and who do not have a permanent establishment, branch, agency (or equivalent)

or fixed base in any other jurisdiction with which the holding of the ordinary shares is connected ("U.K.

Holders"), who are absolute beneficial owners of the ordinary shares (where the ordinary shares are not

held through an Individual Savings Account or a Self-Invested Personal Pension) and who hold the ordinary

shares as investments. The statements in this guide do not apply to any Holder who either directly or

indirectly holds or controls 10% or more of the company's share capital (or class thereof), voting power or

profits.

This guide may not relate to certain classes of U.K. Holders, such as (but not limited to):

• persons who are connected with the company;

• financial institutions;

• insurance companies;

• charities or tax-exempt organizations;

• collective investment schemes;

• pension schemes;

• market makers, intermediaries, brokers or dealers in securities; and

• persons who have (or are deemed to have) acquired their ordinary shares by virtue of an office or

employment or who are or have been officers or employees of the company or any of its affiliates.

**THESE PARAGRAPHS ARE A SUMMARY OF CERTAIN U.K. TAX CONSIDERATIONS AND ARE INTENDED AS A** 

**GENERAL GUIDE ONLY. IT IS RECOMMENDED THAT ALL HOLDERS OF ORDINARY SHARES OBTAIN ADVICE AS TO** 

**THE CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSAL OF THE ORDINARY SHARES IN THEIR OWN** 

**SPECIFIC CIRCUMSTANCES FROM THEIR OWN TAX ADVISORS. IN PARTICULAR, NON-U.K. RESIDENT PERSONS ARE** 

**ADVISED TO CONSIDER THE POTENTIAL IMPACT OF ANY RELEVANT DOUBLE TAXATION AGREEMENTS.**

KLARNA GROUP PLC70

Dividends

**Withholding tax**

Dividends paid by the Company will not be subject to any withholding or deduction for or on account of

U.K. tax.

**Income tax**

An individual U.K. Holder may, depending on their particular circumstances, be subject to U.K. tax on

dividends received from the Company. An individual holder of ordinary shares who is not resident for tax

purposes in the U.K. should not be chargeable to U.K. income tax on dividends received from the Company

unless they carry on (whether solely or in partnership) a trade, profession or vocation in the United

Kingdom through a branch or agency to which the ordinary shares are attributable. There are certain

exceptions for trading in the U.K. through independent agents, such as some brokers and investment

managers.

All dividends received by an individual U.K. Holder from us or from other sources will form part of that

U.K. Holder's total income for income tax purposes and will constitute the top slice of that income. A nil

rate of income tax will apply to the first £500 of taxable dividend income received by the individual U.K.

Holder in the 2025/26 and 2026/27 tax years (the "Nil Rate Band"). Income within the Nil Rate Band will be

taken into account in determining whether income in excess of the Nil Rate Band falls within the basic rate,

higher rate or additional rate tax bands. Dividend income in excess of the Nil Rate Band will (subject to the

availability of any income tax personal allowance) be taxed at 8.75% (10.75% in the 2026/27 tax year) to the

extent that the excess amount falls within the basic rate tax band, 33.75% (35.75% in the 2026/27 tax year)

to the extent that the excess amount falls within the higher rate tax band and 39.35% (no change in the

2026/27 tax year) to the extent that the excess amount falls within the additional rate tax band.

**Corporation tax**

A corporate holder of ordinary shares who is not resident for tax purposes in the United Kingdom

should not be chargeable to U.K. corporation tax on dividends received from the company unless it carries

on (whether solely or in partnership) a trade in the U.K. through a permanent establishment to which the

ordinary shares are attributable.

Corporate U.K. Holders should not be subject to U.K. corporation tax on any dividend received from the

company so long as the dividends qualify for exemption, which should generally be the case, although

certain conditions must be met. If the conditions for the exemption are not satisfied, or such U.K. Holder

elects for an otherwise exempt dividend to be taxable, U.K. corporation tax will be chargeable on the

amount of any dividends (currently, the main rate of corporation tax is 25%).

Chargeable Gains

A disposal or deemed disposal of ordinary shares by a U.K. Holder may, depending on the U.K. Holder's

circumstances and subject to any available exemptions or reliefs (such as the annual exemption for

individuals), give rise to a chargeable gain or an allowable loss for the purposes of U.K. capital gains tax and

corporation tax on chargeable gains.

If an individual U.K. Holder who is subject to U.K. income tax at either the higher or the additional rate is

liable to U.K. capital gains tax on the disposal of ordinary shares, the current applicable rate in the 2025/26

and 2026/27 tax years will be 24%. For an individual U.K. Holder who is subject to U.K. income tax at the

basic rate and liable to U.K. capital gains tax on such disposal, the applicable rate in the 2025/26 and

2026/27 tax years would be 18%, save to the extent that any capital gains when aggregated with the U.K.

Holder's other taxable income and gains in the relevant tax year exceed the unused basic rate tax band. In

that case, the rate applicable to the excess in the 2025/26 and 2026/27 tax years would be 24%.

KLARNA GROUP PLC71

If a corporate U.K. Holder becomes liable to U.K. corporation tax on the disposal (or deemed disposal)

of ordinary shares, U.K. corporation tax at the applicable rate (currently the main rate is 25%) would apply.

A holder of ordinary shares that is not resident for tax purposes in the U.K. should not normally be

liable to U.K. capital gains tax or corporation tax on chargeable gains on a disposal (or deemed disposal) of

ordinary shares unless the person is carrying on (whether solely or in partnership) a trade, profession or

vocation in the U.K. through a branch or agency (or, in the case of a corporate holder of ordinary shares, a

trade through a permanent establishment) to which the ordinary shares are used in or for the purposes of

such trade, profession or vocation (or, in the case of a corporate holder of ordinary shares, used, held or

acquired for the purposes of the permanent establishment). However, an individual holder of ordinary

shares who has ceased to be resident for tax purposes in the U.K. for a period of less than five years and

who disposes of ordinary shares during that period may be liable on their return to the U.K. to U.K. tax on

any capital gain realized (subject to any available exemption or relief).

Stamp Duty and Stamp Duty Reserve Tax

The discussion below relates to the holders of our ordinary shares wherever resident; however, it

should be noted that special rules may apply to certain persons such as market makers, brokers, dealers

or intermediaries. UK stamp duty is charged on documents and in particular instruments for the transfer of

registered ownership of ordinary shares. SDRT arises when there is an agreement to transfer shares in UK

companies "for consideration in money or money's worth", and so an agreement to transfer ordinary

shares for money or other consideration may give rise to a charge to SDRT at the rate of 0.5% (rounded up

to the nearest penny).

Certain of our existing ordinary shares are held by Cede & Co, as nominee for DTC, and eligible for

trading on the exchange via the transfer of book-entry interests in the shares through the DTC system.

Our remaining shares are subject to a lock-up agreement implemented in connection with the

company's IPO and are currently held by a nominee for Computershare, an issuer of depository receipts,

and must be transferred into the DTC system before being eligible for trading on the exchange.

The discussion below covers the stamp duty and SDRT treatment of the issuance of new ordinary

shares, the transfer of our shares outside and into DTC, and the transfer of book-entry interest in our

ordinary shares, and share buybacks by us.

**Issue of shares**

There is generally no liability to stamp duty or SDRT payable on the issue of new ordinary shares in the

Company.

**Transfers of shares outside DTC**

An unconditional agreement to transfer ordinary shares outside the facilities of DTC will normally give

rise to a charge to SDRT at the rate of 0.5% of the amount or value of the consideration payable for the

transfer. The purchaser of the shares is liable for the SDRT. Transfers of ordinary shares in certificated

form are generally also subject to stamp duty at the rate of 0.5% of the amount or value of the

consideration given for the transfer (rounded up to the next £5). Stamp duty is normally paid by the

purchaser. There is an exemption where the consideration for a transfer is £1,000 or less and that transfer

does not form part of a larger transaction or series of transactions where the combined consideration

exceeds £1,000 and this is certified on the instrument of transfer. The charge to SDRT will be canceled or,

if already paid, repaid (generally with interest and upon claim), where a transfer instrument has been duly

stamped within six years of the charge arising (either by paying the stamp duty or by claiming an

appropriate relief) or if the instrument is otherwise exempt from stamp duty.

KLARNA GROUP PLC72

**Transfers into (or between) depositary receipt issuers and clearance services**

Subject to the following, an unconditional agreement to transfer ordinary shares to, or to a nominee or

agent for, a person whose business is or includes the issue of depositary receipts or the provision of

clearance services (a "depositary receipt issuer" and a "clearance service," respectively) will *prima facie* 

be subject to SDRT (or, where the transfer is effected by a written instrument, stamp duty) at a higher rate

of 1.5% of the amount or value of the consideration given for the transfer or, in certain circumstances, the

value of the shares (rounded up to the next multiple of £5 in the case of stamp duty) unless (in respect of

transfers to clearance services) the clearance service has made and maintained an election under section

97A of the United Kingdom Finance Act 1986 (a "section 97A election"). Any stamp duty or SDRT payable

on a transfer of ordinary shares to a depositary receipt issuer or a clearance service will in practice

generally be paid by the participants in the clearance service or depositary receipt system. No charge to

stamp duty or SDRT should arise on the issuance of new ordinary shares to a depositary receipt issuer or a

clearance service. However, such transfers to the depository or to certain persons providing a clearance

service (or their nominees or agents) will not attract stamp duty or SDRT where they satisfy the conditions

of an exemption, including exemptions which can apply to certain capital raising or qualifying listing

arrangements. Specific professional advice should be sought before paying the 1.5% SDRT or stamp duty

charge in any circumstances.

Transfers of shares from a depositary receipt issuer to a clearance service are generally outside of the

charge to U.K. stamp duty and SDRT (assuming that the clearance service has not entered into a section

97A election) and, as such, a transfer of our ordinary shares from the nominee for Computershare, as

depositary receipt issuer, to the nominee for DTC should not give rise to a liability to U.K. stamp duty or

SDRT. It is understood that HMRC regards the facilities of DTC as a clearance service for these purposes,

and we are not aware of any section 97A election having been made by DTC.

**Transfers of book-entry interests in our shares**

No stamp duty or SDRT should be required to be paid on a transfer of book-entry interests in our

ordinary shares through the clearance service facilities of DTC, provided that no section 97A election has

been made by DTC and (in the case of stamp duty only) provided that no written instrument of transfer is

entered into in respect of the transfer.

**Share buybacks**

A share buyback of our ordinary shares will give rise to stamp duty at the rate of 0.5% of the

consideration payable by us for such ordinary shares. This stamp duty will be paid by us.

**Material U.S. Federal Income Tax Considerations for U.S. Holders**

The following are material U.S. federal income tax consequences to U.S. Holders (as defined below) of

owning and disposing of our ordinary shares, but it does not purport to be a comprehensive description of

all tax considerations that may be relevant to a particular person's decision to acquire our ordinary shares.

This discussion applies only to a U.S. Holder that holds those ordinary shares as capital assets for U.S.

federal income tax purposes (generally, property held for investment). This discussion does not address

any aspect of the Medicare contribution tax on "net investment income," any applicable minimum tax, any

state, local or non-U.S. tax considerations, or any U.S. federal tax (such as estate or gift tax) other than U.S.

federal income tax. In addition, this discussion does not describe all aspects of U.S. federal income

taxation that may be relevant to U.S. Holders subject to special rules, including:

• banks and certain financial institutions;

• insurance companies;

• real estate investment trusts or regulated investment companies;

KLARNA GROUP PLC73

• dealers or traders in securities that use a mark-to-market method of tax accounting;

• persons holding our ordinary shares as part of a straddle, wash sale, hedging transaction,

conversion transaction or other integrated transaction or entering into a constructive sale with respect to

our ordinary shares;

• persons whose functional currency for U.S. federal income tax purposes is not the U.S. dollar;

• tax-exempt entities, governmental organizations, "individual retirement accounts" or "Roth IRAs";

• persons that own or are deemed to own 10% or more of our shares (by vote or value);

• persons owning our ordinary shares in connection with a trade or business conducted outside the

United States; or

• entities or arrangements classified as partnerships for U.S. federal income tax purposes.

If an entity or arrangement that is classified as a partnership for U.S. federal income tax purposes

holds our ordinary shares, the U.S. federal income tax treatment of a partner will generally depend on the

status of the partner and the activities of the partnership. Partnerships holding our ordinary shares and

partners in such partnerships should consult their tax advisers as to the particular U.S. federal income tax

considerations of owning and disposing of our ordinary shares.

This discussion is based on the Internal Revenue Code of 1986, as amended (the "Code"),

administrative pronouncements, judicial decisions, and final, temporary and proposed U.S. Treasury

regulations, all as of the date hereof, any of which is subject to change or differing interpretations, possibly

with retroactive effect. We have not sought and will not seek any rulings from the IRS regarding any matter

discussed herein. There can be no assurance that the IRS will not assert, or that a court will not sustain, a

position contrary to any of those set forth below.

A "U.S. Holder" is a person that, for U.S. federal income tax purposes, is a beneficial owner of the

ordinary shares and:

• a citizen or individual resident of the United States;

• a corporation, or other entity taxable as a corporation, created or organized in or under the laws of

the United States, any state therein or the District of Columbia; or

• an estate or trust the income of which is subject to U.S. federal income taxation regardless of its

source.

U.S. Holders should consult their tax advisers concerning the U.S. federal, state, local and non-U.S. tax

consequences of owning and disposing of our ordinary shares in their particular circumstances.

Taxation of Distributions

The following is subject to the discussion under "—Passive Foreign Investment Company Rules" below.

Any distributions paid on our ordinary shares, other than certain pro rata distributions of our ordinary

shares, will be treated as dividends for U.S. federal income tax purposes to the extent paid out of our

current or accumulated earnings and profits (as determined under U.S. federal income tax principles).

Because we do not intend to maintain calculations of our earnings and profits under U.S. federal income

tax principles, we expect that distributions will generally be reported to U.S. Holders as dividends.

Dividends received by non-corporate U.S. Holders may be "qualified dividend income," which is taxed at

the lower applicable capital gains rate, provided that (1) we are eligible for the benefits of the tax treaty

between the United States and the United Kingdom (the "Treaty"), (2) we are not a PFIC (as discussed

below) (or treated as a PFIC with respect to a U.S. Holder) for either the taxable year in which the dividend

KLARNA GROUP PLC74

was paid or the preceding taxable year and (3) the U.S. Holder satisfies certain holding period and other

requirements. U.S. Holders should consult their tax advisors regarding the availability of the lower rate for

dividends paid with respect to our ordinary shares. The amount of any dividend will generally be treated as

foreign-source dividend income to U.S. Holders and will not be eligible for the dividends-received

deduction generally available to U.S. corporations under the Code. Dividends will be included in a U.S.

Holder's income on the date of the U.S. Holder's receipt of the dividend.

Sale or Other Disposition of Our Ordinary Shares

The following is subject to the discussion under "—Passive Foreign Investment Company Rules" below.

Any gain or loss realized on the sale or other disposition of our ordinary shares will be capital gain or

loss, and will be long-term capital gain or loss if a U.S. Holder has held the ordinary shares for more than

one year. Long-term capital gains of individuals and other noncorporate U.S. Holders are eligible for

reduced rates of taxation. The amount of the gain or loss will equal the difference between a U.S. Holder's

tax basis in our ordinary shares disposed of and the amount realized on the disposition, in each case as

determined in U.S. dollars. Such gain or loss will generally be U.S.-source gain or loss for foreign tax credit

purposes. The deductibility of capital losses is subject to various limitations. Any U.K. stamp duty or SDRT

(as discussed above under "—Material U.K. Tax Considerations for U.K. Holders") imposed upon transfers of

our ordinary shares will not be creditable for U.S. federal income tax purposes. U.S. Holders should consult

their tax advisers regarding whether any such U.K. stamp duty or SDRT may be deductible or reduce the

amount of gain (or increase the amount of loss) recognized upon a sale or other disposition of our ordinary

shares.

Passive Foreign Investment Company Rules

We will be a PFIC for any taxable year in which (i) 75% or more of our gross income consists of passive

income or (ii) 50% or more of the value of our assets (generally determined on a quarterly average basis)

consists of assets that produce, or are held for the production of, passive income. For purposes of these

tests, passive income generally includes dividends, interest, gains from the sale or exchange of investment

property and certain rents and royalties. Cash and cash equivalents are generally passive assets for these

purposes. In addition, for purposes of the above calculations, a non-U.S. corporation that directly or

indirectly owns at least 25% by value of the shares of another corporation is treated as holding its

proportionate share of the assets, and receiving directly its proportionate share of the income, of such

other corporation.

Based upon the estimated value of our assets, the nature and composition of our income and assets

and the application of an exception applicable to certain banks (under which interest, income equivalent

to interest and certain other types of income earned by certain banks are treated as active for purposes of

the PFIC rules), we do not believe we were a PFIC with respect to our taxable year ended December 31,

2025. However, our PFIC status for any taxable year is an annual determination that cannot be made until

after the end of that year and will depend on the composition of our income and assets and the value of

our assets from time to time, as well as our qualification for the active banks exception described above,

which is pursuant to proposed Treasury regulations. Although under current IRS guidance these proposed

Treasury regulations can be relied upon prior to their finalization, there is no assurance that such

proposed Treasury regulations will be finalized in their current form. In addition, the qualification of certain

of our income and assets as active under the active banks exception is not entirely clear, and there is no

assurance that the IRS will agree with our classification of such items as active, in which case we may be

treated as a PFIC. Furthermore, we may be a PFIC if in the future we generate a significant amount of

interest income, or other income treated as interest for U.S. federal income tax purposes, other than

through Klarna Bank. Moreover, the total value of our assets (including goodwill and other intangibles) may

be determined, in part, by reference to the market price of our ordinary shares from time to time, which

may fluctuate. Accordingly, if our market capitalization declines while we hold a substantial amount of

cash, cash equivalents or other passive assets for any taxable year, we may be a PFIC for that taxable

year. The extent to which the value of our goodwill and other intangible assets should be treated as active

KLARNA GROUP PLC75

is also not entirely clear. For these reasons, we can give no assurance that we will not be a PFIC for our

current or any future taxable year. Due to the factual nature of the determination of our PFIC status, our

U.S. counsel expresses no opinion with respect to our PFIC status for any taxable year.

If we were a PFIC for any taxable year and any of our subsidiaries or other companies in which we

owned or were treated as owning equity interests were also a PFIC (any such entity, a "Lower-tier PFIC"), a

U.S. Holder would be deemed to own a proportionate amount (by value) of the shares of each Lower-tier

PFIC and would be subject to U.S. federal income tax according to the rules described in the subsequent

paragraph on (i) certain distributions to us by a Lower-tier PFIC and (ii) our disposition of shares of Lower-

tier PFICs, in each case as if such holder held such shares directly, even though such holder may not have

received the proceeds of those distributions or dispositions.

If we were a PFIC for any taxable year during which a U.S. Holder held our ordinary shares, absent

making certain elections (as described below), such holder would generally be subject to adverse tax

consequences. Generally, gain recognized upon a disposition (including, under certain circumstances, a

pledge) of our ordinary shares by such U.S. Holder would be allocated ratably over such U.S. Holder's

holding period for our ordinary shares. The amounts allocated to the taxable year of the sale or other

disposition and to any year before we became a PFIC would be taxed as ordinary income. The amount

allocated to each other taxable year would be subject to tax at the highest rate in effect for that taxable

year for individuals or corporations, as applicable, and an interest charge would be imposed on the

resulting tax liability. Further, to the extent any distributions received in a taxable year in respect of our

ordinary shares exceeded 125% of the average of the annual distributions on our ordinary shares received

by the U.S. Holder during the preceding three taxable years or its holding period, whichever was shorter,

that distribution would be subject to taxation in the same manner as gain, described immediately above. If

we were a PFIC for any taxable year during which a U.S. Holder owned our ordinary shares, we would

continue to be treated as a PFIC with respect to such U.S. Holder for subsequent taxable years, unless we

ceased to be a PFIC and the U.S. Holder made a "deemed sale" election. U.S. Holders should consult their

tax advisers regarding the consequences of making this election, if relevant.

Alternatively, if we were a PFIC and if our ordinary shares were "regularly traded" on a "qualified

exchange," a U.S. Holder would be eligible to make a mark-to-market election that would result in tax

treatment different from the general tax treatment for PFICs described above. Once made, the election

cannot be revoked without the consent of the IRS unless our ordinary shares cease to be marketable. If a

U.S. Holder makes the mark-to-market election, the U.S. Holder will generally recognize as ordinary income

any excess of the fair market value of such U.S. Holder's ordinary shares at the end of each taxable year

over their adjusted tax basis, and will recognize an ordinary loss in respect of any excess of the adjusted

tax basis of our ordinary shares over their fair market value at the end of the taxable year (but only to the

extent of the net amount of income previously included as a result of the mark-to-market election). If a U.S.

Holder makes the election, the U.S. Holder's tax basis in our ordinary shares will be adjusted to reflect

these income or loss amounts. Any gain recognized on the sale or other disposition of our ordinary shares

in a year when we are a PFIC will be treated as ordinary income and any loss will be treated as an ordinary

loss (but only to the extent of the net amount of income previously included as a result of the mark-to-

market election, with any excess loss treated as a capital loss). This election can be filed only with respect

to shares that are regularly traded on a qualified exchange. Accordingly, a U.S. Holder may continue to be

subject to tax under the PFIC excess distribution regime with respect to any Lower-tier PFICs

notwithstanding a mark-to-market election for our ordinary shares.

We do not intend to provide the information necessary for a U.S. Holder to make a qualified electing

fund election.

In addition, if we were a PFIC (or treated as a PFIC with respect to a U.S. Holder) for the taxable year in

which we paid a dividend or for the prior taxable year, the favorable qualified dividend tax rates discussed

above with respect to dividends paid to noncorporate U.S. Holders would not apply.

KLARNA GROUP PLC76

If a U.S. Holder owns our ordinary shares during any year in which we are a PFIC, such holder must

generally file annual reports containing such information as the U.S. Treasury may require on IRS Form

8621 (or any successor form) with respect to us, generally with such U.S. Holder's federal income tax return

for that year. A failure to file one or more of these forms as required may toll the running of the statute of

limitations in respect of each of the U.S. Holder's taxable years for which such form is required to be filed.

U.S. Holders should consult their tax advisers regarding the potential application of the PFIC rules,

including whether the elections discussed above would be available and, if so, what the consequences of

the alternative treatments would be in their particular circumstances.

Information Reporting and Backup Withholding

Payments of dividends and sales proceeds that are made within the United States or through certain

U.S.-related financial intermediaries generally are subject to information reporting, and may be subject to

backup withholding, unless (i) the U.S. Holder is a corporation or other exempt recipient (and if required

establishes its exempt recipient status) or (ii) in the case of backup withholding, the U.S. Holder provides a

correct taxpayer identification number and certifies that the U.S. Holder is not subject to backup

withholding.

Backup withholding is not an additional tax. The amount of any backup withholding from a payment to

the U.S. Holder will be allowed as a refund or credit against the U.S. Holder's U.S. federal income tax

liability and may entitle the U.S. Holder to a refund, provided that the required information is timely

furnished to the IRS.

Information with Respect to Foreign Financial Assets

Certain U.S. Holders who are individuals (and certain entities) may be required to report information on

their U.S. federal income tax returns relating to an interest in our ordinary shares, subject to certain

exceptions (including an exception for our ordinary shares held in accounts maintained by certain U.S.

financial institutions). U.S. Holders should consult their tax advisers regarding the effect, if any, of this

requirement on their ownership and disposition of our ordinary shares.

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**Item 4. Information on the Company**

**History and Development of the Company**

Klarna Group plc ("Klarna" or the "Company") was founded in 2005 in Sweden with the objective of

improving trust and efficiency in online commerce. The Company initially focused on providing flexible

payment solutions designed to allow consumers to pay for goods after delivery, thereby reducing friction

and uncertainty between consumers and merchants in e-commerce transactions.

Following its founding, Klarna expanded rapidly across the Nordic region and subsequently into other

European markets. By 2010, the Company operated in the Nordics, Germany and the Netherlands, and by

2016 had established operations in nine markets, including Austria, Switzerland and the United Kingdom.

During this period, Klarna focused on scaling its payments platform, expanding its merchant network and

refining its underwriting capabilities to support real-time transaction decisioning.

In 2017, Klarna began operating as a licensed bank within the European Economic Area following

approval by the Swedish Financial Supervisory Authority. This milestone enabled Klarna to broaden its

range of financial services, including the ability to fund a significant portion of its lending activities through

customer deposits, and supported the continued development of its consumer and merchant offerings.

Beginning in 2019, Klarna initiated a strategic expansion into additional international markets, with a

particular focus on the United States. Over the following years, the Company expanded into multiple new

geographies while continuing to invest in product development, technology infrastructure and brand

awareness.

Over time, Klarna introduced new products and services, including payment options allowing

consumers to pay immediately, defer payment, or finance purchases over longer fixed terms, as well as

consumer-facing tools designed to help manage purchases and spending.

Klarna has also expanded beyond payments into adjacent commerce services. In 2019, the Company

began scaling its advertising and merchant marketing solutions, enabling merchants to connect with

consumers within a commerce-centric environment. In subsequent years, Klarna introduced additional

consumer-facing products, including the Klarna app and the Klarna Card, and continued to develop

technology-enabled features intended to streamline the commerce experience.

In May 2024, Klarna completed a corporate reorganization pursuant to which the Company

redomiciled its parent entity from Sweden to the United Kingdom by way of a share-for-share exchange. As

a result of the reorganization, Klarna Group plc became the ultimate holding company of the Klarna group.

Following the reorganization, the Company's ordinary shares were listed on the New York Stock Exchange.

Additional information regarding the corporate reorganization and the Company's share capital is set forth

under "Description of Share Capital and Articles of Association."

Throughout its history, Klarna has evolved from a payments-focused provider into a global digital

commerce network connecting consumers and merchants across multiple channels and geographies. As

of December 31, 2025, the Company served approximately 118 million active consumers and approximately

960,000 merchants across 26 countries.

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**Business Overview**

Our Mission and Vision

Our mission is to reimagine how consumers spend and save in their daily lives. We help people save

time, money and put them in control of their finances through AI-powered, transparent and flexible

financial services.

Our vision is a world where Klarna empowers everyone, everywhere, through seamless commerce

experiences—as a personalized, trusted AI-enabled assistant making financial empowerment effortless.

Our Company

We are a global digital bank and flexible payments provider building the next-generation AI-powered

commerce network.

We have built one of the largest commerce networks in the world, measured by the number of

consumers and merchants, serving approximately 118 million active Klarna consumers and approximately

966 thousand merchants in 26 countries as of December 31, 2025, and facilitating $128 billion of GMV in

the year ended December 31, 2025. Our flexible and personalized products, trusted consumer brand,

global distribution and proprietary scalable infrastructure are the foundations enabling us to become our

consumers' everyday spending and saving partner, available everywhere and for everything. Through our

history, we have consistently innovated and challenged the status quo, evolving our network from a

consumer-focused payments tool to a global commerce network that enables merchant success. Klarna

was built to address the manifold pain points in commerce today, including inefficiency, lack of trust,

prevalence of fraud, impersonal relationships between consumers and merchants and high interest and

credit-related fees that are harmful to consumers, merchants and society at large.

We began by pioneering a new approach to online payments, designed to bridge uncertainty in the

transactions between consumers and merchants by providing short-term flexible credit that is

predominantly interest-free and accelerating growth for merchants. Our approach leverages differentiated

underwriting capabilities, utilizes bank deposits and other low-cost funding sources and is monetized

primarily by driving increased GMV for merchants on our network rather than from only charging interest

to consumers. For the year ended December 31, 2025, 97% of transactions conducted on our network

were interest-free. This results in lower fees, which we believe drives consumers and, in turn, our

merchants, to shift more of their commerce activity onto our network, aligning the financial success of our

consumers and merchants with our long-term ambition of durable growth. We have also built a unique

advertising solution, connecting engaged consumers to advertisers in a personalized, commerce-centric

environment.

Consumers come to Klarna to pay flexibly and securely, to find goods, services and experiences that

are relevant to them, and to manage their purchases and savings, all in a trusted environment. We

designed our network to provide consumers with more control and flexibility over their payments, to save

them time and money and to help them worry less about their finances. This allows us to become an

important growth partner for merchants of all sizes, enabling them to grow their businesses and acquire

new customers, convert more transactions with higher Average Order Values ("AOVs") and retain

customers with increased loyalty, all while establishing and fostering personal relationships with their

customers. Just as card networks revolutionized the way merchants and consumers received and made

payments decades ago, we have created a new type of network built upon fairness, sustainability and

innovation, while removing intermediaries, complexity and fees along the way.

We accelerate commerce by connecting consumers and merchants with comprehensive AI-powered

payment and performance-based advertising solutions, both online and offline. Our payment options

provide consumers with the choice to pay however they prefer: Pay in Full for immediate settlement, Pay

Later allows consumers to complete a purchase today while deferring payment to a later date or into

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installments and Fair Financing allows consumers to settle payments over longer, fixed-term schedules

with transparent pricing. We offer the benefits of both open and closed networks. We open our network to

a broad consumer and merchant ecosystem, similar to Visa, MasterCard and Amex, but also benefit from

our proprietary closed-loop network where we issue, fund, process and settle the entire payment, while

retaining a direct relationship with our consumers. Payment options are facilitated across numerous

channels, including directly at our merchants' online or in-store checkouts, in the Klarna app, with the

debit-first Klarna card or using Apple Pay or Google Pay.

We have achieved global consumer and merchant scale. Our 118 million active Klarna consumers are

diverse—from a wide range of income levels and educational backgrounds—and representative of the

broader population. In Sweden, our most mature market, approximately 85% of adults were active Klarna

consumers as of December 31, 2025, according to our estimates. Our consumers are financially

responsible, too—in the year ended December 31, 2025, Provision for credit losses were less than 1% of

originated Gross Merchandise Volume. Merchants view Klarna as an important growth partner because of

our consumer scale and global reach. Our approximately 966 thousand merchants include some of the

largest global brands—on average, 48% of the top 100 merchants in each of the major markets we serve,

which include the United States, the U.K., the Nordics, Germany, Austria, Belgium, Spain, France, Italy, the

Netherlands and Switzerland (based on data from eCommDB and Digital Commerce 360) used Klarna in

the last twelve months ended July 31, 2025 to facilitate payments, while an even greater percentage (66%)

advertised on our network during the same period. Our broad adoption across merchants contributes to

our GMV diversification, with no single merchant representing more than 10% of our GMV in any of our

major markets in the year ended December 31, 2025. Through both our payment and advertising solutions,

we help our merchants attract new customers, drive higher AOV with higher purchase frequency and offer

frictionless commerce and higher conversion rates. We do all of this while allowing merchants to

seamlessly integrate Klarna into their existing operations and infrastructure, retaining full control over their

brands.

Klarna sits at the center of a global ecosystem. We connect an array of different financial services and

commerce organizations, from PSPs, traditional banks, card networks and open banking providers, to

commerce enablers, technology partners, in-store payments providers and shipping and return logistics

providers, to improve the commerce experience for our consumers and merchants through a unique AI-

powered global network. We continue to grow our network across verticals and geographies to better

serve consumers and merchants.

We believe that our credit underwriting capabilities, enabled by our proprietary data from

approximately 3.4 million transactions made on average per day on our network from 118 million active

Klarna consumers in the year ended December 31, 2025, differentiate us from other networks. We are able

to make underwriting decisions in seconds with our fully automated processes and underwrite every

transaction in real time. We also provide a small spending capacity that gradually increases as consumers

responsibly spend more with Klarna, and clear and transparent repayment terms that encourage

borrowers to repay on time. All of this distinguishes our financing solutions from market alternatives. In the

year ended December 31, 2025, our average balance per active Klarna consumer was $124 (Pay in Full: $0;

Pay Later: $120 Fair Financing: $393) (compared to an average balance per credit card of approximately

$6,961 in the United States in 2025, according to Experian). Based on contractual repayment schedules,

our weighted average life (WAL) was approximately 39 days (27 days for Pay Later and 109 days for Fair

Financing) (compared to a typical loan duration of more than five years at a typical Nordic bank in 2024,

according to publicly available information, and an average of 2.5 years of a typical U.S. personal bank loan

in Q1 2025, according to TransUnion). This allows us to quickly react to market changes and efficiently

manage credit risk. Our underwriting process results in credit losses that are generally lower than the

industry average: for example, our provision for credit losses represented 0.63% of GMV in the year ended

December 31, 2025, while the charge-off rate on consumer loans, issued by all commercial banks reached

2.89% in Q3 2025, according to the Federal Reserve Bank of St. Louis. In addition to lower credit losses, we

believe that our underwriting process provides more value to consumers and merchants than alternative

payment methods, which helps drive our financial performance.

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We have been a constant pioneer in our industry. In 2005, when online shopping was still nascent and

marked by distrust, we launched Pay Later products to guarantee consumers would pay only after they

had received goods, while also pioneering a new approach to credit. In 2010, we launched our Pay in Full

product to give consumers more choice and control over how they pay. In 2017, we started building a

disruptive brand to help people streamline their financial lives. As we learned that consumers wanted to

use Klarna everywhere, we launched the Klarna card in 2018. That same year, we launched the Klarna app,

which enables our consumers to track all their purchases in one place, track their shipments, assist with

errands and much more. While we began with payments innovation, in 2019, we started to meaningfully

scale our advertising solutions, which personalize the commerce experience for our consumers by using

our vast proprietary data set, including data they entrust to us. In 2023, we developed an AI assistant

Klarna balance, which makes commerce even more effortless by allowing consumers to Pay in Full or Pay

Later without connecting to a bank account or card. In 2025, we continued to expand and introduce more

digital finance products to help our consumers save time and money and effortlessly put them in control of

their finances. For example, we enhanced the Klarna Card to deepen its role in everyday financial

management and completed its rollout in the United States. The debit-first card integrates our Pay in Full

and Pay Later options within a single product and was upgraded with real-time transfer and deposit

capabilities to support smarter wallet functionality. The Klarna Card continues to scale rapidly, with more

than 4.2 million active consumers globally, reflecting strong consumer demand for simple, flexible and

transparent payment tools. At the same time, we continued reshaping access to credit through the

expansion of our Fair Financing offering—a transparent, non-revolving alternative to traditional credit—now

available at a broader merchant network, including major partners like Walmart. These innovations are all

built on our AI-enabled, cloud-native and global technology platform to which merchants can connect via a

single API. Every product we bring to market can be launched globally, allowing merchants to reach

millions of consumers worldwide almost instantly once connected to our network.

We began operations in Sweden in 2005, and rapidly expanded through the rest of the Nordics. By

2010, we operated in the Nordics, Germany and the Netherlands. By 2016, we were established in nine

markets, including Austria (2012), Switzerland (2014) and the U.K. (2014). Since inception, we have strived to

maintain a deliberate balance of growth and profitability. We remained profitable for the first 14 years as

we scaled our operations in Europe. In 2019, we strategically decided to expand our successful operating

model into additional geographies, with a particular focus on the United States, and in the following three

years expanded into 12 additional markets. While our expansion in the United States has contributed to an

increase in our GMV, it has also led to net losses in recent periods. In 2023, our operating loss started to

decline and we began generating positive transaction margin dollars in the United States, while continuing

to grow our GMV and the number of active Klarna consumers and merchants worldwide.

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**Our Network's Growth**

![Screenshot 2026-01-30 173557.jpg](klar-20251231_g1.jpg)

For over two decades, Klarna has been transforming the commerce landscape. Our growth strategy is

an extension of our ability to innovate and cater to our customers' needs:

• **Klarna at Every Checkout**. We have a proven track record of bringing leading global merchants to

our network, which have been key in amplifying our brand's reach. We also have a unique go-to-market

strategy: by partnering with several of the world's largest PSPs, including Worldpay, Stripe, Nexi, J.P.Morgan

Payments and Adyen, we can connect with consumers through hundreds of thousands of merchant

checkouts. By integrating Klarna with Apple Pay and Google Pay, our consumers can use Klarna's payment

solutions wherever Apple Pay or Google Pay is available online in the United States as well as, in the case

of Apple Pay, in the U.K., without having the Klarna card. Increasing the availability of our payment methods

is imperative to further growth of our network, as a higher penetration of merchants directly translates to a

higher share of checkout.

• **Klarna Card in Every Wallet**. We envision Klarna becoming the default payment method for our

millions of active Klarna consumers and future consumers. The Klarna Card is a debit-first product that

integrates all of Klarna's flexible payment methods within a single physical and digital card experience. It

supports real-time transfers and deposits, provides spending controls, and connects directly to the Klarna

app for transaction tracking, budgeting tools and repayment management. In 2025, we completed the U.S.

rollout of the Klarna Card, which now has more than 4.2 million active users globally.

• **Next-Generation Digital Financial Services.** As a digital-first neobank, Klarna's services are

automated, insight-driven and designed to be transparent, fair and intuitive. We partner with PSPs,

traditional banks, card networks, commerce enablers, technology partners, merchants and shipping and

return logistics providers to improve the commerce experience for our consumers. This breadth of our

ecosystem, coupled with our extensive portfolio of licenses and regulatory authorizations, allows us to

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provide consumer services that others cannot, such as instant refunds, cashback, real-time debit or order

and return tracking. These features save consumers time and money and effortlessly put them in control

of their finances.

• **Klarna's Personal Shopping and Money Assistant**. Through a true understanding of our consumers'

needs, we are uniquely positioned to offer them curated shopping assistance and related products that

are truly valuable and relevant to them. Consumers gain access to premium features through subscription

services, enhancing their lifestyle while enjoying convenience and savings. Within the Klarna app, they can

spend, save and shop smarter with the power of an AI assistant designed to understand personal needs

and preferences. From product recommendations to managing expenses, this smart companion is here to

guide the consumer throughout the entire commerce journey. This, we believe, will redefine how

consumers interact and engage with Klarna, creating a deep and sticky customer relationship.

• **AI-Powered Efficiency**. AI allows us to drive scale efficiencies greater than what was previously

thought possible, allowing our deep talent pool to focus on innovation and growth.

**Our Competitive Advantages**

We enjoy several key competitive advantages that have enabled our continued success since our

founding in 2005.

Compounding Network Effects

Klarna enjoys powerful network effects. Our personalized, highly engaging consumer experiences drive

consumers to our network. As more consumers engage at scale, more merchants join our network and

grow their businesses. As more merchants join the network, consumers benefit from increased selection

across verticals, channels and geographies, and can purchase more frequently using, and demonstrate

preference for, our network. Klarna has established a high-utility, high-frequency model, enabling the

purchase of everyday goods and services that benefits both our consumers and merchants.

Trusted Brand, Global Distribution

We have built a brand that is distinctly global, universally recognized and well-loved by consumers and

merchants, an accomplishment that we believe is rare among businesses that provide payments and

financial services. Our global NPS in September 2024 was 73, according to our estimates, which is

significantly higher than an average NPS of 44 for the finance industry in our top eight markets as of March

2023, according to CustomerGauge. As of December 2024, we also had a higher global brand awareness

(40%) than the average of our main competitors (28%), according to our estimates. The strength of our

brand contributes to our global scale. Our approximately 118 million active Klarna consumers and 966

thousand merchants as of December 31, 2025 operated in 26 countries around the world. Our merchants

include global leaders across verticals, such as Walmart, Airbnb, H&M, Nike, Uber and eBay. The ability to

provide merchants with global access to consumers almost instantly once connected to our network is a

critical competitive advantage.

Industry-Leading AI Adoption and Implementation

Klarna has been an early and leading adopter of AI. Our unique data set includes SKU-level data points,

including 2.6 billion data points collected in the year ended December 31, 2025, and the learnings of more

than 6.4 billion transactions conducted on our network to date. We also utilize ML in our business, in

particular to increase the speed and accuracy of our proprietary underwriting model.

Consumers and merchants entrust us with their data because we use that data for their benefit by

improving their experience with Klarna, as more fully explained below:

• **AI Improves Conversion and Accelerates Our Revenue.** We present consumers with AI-powered

personalized shopping feeds, leading to more transactions on our network.

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• **AI Streamlines the Consumer Experience and Reduces Our Costs.** In February 2024, we launched our

AI assistant in partnership with OpenAI. Our AI assistant has handled 80% of customer service chats in the

year ended December 31, 2025 (according to our service chat log data), with no drop in consumer

satisfaction levels since its introduction (according to internal consumer satisfaction surveys).

• **ML Supplements Our Credit Underwriting.** ML enhances our high-frequency, large-scale and real-

time underwriting.

• **AI Transforms Our Productivity and Drives Increasing Efficiency.** AI adoption—including the related

reduction in the use of third-party suppliers and vendors and the adoption of the AI copilot to create and

review code—has led to internal efficiencies. Our average annual revenue per employee at period end has

increased from approximately $344,000 in 2022 to approximately $1,240,000 in the year ended

December 31, 2025.

Scalable Technology Platform

connections across the global ecosystem. Businesses ranging from PSPs, traditional banks, card networks

and open banking providers to commerce enablers, technology partners, in-store payment providers and

shipping and return logistics providers join our network through a single shared API to enable fast and

global connectivity nearly instantly.

Diversified and Sustainable Business Model

Our diversified revenue model, based primarily on merchant fees, aligns the interests of merchants,

consumers and our business. The proportion of our revenue generated from merchants, consumers and

advertising is generally more balanced compared to many of our competitors in the payments and the

banking industries, who tend to depend more heavily than we do on either merchant revenue or interest

income. Our banking license provides us with a diversified, flexible funding toolkit and enables us to

maintain a low-cost, stable funding model based on consumer deposits as well as the ability to actively

manage our balance sheet through a range of complementary funding and risk-transfer mechanisms as we

scale. We currently offer savings accounts directly to residents of Austria, Belgium, Denmark, Finland,

France, Germany, Ireland, Italy, the Netherlands, Norway, Poland, Portugal, Spain and Sweden. We are also

able to collect deposits in Germany, the Netherlands, France, Spain and Ireland pursuant to a partnership

with a third-party deposit-taking platform operated by Raisin. Our banking pedigree adds rigor to our

underwriting processes, which are designed to continuously improve our credit decisioning and

monitoring. These factors, combined with our efficient go-to-market model defined by a recognizable

brand and partnerships with top global merchants, PSPs and commerce platforms, drive leverage in our

operating model.

Durable Growth Profile, with Scale Efficiencies

Our network connects millions of consumers and hundreds of thousands of merchants at scale to

power global commerce. Our scale enables our efficient growth. More consumers attract more merchants

to our network, which, in turn, attract more consumers. As we have scaled our operations over the last 20

years, we have optimized our cost structure and driven meaningful operating leverage in the business. For

example, for example, from 2023 to the year ended December 31, 2025, our operating loss improved by

29% while our transaction margin dollars increased by 14% and operating margin by 8 percentage points

during the same period.

Thanks to these competitive advantages, we believe we have a substantial opportunity to increase our

market share across channels, geographies and verticals. Annual consumer retail and travel spending in

the markets in which we currently operate is estimated to be $20 trillion for the year ended December 31,

2025, of which $9 trillion was in the United States, based on the Market Opportunity Study. We consider

our SAM to be the approximately $560 billion payments revenue opportunity associated with that spend,

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based on our average take rate in the last twelve months ended December 31, 2025. The global retail and

travel spending across all markets (excluding China) is estimated to reach $35 trillion in 2027, based on the

Market Opportunity Study. We have the opportunity to expand into new markets, to reach further into that

spend opportunity. We have also scaled our advertising revenue from approximately $13 million in 2020 to

$190 million for the year ended December 31, 2025. Digital advertising represents an additional

approximately $600 billion market opportunity globally (excluding China) as of December 31, 2025 (based

on the Market Opportunity Study) that we believe we are uniquely positioned to address given our unique

data from intent-driven consumers. Additionally, we are well positioned to build a leading presence in

strategic adjacencies such as retail banking services, given our trusted relationships with consumers, our

experience and our existing banking services in select regions, where we held $13 billion of consumer

funds as of December 31, 2025. We continuously strive to develop innovative products and solutions for

our consumers and merchants to continue to grow our addressable markets.

These network effects power our robust and compounding financial model characterized by long-term

growth and expanding margin profile. For example, for the year ended December 31, 2025, our GMV was

$128 billion, representing 21% (or 20% on a like-for-like basis) year-over-year growth and our total revenue

was $3,509 million, representing 25% year-over-year growth (24% on a like-for-like basis). Our adjusted

operating profit was $65 million, representing a $116 million reduction year-over-year. Our transaction

margin dollars equaled $1,238 million in the year ended December 31, 2025, stable year-over-year . Our net

loss in the year ended December 31, 2025 was $273 million.

**Commerce and Financial Services Should Be Fair, Simple and Trustworthy** 

Consumers face multiple pain points with commerce and financial services today:

• **Disparate and Disjointed Financial Intermediaries**. Challenges faced by consumers span beyond just

commerce. When making decisions about everything from long-term financial health to purchase

decisions, consumers struggle to interact with antiquated and disconnected intermediaries from banks, to

credit card providers, to marketplaces. Only 7% of surveyed Americans budget using their bank's

budgeting tools in 2025, and 96% of consumers want more detailed transaction information as of 2021,

according to Debt.com and Mastercard, respectively.

• **Inefficient User Experience**. Commerce discovery experiences are often inefficient and time-

consuming. Consumers face an abundance of choice, yet struggle to compare prices, shipping options and

reviews across various merchants in a time efficient or easy-to-use, single interface. Post-purchase,

receipts and shipping details are often scattered throughout their inboxes, complicating the post-

purchase experience. Consequently, only 14% of consumers claim they are satisfied with their online

shopping experience and 83% of them believe brands do not care about their experience after checkout,

according to IBM and ParcelPerform, respectively.

• **Irrelevant Advertising**. 80% of shoppers want personalized experiences from merchants, according

to Epsilon. Nonpersonalized advertising results in a poor user experience, wasted time and degrades

consumer trust in the shopping experience.

• **Predatory Lending Practices**. Consumer credit around the world is unnecessarily expensive. In the

United States alone, consumers collectively paid $254 billion in credit card interest and fees in 2024,

according to WalletHub. Many consumers are unaware of the hidden costs of their credit instruments and

the impact on their overall financial well-being.

• **Scams and fraud**. Payment and merchant fraud have negatively impacted the commerce

experience for consumers. Among online shoppers, three out of four report experiencing financial fraud,

according to Chubb.

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Merchants also face multiple pain points:

• **Low Conversion and High Customer Acquisition Cost**. Customer acquisition is a mission-critical

priority for merchants and advertising is a significant expense for merchants. The retail industry

represented approximately 20% of total digital advertising spend in the United States in 2024, according to

eMarketer. Merchants struggle to find ways to increase their reach in a cost-efficient manner and, even

when they have access to high intent traffic, struggle to convert their visitors into customers. Despite the

significant investment of time and money, businesses are ineffectively spending between 40% and 60% of

their digital advertising budgets, according to Proxima, leading to low conversion rates and online shopping

cart abandonment rates that now exceed 70% according to Baymard Institute.

• **Excessive Transaction Fees**. Accepting digital payments is costly for merchants, as swipe fees can

be some merchants' second-largest expense after labor. Merchants face the hard choice of decreasing

margins or passing costs to consumers, which can dampen sales.

• **No Brand Control**. Whether through their own site using a payments provider or via a marketplace,

many merchants struggle to build trusted, brand-enhancing direct relationships with consumers.

• **Lack of Data and Insight**. Merchants face significant challenges understanding the holistic consumer

commerce journey. While they may have purchase data, they have little insight into alternative products

that consumers browsed, whether they compared prices and what advertisements resonated with

consumers. Merchants lack the data to understand what factors contributed to a customer making a

purchase. Without insight into consumer preferences, merchants struggle to optimize their business

strategies and improve overall performance.

**Trends in Our Favor**

Powerful demographic, secular and technological trends are accelerating the need for new and

innovative commerce solutions:

• **Digital Payments Are Becoming the Norm**. 84% of American consumers shop online, according to

Capital One Shopping.

• **Generational Shift Away from Credit Card Debt**. As of June 2024, the average credit card balance of

Gen Z Americans was 50% lower than that of all American consumers, according to Experian. They

demand fairer and more sustainable forms of credit.

• **Low Trust in Banks**. In 2024, only 30% of U.S. consumers had trust in their bank and its practices,

according to Ipsos Global, trust in financial services providers remain close to the bottom among all

business sectors and industries, according to Edelman.

• **Digital Wallets Are Increasingly Popular**. Digital wallets are a convenient and secure method to store

various payment methods and manage loyalty cards. Their popularity with consumers is expected to drive

20% annual growth in their use through 2027, according to the Market Opportunity Study.

• **New Avenues for Consumer Spending Growth**. Through 2027, e-commerce global retail sales are

expected to grow by 12% CAGR, according to the Market Opportunity Study, as consumers demand the

ability to shop anywhere at any time and buying online becomes increasingly easier with advancements in

logistics and payments.

• **Concerns about Data Security**. Over 50% of consumers say they have abandoned an online

purchase due to security concerns, according to a Make Trust Pay study in 2025.

• **Commerce-Aligned Advertising Models Gaining Share**. Commerce media, where advertisements are

placed alongside shoppable inventory, is projected to grow by a 19% CAGR through 2027, compared to the

projected 9% growth for the broader digital advertising market, according to the Market Opportunity Study.

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**The Klarna Network**

Over the past 20 years, we have built the next-generation commerce network that connects

consumers and merchants globally.

Our Network Efficiently Connects Consumers and Merchants

We enable next-generation payments through direct relationships between consumers and merchants.

Through our network, consumers can find and pay for goods, services and experiences in a highly efficient

and flexible manner, and merchants are connected with more—and more empowered—consumers. We

have built our network to directly connect consumers and merchants, removing reliance on card networks

or issuing banks, which provides us with better data and a cost advantage compared to traditional

providers. Consumers and merchants entrust us directly with their data. We use this data, including 2.6

billion data points collected in the year ended December 31, 2025, to better understand consumer

preferences, more accurately underwrite consumer credit, provide clearer indications of consumer

purchasing power and help merchants build trusted, brand-aligned relationships. We are able to provide

our consumers and merchants key insights and services, in addition to payment processing, to facilitate

more efficient commerce experiences. Our network also removes middlemen from a typical transaction,

resulting in lower fees for both consumers and merchants. We believe that we operate one of the largest

account-to-account (A2A) networks in Europe and the United States with direct connectivity to over 15,800

banks as of December 2025. This allows us to offer consumers the option to Pay in Full (i.e., debit) and to

settle payments in a simple and cost-efficient manner by direct bank transfer. Our network offers the

benefits of open and closed networks. We open our network to a broad consumer and merchant

ecosystem, similar to Visa, MasterCard and Amex, but also benefit from our proprietary closed-loop

network where we issue, fund, process and settle the entire payment, while retaining a direct relationship

with our consumers.

Our Network Sits at the Center of a Global Ecosystem

We partner with a range of global constituents that facilitate commerce to make our network more

ubiquitous and efficient for our consumers and merchants. Our network integrates with PSPs, who help

grow our merchant presence, and traditional banks, card networks and open banking providers, who help

facilitate payments. We also partner with commerce enablers (i.e., companies that offer end-to-end

services to help businesses operate their stores) and technology partners to provide merchants holistic

commerce solutions, in-store payments providers to facilitate offline transactions and shipping and return

logistics providers who help our consumers manage purchases. By integrating Klarna with Apple Pay and

Google Pay, our consumers can use Klarna's payment solutions wherever Apple Pay or Google Pay is

available online in the United States as well as, in the case of Apple Pay, in the U.K., without having the

Klarna card. We allow hundreds of partner companies to integrate into our open network, which improves

the value proposition we provide our consumers and merchants by making Klarna available at more

checkout points.

The Scale of Our Network Makes Klarna a Critical Growth Partner for Merchants and the Preferred

Commerce Network for Consumers

With 118 million active Klarna consumers distributed globally as of December 31, 2025, Klarna provides

merchants with an extensive network and solutions for customer acquisition and loyalty, driving higher

conversion and AOV as well as improved retention. We believe that merchants and other payment

ecosystem participants recognize the value that we bring through the scale and reach of our network and

see us as a critical growth partner. Merchants have the opportunity to benefit from our network across the

globe. Similarly, consumers enjoy the benefits of searching, discovering and paying by Klarna, across our

approximately 966 thousand merchants as of December 31, 2025, knowing they will have a positive

consumer experience with our network's abundance of choice, price comparison features and payment

flexibility.

KLARNA GROUP PLC87

We Have Built Market-Leading Underwriting Capabilities

We believe that our credit underwriting capabilities differentiate us from other payment networks and

improve our overall commerce experience. With enhanced underwriting, our consumers have access to

numerous payment methods that help promote their financial well-being while our merchants drive

additional sales. Our proprietary data, including purchase behavior from approximately 3.4 million

transactions per day on average in the year ended December 31, 2025 made by 118 million active Klarna

consumers, underpins our underwriting capabilities. With this data, we are able to make decisions in

seconds, fully automate our process and underwrite every transaction in real time. We also provide a small

spending capacity to consumers, which gradually increases over time as consumers responsibly spend

more with Klarna, and clear repayment terms that encourage borrowers to repay on time, a unique

approach to extending consumer credit compared to market alternatives. In the year ended December 31,

2025, our average balance per active Klarna consumer was $124 (Pay in Full: $0; Pay Later: $120 Fair

Financing: $393) (compared to an average balance per credit card of approximately $6,961 in the United

States in 2025, according to Experian). Based on contractual repayment schedules, our weighted average

life (WAL) was approximately 39 days (27 days for Pay Later and 109 days for Fair Financing) (compared to

a typical loan duration of more than five years at a typical Nordic bank in 2024, according to publicly

available information, and an average of 2.5 years of a typical U.S. personal bank loan in Q1 2025,

according to TransUnion). We believe this differentiated underwriting process provides more value to our

consumers and merchants and lowers our credit losses relative to the industry, which drives our more

sustainable financial performance.

Our Network Fuels a Powerful Advertising Solution

We have built a highly differentiated advertising solution based on the close relationship we maintain

with our consumers and merchants and the vast amounts of data they entrust to us. We use proprietary

data, including first-party, SKU-level data, such as browsing, searching, transacting, tracking, returning and

customer service data, to help merchants reach and engage high-intent consumers with relevant

advertisements. We offer brand, search and affiliate solutions to advertisers such that they can connect

with consumers across the commerce journey. We also allow merchants to reach consumers in a

commerce-centric environment, which we believe is the most effective place to reach consumers. These

features, together with our vast amounts of data, allow us to deliver to our merchants marketing attribution

and better measurability and, as a result, a higher ROI on their advertising spend.

We Are a Licensed Bank

We have operated as a licensed bank in the European Economic Area ("EEA") since 2017, when the

Swedish Financial Supervisory Authority ("SFSA") approved our application for a bank license. This license

reinforced our position as a stable, trustworthy institution among our consumers and merchants. Our

license enables our differentiated funding strategy by allowing us to fund 95% of our lending activities

during the year ended December 31, 2025 by utilizing deposits, which are highly stable and lower-cost than

other non-bank funding strategies, such as asset-backed financing. As our consumers increasingly trust us

with their savings, we have collected a large and growing pool of consumer deposits ($13 billion as of

December 31, 2025). We also continue to expand the markets in which we collect deposits, including by

utilizing third-party platforms, such as Raisin. We believe that consumers find our deposit platform

attractive due to its ease of account opening, its intuitive digital platform and the competitive interest rates

that we offer. Our business also benefits from an inherent duration gap between our consumer loans,

which had based on contractual repayment schedules, a weighted average life (WAL) of approximately 39

days as of December 31, 2025 (27 days for Pay Later and 109 days for Fair Financing), and our deposits,

58% of which were fixed-term with an average duration of 268 days in the year ended December 31, 2025.

As a result, we can adjust our lending policies more quickly than our deposit base might change. We also

have the ability to deliberately change the length and interest rate on the deposits that we offer to adjust

this duration gap. Finally, our banking license allows us to design and offer financial products and services

KLARNA GROUP PLC88

that otherwise could require third-party partnerships, like card issuance, and extensive experience and

investment to ensure compliance with applicable regulatory requirements.

Our Structure Allows Us to Offer Fair and Affordable Products

We operate a sustainable business model defined by lower fees for both merchants and consumers

relative to legacy payment networks, such as credit cards. Merchants and consumers combined paid

1.2 times and 1.5 times more in fees using credit cards than with Klarna in Western Europe and the United

States, respectively, comparing credit card fees in the year ended December 31, 2025 and our current

fees, according to the Market Opportunity Study. Further, the average credit card annual percentage rate

in the United States reached 24% in December 2025, according to Lending Tree, while the average credit

card annual fee was $128 as of July 2023, according to NerdWallet. The revolving nature of credit cards

and the broad use of a minimum balance payment keeps consumers in debt. For example, in 2024, U.S.

consumers paid $254 billion in credit card interest and fees, according to the WalletHub analysis of

Federal Financial Institutions Examination Council (FFIEC) and Federal Reserve data. By comparison, in the

year ended December 31, 2025, consumer fees represented only 31% and 30% of a Klarna transaction in

Western Europe and the United States, respectively. We believe our lower fees promote financial well-

being for our consumers and align our success with that of our merchants. As we help consumers and

merchants save more on each transaction, we give consumers more control over their finances and help

them save money. We believe this positive experience encourages them to remain on our network and

move more of their spending to Klarna, which supports our long-term financial success.

Our network as a whole provides structural competitive advantages, which enable us to independently

develop superior experiences for our consumers and merchants, while keeping costs low and driving long-

term growth. The collective cost advantages of our network accelerate our network effects, while

maintaining our own sustainable financial model.

**Better for Consumers**

We are revolutionizing the commerce experience for consumers around the world. We help consumers

find personalized brands and products, pay and manage commerce transactions and finances. We do this

through our network that prioritizes safety and fairness to consumers. We help our consumers save time

and money and put them in control of their commerce experience.

Our Consumers

Adults around the world are using Klarna for their everyday spending, both online and in-store, across

many types of verticals. There is no typical Klarna consumer. In fact, in Sweden, our most mature market,

approximately 85% of the adult population were active Klarna consumers as of December 31, 2025. Our

network is built for everyone, and our consumers are diversified across multiple demographics.

![31613](klar-20251231_g2.gif)

![31615](klar-20251231_g3.gif)

KLARNA GROUP PLC89

![31619](klar-20251231_g4.gif)

![31621](klar-20251231_g5.gif)

________________

Source: Klarna Global Consumer Survey from Q3 2023, n = 16,370.

On the following pages, we provide testimonials from several of our consumers in different markets.

While these case studies are only a selected sample, we believe that they provide a helpful example of

how these consumers have integrated Klarna in their everyday shopping. In particular, the testimonials are

designed to demonstrate the characteristics of our network and products and services that our

consumers find particularly appealing, the diversity and engagement of our consumer base, the strength of

our brand and the flexibility of the payment solutions that we offer our consumers.

Our Globally Recognizable Brand

Our brand is globally recognizable. Our global NPS in September 2024 was 73, according to our

estimates, which is significantly higher than the average NPS for the finance industry of 44 in our top eight

markets as of March 2023, according to CustomerGauge. As of December 2024, according to our

estimates, we had 40% global brand awareness, as compared to 28% on average for our main competitors,

and a global brand trust score of 54%.

Our brand also defines our relationship with consumers. In a financial services ecosystem filled with

opacity and mistrust, Klarna has created a brand associated with trust, transparency and financial

wellness. This brand resonates with our consumers, merchants, partners and employees.

• **Culture**. We are curiously bold. It defines the Klarna spirit. We partner with leading media

companies and globally recognized icons, such as Snoop Dogg and Paris Hilton and her media company

11:11 media, to promote our network in fresh, bold ways reflective of our culture and spirit.

• **Personalization**. Our AI-native product approach makes consumer interactions with Klarna deeply

personal, including recommendations on brands, products and creators.

• **Human Connection**. We are optimists, making everyday money moments better. We are rebels with

a cause, daring to disrupt but always with a purpose to improve commerce and payments for all. And we

do this all simply—we think less is more. We use words like "money" instead of "funds" and "improve"

instead of "optimize." These tenets allow us to connect deeply with our consumers.

• **Purpose**. We care about our planet, and in 2021 launched our Give One planet health initiative to

tackle climate, biodiversity and land degradation crises. Because we support global environmental

initiatives and engage with local communities, our consumers know that we are more than just a

corporation.

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Our Consumer Solutions

Our consumer solutions are built to address the commerce journey:

**Find**

We allow our consumers to discover and engage with merchants pre-purchase with AI-powered,

personalized recommendations. In 2024, we saw an average of 11.9 million daily pre-purchase interactions

on our network (which include clicks by consumers using our discovery and search tools and on ads

placed on our network) and delivered 838 million leads to merchants (i.e., click-throughs by a consumer to

a merchant's store from either the Klarna app or our website). Solutions we offer include personalized

inspiration, merchant deals, cashback offers, product search, price drop notifications, price comparison

and the ability to create wish lists. We also offer location-based product and store recommendations. In

2024, this solution had an eight times higher click-through rate than a leading competitor service

(according to WordStream) and resulted in approximately 3.6 billion drive-to-store offer impressions. It also

drove a higher purchase frequency, as consumers utilizing our location services made approximately 53%

more purchases per month than consumers who had these services disabled. By tailoring

recommendations based on consumer location and preferences, we believe that this solution enhances

the shopping experience and helps alleviate the need for in-store product research by consumers. This is

increasingly important, as approximately 87% of shoppers use their smartphone to research products

while shopping in a store at least some of the time, as of the third quarter of 2023, according to

1WorldSync.

**Pay**

We offer consumers transparent and seamless purchase capabilities through our multiple payment

options that allow consumers to pay in whichever way is most convenient for them, including debit and

credit, without hidden fees or revolving credit. Our payment options have promoted safety and trust since

our inception when we first enabled consumers to pay after receiving their goods. In the year ended

December 31, 2025, we powered approximately 3.4 million daily purchases on average on our network.

Solutions that we offer include our Pay in Full, Pay Later and Fair Financing payment methods. We

continue to innovate our consumer solutions. For example, in 2024, we introduced Klarna balance, which

allows consumers to Pay in Full or make Pay Later payments without connecting a bank account or a

credit or debit card and facilitates the growth of cashback.

**Manage**

We provide consumers a holistic suite of services to fully understand purchases, track after-purchase

activities such as shipping and returns, and manage personal finances with intuitive financial overviews

and deposit and savings accounts. In 2024, there were on average 8.2 million daily post-purchase

interactions and, in the year ended December 31, 2025, on average, 46 million million of our active Klarna

consumers opened the Klarna app every month. Our solutions include loyalty cards, the ability to track

delivery and returns, AI-enabled customer support, and insights into personal finances. In 2024, 48% of our

active Klarna consumers visited the order information page on the Klarna app every month and had a more

than 80% customer satisfaction score on average between February and August 2024. We believe we have

a significant opportunity to expand into digital retail banking services as well. We have a leading deposit

franchise in Europe that we have offered for 10 years. With Klarna balance, consumers can now also hold a

positive monetary balance with us and add, store and withdraw money, settle existing Klarna debt, collect

refunds and receive cashback. In select markets, we allow consumers to create sub-accounts that help

them compartmentalize their money and create savings goals. We currently offer savings accounts directly

to residents of Sweden, Germany, Austria, the Netherlands, Finland, France, Belgium, Spain, Ireland, Italy

and Portugal. We are also able to collect deposits in Germany, the Netherlands, France, Spain and Ireland

pursuant to a partnership with a third-party deposit-taking platform operated by Raisin.

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Advantages of Our Consumer Solutions

Consumers shop effortlessly on our network. We believe we offer them a more relevant and

convenient way to shop that also provides greater financial control.

• **Personalized**. Shopping on our network is personalized with tailored search and recommended

content based on past purchase behavior. Consumers receive personalized recommendations and deals

for top products and brands.

• **Convenient and Easy**. When shopping on the Klarna app, the entire commerce journey is in one

place, including browsing, paying, tracking orders and deliveries, finding receipts and managing returns. We

are reducing the commerce clutter for our consumers.

• **Safe and Trustworthy**. Since our inception, we have allowed consumers to touch and feel products

before they paid for them by offering them Pay Later solutions. Our payment methods give consumers

confidence to transact.

• **Affordable**. The majority of our payment options do not charge consumers interest as they allow

consumers to spread the cost of a purchase interest-free. We do not offer revolving credit, and there are

no hidden fees on our network. This results in lower costs for purchases by our consumers than for

average credit card transactions that revolve.

• **Transparent and Fair**. We believe we provide consumers greater financial control over their

commerce journeys. Our multiple payment methods allow consumers to pay however they choose. They

also have flexible and consumer-friendly terms that are easy to understand. New consumers start with a

small spending capacity that increases as consumers responsibly spend more with Klarna. The repayment

terms are fixed and typically short-term.

Increasing Diversity of Use Cases and Frequency for Our Consumers

We believe that the breadth and quality of our products drive consumers to use Klarna for more of

their purchases and across additional verticals over time. As our markets mature and consumers use our

network for longer, the average consumer purchase frequency typically increases. Similarly, purchases

across verticals also generally become more diversified over time.

**Increased Consumer Adoption**

![Screenshot 2026-01-23 140241.jpg](klar-20251231_g6.jpg)

KLARNA GROUP PLC92

________________

Note: The chart above refers to the last twelve months ended December 31, 2025. The "Years since

launch" axis does not apply to the Klarna card or the typical U.S. credit card frequency data point. U.S.

credit card use frequency based on data by Capital One.

**Better for Merchants**

We believe we are revolutionizing commerce for merchants, enabling them to succeed on every

mission-critical business priority.

Our Merchants

Klarna is a preferred growth partner for approximately 966 thousand merchants in 26 countries across

the world as of December 31, 2025. In the last twelve months ended July 31, 2025, 48% on average of the

top 100 merchants in each of the major markets we serve (i.e, the United States, the U.K., the Nordics,

Germany, Austria, Belgium, Spain, France, Italy, the Netherlands and Switzerland) chose Klarna to facilitate

payments, based on data from eCommDB and Digital Commerce 360. Our broad adoption across

merchants contributes to our GMV diversification, with no single merchant representing more than 10% of

our GMV in any of our major markets in the year ended December 31, 2025. We power merchants across

different verticals including Fashion & Accessories (H&M, Ray-Ban, Macy's and Zara), Travel (Airbnb,

Expedia, Booking.com and Cathay Pacific), Sports & Outdoor (JD Sports, On, Patagonia and Decathlon),

Everyday Payments (Uber, Spotify, Walmart and Instacart), Luxury & Premium (Gucci, Farfetch, Vestiaire

Collective and Net-a-porter), Health & Beauty (Sephora, Charlotte Tilbury, Rituals and Benefit Cosmetics),

Home & Electronics (Samsung, Bose, Dyson and Sonos) and much more (Ikea, Ticketmaster, eBay and

Etsy).

On the following pages, we provide several case studies and other examples of what successful

integration with Klarna can mean for our merchants in different verticals. Results achieved by individual

merchants may vary for a number of reasons, including the number and the type of our solutions, products

and services deployed by the merchant, the geography and vertical in which the merchant operates and

the timeframe during which the results are measured, as well as because of our growing global presence

and introduction of new and improved merchant solutions. At the same time, we believe that the examples

that we have chosen are representative of the impact that our network has on enabling our merchants'

growth and the financial and performance results presented are typical of the results that our merchants

generally experience.

Our Merchant Solutions

Our merchant solutions enable merchants to grow their businesses and attract, engage and retain

customers by partnering with Klarna.

• **Numerous Channels to Connect to Our Consumers**. We want to make it as easy as possible for

merchants to join the Klarna network, accept our payment methods and connect to millions of our

consumers. Merchants around the world can connect to our network through a single shared API and gain

access to our consumers nearly instantly. We make local adaptations as needed in new markets, but the

foundation of our network is built to support a global footprint. We offer multiple channels for merchants

to connect to our network both online and offline, including embedding Klarna payment options at

checkout on their websites or in apps, on the Klarna app, by accepting the Klarna card, in-store solutions

and a full checkout experience that also accepts other payment options.

• **Merchant Enablement and Growth Tools**. We provide merchants with several merchant tools that

help accelerate the growth of their businesses. We offer a host of solutions that drive conversion at

checkout, such as on-site messaging, which promotes Klarna as a payment method, express checkout,

KLARNA GROUP PLC93

which provides a one-click purchase experience, and merchant offers, which promote products and

services selected by the merchant. We also operate a merchant portal that organizes various tasks for

business management such as daily sales overviews or customized settlement reports.

• **Advertising to Help Merchants Better Connect with Consumers**. We have developed highly

differentiated advertising solutions that allow merchants to reach and engage high-intent consumers in a

commerce-centric environment. We use first- and third-party data, including browsing, searching,

transacting, tracking, returning and choosing replacements, to serve consumers relevant and experience-

enhancing products through ads. Our advertising solutions allow merchants to reach consumers across

their shopping journey, whether in their discovery phase of shopping, or those with demonstrated intent or

ready to transact.

Advantages of Our Merchant Solutions

• **Better Conversion Rates**. We provide efficient commerce through our multiple payment methods

online and offline. This has helped drive a 20% conversion increase for certain of our merchants since they

joined our network.

• **New Customers**. We believe that our solutions help merchants acquire new customers more

efficiently than other customer acquisition channels. Our advertising solutions leverage our scale,

consumer and merchant engagement, and first- and third-party data to allow merchants to engage with

consumers in a closed-loop, commerce-native network.

• **Higher AOV**. Our consumer solutions promote the financial well-being of our consumers while

unlocking consumer purchase power. For example, our study of 83 merchants across different verticals

and geographies concluded that we drove on average 23% higher AOVs for our merchants (from 2022 to

June 2024).

• **Fair Merchant Fees**. We provide significant value to our merchants and charge fair fees for our

service. We believe that our merchants gain greater benefits with Klarna when compared to other payment

solutions, with fees in line with other providers. On top of this, we also save our merchants' end customers

money as compared to an average credit card transaction and give them greater control over their

purchases and finances, helping improve both our merchants' and customers' experiences.

• **Full Brand Control**. We want our merchants to leverage our network to define their brand and build

direct relationships with their consumer base. As such, we offer the ability for merchants to promote

themselves in their unique way on the Klarna app and our website. For example, merchants can set up

storefronts on the Klarna app and our website which they design and manage themselves with their own

branding. Direct relationships with consumers drive greater retention, and merchants using Klarna had

46% higher retention in September 2024 compared to legacy payment methods, according to our

estimates.

• **Rich Data Insights**. Merchants gain rich insights into consumers' behavior across their shopping

journeys, from browsing and advertising click-through rates to price comparison and cart dynamics,

allowing them to optimize consumer commerce experiences.

The chart below illustrates our expanding partnership with On, one of many globally trusted brands

that joined our network in recent years.

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**Accelerating Merchant Growth**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) |
|  | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) |
|  | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) |
|  | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) | ![klarna.jpg](klar-20251231_g7.jpg) |
|  | **2020** | **2021** | **2022** | **2023** | **2024** |
|  |  |  |  | ![header.jpg](klar-20251231_g8.jpg) |  |
| Share of<br>checkout\*\*<br>| **12%** | **15%** | **35%** | **30%\*** | **32%** |
| GMV vs.<br>2020<br>| **1x** | **2x** | **2x** | **3x** | **5x** |
| Revenue vs.<br>2020<br>| **1x** | **2x** | **2x** | **4x** | **9x** |

---

________________

Note: On's expansion to the United States impacted the share of checkout in 2023. Share of checkout

is calculated as Klarna's GMV share of the merchant's total GMV generated online (including on the On

app) in our markets. GMV represents the merchant's total GMV transacted on our network. Revenue

represents the merchant's total revenue generated on our network.

Source: Klarna's calculations based on information received from the merchant.

Our solutions have consistently proven to drive merchant growth across different markets and

verticals, resulting in more efficient customer acquisition, higher AOV and better order conversion and

customer retention rates for our merchants, as illustrated by the several case studies presented below.

![foodora.jpg](klar-20251231_g9.jpg)

________________

Note: In 2020, H&M integrated Klarna's In-app mobile checkout into its app in ten markets. Klarna

payment options were quickly adopted by H&M customers—in these markets, our share of checkout has

reached almost 50% and, in Sweden, 60% of orders from new customers are made through Klarna. In

partnership with us, Sephora has introduced flexible payment options across the United States and

Canada, which have increased customer loyalty and purchase frequency. In 2023, Klarna users shopped at

KLARNA GROUP PLC95

Sephora 6.8 times per year on average, compared to four times per year on average for all Sephora

consumers. In recent years, members of Sephora's Beauty Inside Loyalty program across tiers (Insider, VIB

and Rouge) were two times more likely to use Klarna. Within the program, more than 40% of Klarna users

enrolled in a Sephora loyalty program qualified in the top two tiers (VIB and Rouge), measured by annual

spend. Using our affiliate program, Expedia increased its exposure on the Klarna app through a variety of

channels and placements, including email campaigns and ads. For instance, in 2024, the percentage of

Expedia transactions made by new Klarna customers more than doubled in the United States year over

year. In the United States, through our affiliate program, Expedia and Hotels.com experienced an

approximately 5% increase in their basket size in 2024 year over year. Since 2019, Foodora's customers in

Sweden have been able to pay for their purchases with Klarna. In August 2024, Foodora decided to use our

advertising solutions to promote on our network. As a result, the purchase frequency of Klarna consumers

increased by 14% in August 2024, as compared to October 2023, and our share of checkout in Sweden

reached 35% on average between August 2024 and September 2024.

Source: Klarna's calculations based on information received from the merchant.

**Proprietary Data, Technology Platform and AI Strategy**

Since 2005, Klarna has been a constant innovator in our industry. We were a first mover in the "buy

now, pay later" space, built a disruptive brand when we obtained our banking license, integrated "pay

anywhere" into the Klarna app and leveraged our data to develop highly differentiated advertising

solutions. Today, we are among the very first to adopt AI, which we use to improve consumer

personalization as well as achieve internal efficiencies.

Consumer Data at the Core of Our Technology Platform

The strong trust and engagement we have earned from our consumers and merchants gives us a

unique data advantage. We use consumer data to improve their commerce experience, with an aim to save

them time and money. Our unique data set includes SKU-level data points, including 2.6 billion data points

collected in the year ended December 31, 2025, and the learnings of more than 6.4 billion transactions

conducted on our network to date.

This data powers our understanding of:

• **Intent**. We understand saved, wish listed and shared items, time spent browsing products,

engagement with deals or campaigns and brand affinity. With such customer intent data, we are able to

predict what our consumers are looking for, and help merchants offer them more relevant products and

ads.

• **Purchase History**. We have insight into consumer SKU-level purchase history, brand loyalty,

payment method, price sensitivity, purchase frequency, AOV and order return rates. Consumer purchase

history allows us to deeply understand how our consumers like to shop and we can therefore help

merchants drive higher conversion.

• **Consumer Profiles**. We understand details of our consumers such as purchase power, credit score

and declared interests. With consumer profile data, we know how to relate to each consumer in a personal

and tailored way that builds trust and delivers better commerce experiences.

Our Single, Cloud-Based Technology Platform

Data underpins our technology platform. The platform connects to the many constituents of our

network, including consumers, merchants, PSPs, affiliate networks, credit bureaus and banks, to deliver a

seamless user experience for our consumers and merchants across our core product offerings. Because

we operate a single cloud-based platform, our consumer and merchant solutions are highly scalable and

secure. This underlying technology enables merchants around the world to connect to our network

through a single shared API and gain access to our millions of consumers nearly instantly. We prioritize

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building our own technology and investing in extraordinary engineering talent. As of December 31, 2025,

over 1,500 of our positions, or approximately 53% of our entire organization, were engineering and data

science positions.

We Are an AI-Powered Company

utilizing AI to transform commerce. We harness AI for the benefit of consumers, merchants and our

employees. AI makes us more productive and efficient. As of August 31, 2024, 96% of our employees used

generative AI in their daily work, according to our internal data gathered from OpenAI and our internal AI

tools.

• **Generative AI Improves Merchant Conversion and Accelerates Our Revenue**. We present consumers

with AI-powered personalized shopping feeds that allow them to discover dynamic and personalized

brand, product and creator recommendations. We have also developed an AI shopping assistant that

enables merchants to make strategic product recommendations to consumers. Our consumer data

platform ensures that our merchants have high-quality customer targeting. These features drive higher

consumer engagement and merchant conversion rates, leading to more transactions from our consumers,

more revenue for our merchants and more revenue for us.

• **Generative AI Streamlines the Consumer Experience and Reduces Our Costs**. In February 2024, we

launched our AI assistant in partnership with OpenAI, available in the Klarna app. This chatbot enhances

consumer shopping and payment experiences and manages various tasks, such as multilingual customer

service and refunds and returns. Since launch, our AI assistant has achieved the same consumer

satisfaction levels as human agents (according to internal consumer satisfaction surveys), more accurately

resolved issues, reduced repeat inquiries by 25% (based on the number of repeat inquiries before and

after the launch of our AI assistant) and resolved queries in two minutes compared to 12 minutes on

average for human agents, as of September 2024 (based on our service chat log data). Available 24/7 in 23

markets, the AI assistant communicates in more than 35 languages. Since launch, our AI assistant has had

31 million conversations, handling 80% of customer service chats in the year ended December 31, 2025,

according to our service chat log data. We estimate that our AI assistant does the equivalent work of over

700 full-time agents (based on the average monthly reduction in chat and telephone conversations in 2024

following the launch of our AI assistant) and delivered $39 million in cost savings in 2024.

• **ML Supplements Our Credit Underwriting**. ML enhances our high-frequency, large-scale and real-

time underwriting, which helps drive conversion rates and minimizes credit losses. Our underwriting model

is based on our access to first- and third-party data, including data entrusted to us by our consumers. It

becomes more accurate as our network scales and our ML models analyze growing amounts of data. In

December 2024, our underwriting model had more than two times better predictability of default than the

VantageScore benchmark in the United States, according to our estimates.

• **Generative AI Enhances Our Productivity and Drives Increasing Efficiency**. We use AI to increase

productivity within our engineering and operational teams. Our engineers and data scientists connect their

work software to the AI copilot that can create and review code, while our legal teams use AI to expedite

document review. We also use AI to minimize external vendor costs. We decreased spending on external

marketing suppliers, such as translation, production, CRM and social agencies, by $7 million in the first

quarter of 2024 (as compared to the first quarter of 2023) and we attribute 37% of this decrease to the use

of AI (based on the savings realized from AI-powered marketing in the first quarter of 2024 and the total

decrease in our spending on external marketing suppliers in that period). We also reduced or canceled

contracts with over 1,700 suppliers following our AI adoption and standardization (based on the decrease

in the number of suppliers we had in 2022, as compared to the number of suppliers in the year ended

December 31, 2025, following our adoption of AI in our operations), and we estimate that we saved $10

million in 2024 from AI-powered marketing. Additionally, we operate an internal knowledge chatbot, which

we call Kiki, that helps employees find information in real time across internal systems. Making information

more readily available across our entire organization with Kiki increases transparency and collaboration

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across our teams, reduces repetition of tasks, boosts productivity, and ultimately reduces our operating

costs. These internal applications of AI have dramatically increased our average revenue per employee in

recent periods.

**Our Market Opportunity**

Our network addresses substantial and growing market opportunities in payments and digital

advertising. Additionally, there are a number of adjacencies that we believe we have the ability to enter,

including P2P transfers, bill payments and other retail banking services. We continuously strive to develop

innovative products and solutions for our consumers and merchants and will continue to leverage and

invest in our network over time.

Payments Opportunity

We have a track record of building and expanding globally. Annual consumer retail and travel spending

in all markets globally (excluding China), including the markets in which we do not yet operate, is estimated

to be $35 trillion in 2027, based on the Market Opportunity Study, which equals nearly $1 trillion in

payments revenue based on our take rate. Our GMV for the year ended December 31, 2025 represented

less than 0.5% of this global payments opportunity. Our network addresses the $20 trillion consumer retail

and travel market spend opportunity in the markets where we operate, based on the Market Opportunity

Study. We consider our SAM to be the approximately $560 billion payments revenue opportunity

associated with that spend, based on our average take rate in the year ended December 31, 2025, of which

$128 billion related to e-commerce. Our revenue in the year ended December 31, 2025 represented

approximately 0.6% of our SAM.

We believe that we are well positioned to continue to grow faster than the market. Our network is

aligned with important secular growth drivers, including the continued share gain of digital payments and

the declining portion of consumers who use credit cards. For example, based on the Market Opportunity

Study, e-commerce is expected to grow at a 8% CAGR through 2027 and digital wallets are expected to

grow by more than 20%, compared to the 9% expected growth of our SAM.

The payments landscape remains highly fragmented. Even as a leader in certain markets, we see

significant growth potential. In Sweden, approximately 85% of adults used Klarna in 2025, but our wallet

share was still below 7%, according to our estimates. In the United States, as of December 2025, only 11% of

adults used Klarna and our wallet share remains below 3%, according to our estimates. We believe that we

can expand our penetration within existing markets by expanding our network into new verticals and

launching new products and payment channels.

Digital Advertising Opportunity

Global digital advertising (excluding China) represents an over $600 billion market opportunity as of

December 31, 2025, based on the Market Opportunity Study. Our advertising revenue in the year ended

December 31, 2025 represented approximately 0.03% of this global digital advertising opportunity.

We have developed innovative advertising solutions using our SKU-level data, which enables

advertisers to reach high-intent consumers with relevant and engaging advertisements. We believe that

our proprietary data, solutions that reach consumers across their commerce journey and ability to reach

consumers in a commerce-centric environment position us well to capture a significant share of the digital

advertising market.

We have exposure to the fastest-growing segment of digital advertising—commerce media—because

our network provides consumers the ability to shop directly in the Klarna app or on our website.

Commerce media, where advertisements are placed alongside shoppable inventory, is projected to grow

by a 19% CAGR through 2027, compared to the projected 9% CAGR for the broader digital advertising

market, according to the Market Opportunity Study.

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Future Market Opportunities

We are integrated in the everyday shopping of our active Klarna consumers and believe we have the

opportunity to further embed Klarna in their daily financial lives. We already have a significant deposit-

taking business that we have built over the past 13 years, with $13 billion in consumer deposits as of

December 31, 2025. We continue to innovate on our digital retail banking opportunity as well. For example,

we launched Klarna balance in 2024, which allows consumers to hold a positive monetary balance with

Klarna and add, store and withdraw money, settle existing Klarna debt, collect refunds and receive

cashback. We plan to continue to grow our consumer retail banking solutions, which we believe will allow

us to capture new market opportunities.

**Our Competitive Advantages**

We enjoy several key competitive advantages that have enabled our continued success since our

founding in 2005:

• **Compounding Network Effects**. Klarna enjoys powerful network effects. Our personalized, highly

engaging consumer experiences drive consumers to our network. As more consumers engage at scale,

more merchants join our network and grow their businesses. As more merchants join the network,

consumers benefit from increased selection across verticals, channels and geographies, and can purchase

more frequently using, and demonstrate preference for, our network. Klarna has established a high-utility,

high-frequency model, enabling the purchase of everyday goods and services that benefits both our

consumers and merchants.

• **Trusted Brand, Global Distribution**. We have built a brand that is distinctly global, universally

recognized and well-loved by consumers and merchants, an accomplishment that we believe is rare

among businesses that provide payments and financial services. Our global NPS in September 2024 was

73, according to our estimates, which is significantly higher than an average NPS of 44 for the finance

industry in our top eight markets as of March 2023, according to CustomerGauge. As of December 2024,

we also had a higher global brand awareness (40%) than the average of our main competitors (28%),

according to our estimates. The strength of our brand contributes to our global scale. Our approximately

118 million active Klarna consumers and 966 thousand merchants as of December 31, 2025 operated in 26

countries around the world. Our merchants include global leaders across verticals, such as Walmart,

Airbnb, H&M, Nike, Uber and eBay. The ability to provide merchants with global access to consumers

almost instantly once connected to our network is a critical competitive advantage.

• **Industry-Leading AI Adoption and Implementation**. Klarna has been an early and leading adopter of

points, including over 2.6 billion data points collected in 2025, and more than 6.4 billion transactions

conducted through our network since our founding. We also utilize ML in our business, in particular to

increase the speed and accuracy of our proprietary underwriting model. Consumers and merchants

entrust us with their data because we use that data for their benefit by improving their experience with

Klarna, as more fully explained below:

• *AI improves conversion and accelerates our revenue*. We present consumers with AI-powered

personalized shopping feeds, leading to more transactions on our network.

• *AI streamlines the consumer experience and reduces our costs*. In February 2024, we

launched our AI assistant in partnership with OpenAI. Our AI assistant has handled 80% of

customer service chats in the year ended December 31, 2025 (according to our service chat

log data), with no drop in consumer satisfaction levels since its introduction (according to

internal consumer satisfaction surveys).

• *ML supplements our credit underwriting*. ML enhances our high-frequency, large-scale and

real-time underwriting.

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• *AI transforms our productivity and drives increasing efficiency*. AI adoption—including the

related reduction in the use of third-party suppliers and vendors and the adoption of the AI

copilot to create and review code—has led to internal efficiencies. Our average annual revenue

per employee at period end has increased from approximately $344,000 in 2022 to

approximately $1,240,000 in the year ended December 31, 2025.

technology platform that facilitates connections across the global ecosystem. Businesses ranging from

PSPs, traditional banks, card networks and open banking providers to commerce enablers, technology

partners, in-store payment providers and shipping and return logistics providers join our network through a

single shared API to enable fast and global connectivity nearly instantly.

• **Diversified and Sustainable Business Model**. Our diversified revenue model, based primarily on

merchant fees, aligns the interests of merchants, consumers and our business. The proportion of our

revenue generated from merchants, consumers and advertising is generally more balanced compared to

many of our competitors in the payments and the banking industries, who tend to depend more heavily

than we do on either merchant revenue or interest income. Our banking license provides us with a

diversified, flexible funding toolkit and enables us to maintain a low-cost, stable funding model based on

consumer deposits as well as the ability to actively manage our balance sheet through a range of

complementary funding and risk-transfer mechanisms as we scale. We currently offer savings accounts

directly to residents of Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the

Netherlands, Norway, Poland, Portugal, Spain and Sweden. We are also able to collect deposits in Germany,

the Netherlands, France, Spain and Ireland pursuant to a partnership with a third-party deposit-taking

platform operated by Raisin. Our banking pedigree adds rigor to our underwriting processes, which are

designed to continuously improve our credit decisioning and monitoring. These factors, combined with our

efficient go-to-market model defined by a recognizable brand and partnerships with top global merchants,

PSPs and commerce platforms, drive leverage in our operating model.

• **Durable Growth Profile, with Scale Efficiencies**. Our network connects millions of consumers and

hundreds of thousands of merchants at scale to power global commerce. Our scale enables our efficient

growth. More consumers attract more merchants to our network, which, in turn, attract more consumers.

As we have scaled our operations over the last 20 years, we have optimized our cost structure and driven

meaningful operating leverage in the business. For example, from 2023 to the year ended December 31,

2025, our operating loss improved by 29% while our transaction margin dollars increased by 14% and

operating margin by 8 percentage points during the same period.

**Our Growth Strategies**

Our vision is a world where Klarna empowers everyone, everywhere, through seamless commerce

experiences—as a personalized, trusted assistant making financial empowerment effortless. Success in the

future will belong to global companies with lean technology and best-in-class customer acquisition models.

We believe the foundations of our network that we have built and our strategic initiatives position us to

deliver on this vision.

Our unique go-to-market strategy, with a recognizable brand and partnerships with top global

merchants, PSPs and commerce platforms, enables us to introduce new consumers and merchants to our

growing network effectively. By combining this acquisition engine with a proven approach to building

consumer and merchant engagement and trust, we believe we are well positioned to expand our

commerce and financial offerings, as an everyday spending and saving partner.

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Our strategic priorities to fuel our future growth include:

• **Klarna at Every Checkout**. We seek to continue to grow the number of merchants on our network

and enable their success.

• *Leverage our proven global go-to-market merchant strategy*. We have a winning approach that

has secured approximately 966 thousand merchants across 26 markets globally as of

December 31, 2025. Our success spans multiple verticals, with an average of 48% of the top

100 merchants in each of the major markets we serve (which include the United States, the

U.K., the Nordics, Germany, Austria, Belgium, Spain, France, Italy, the Netherlands and

Switzerland) already on our network, reinforcing Klarna as a preferred partner for merchants

worldwide.

• *Deepen our partnerships with PSPs*. We plan to make Klarna available at more checkout points

by PSP integration that will make Klarna a default payment method of our partners, like Stripe,

Worldpay, Adyen, Nexi and J.P.Morgan Payments.

• *Expand into new verticals*. We are a market leader in the Fashion, Apparel, and Accessories

verticals in most of our current markets. Our recent expansion into additional verticals has

demonstrated that we can replicate that success in verticals with higher transaction frequency

such as Travel (e.g., Airbnb), on-demand Local Services (e.g., Uber, DoorDash and Instacart) and

Subscription Payments (e.g., Spotify). We plan to continue to diversify the merchant verticals

available on our network.

• *Partner with digital wallets—seamless integration with Apple Pay and Google Pay*. Digital

wallets like Apple Pay and Google Pay are essential distribution channels for Klarna. These

platforms are widely adopted by consumers and frequently used at physical terminals that

support contactless Near Field Communication (NFC) payments. By integrating Klarna with

Apple Pay and Google Pay, our consumers can use Klarna's payment solutions wherever Apple

Pay or Google Pay is available online in the United States as well as, in the case of Apple Pay, in

the U.K., without having the Klarna card.

• *Enter new geographical markets*. We have a proven strategy for entering new markets, as

demonstrated by our continued progress in the United States, where we consistently improved

our operating results following our entry into that market in 2019 and started generating

positive transaction margin dollars in 2023. We will continue to seek attractive new markets to

enter.

**•Klarna Card in Every Wallet**.

• We envision Klarna becoming the default payment method for our millions of active Klarna

consumers and future consumers. With the Klarna card, we are making it easier for consumers

to enjoy our popular flexible payment options, both online and offline. This flexibility is helping

us extend Klarna's reach into the offline world, driving adoption of our payment options across

a wide range of consumers, regardless of their credit score.

• The Klarna card has proven to boost the average purchase frequency by 2023 by three times

in Sweden and eight times in Germany since it was first introduced in those markets, allowing

consumers to pay in ways that suit them best—whether using Pay in Full, Pay Later or Fair

Financing.

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• Klarna Card GMV growth increased from 92% in Q3'25 to 209% in Q4'25, with December growth

reaching 261%. The Card now represents 15% of total transactions, supported by both rapid

user adoption and higher transaction intensity.

**Increased Use of Klarna Card**

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**•Next-Generation Digital Financial Services**. As a digital-first neobank, Klarna's services are

automated, insight-driven and designed to be transparent, fair and intuitive. We partner with PSPs,

traditional banks, card networks, commerce enablers, technology partners, merchants and

shipping and return logistics providers to improve the commerce experience for our consumers.

This breadth of our ecosystem, coupled with our extensive portfolio of licenses and regulatory

authorizations, allows us to provide consumer services that others cannot, such as instant refunds,

cashback, real-time debit or order and return tracking. These features save consumers time and

money and effortlessly put them in control of their finances.

• **Your New Lifestyle Partner: Where Smart Spending Begins**. Traditional credit cards often entice high

spending consumers with the allure of concierge services that promise life-changing benefits but

frequently fail to deliver. We are redefining lifestyle services by becoming the genuine partner that truly

enhances the everyday shopping experiences of all of our consumers.

• Leveraging our unique insights from proprietary data, including first-party, SKU-level data, we

offer personalized services that act as a true utility for consumers. This deep understanding

enables us to tailor individualized offers for goods and services today and, in the future, we

expect to expand into personalized financial services. By delivering highly relevant

recommendations and exclusive deals, we not only enrich the consumer experience but also

attract a growing number of merchants eager to advertise with us, recognizing the value of

reaching engaged and satisfied customers.

• Our AI-powered personal assistant is at the heart of this transformation, making the consumer

journey both effortless and joyful. It anticipates needs, simplifies decision-making and adds

delight to every interaction.

• Consumers gain access to Klarna's subscription tiers, allowing consumers to earn cashback

and unlock additional benefits such as exclusive deals, travel protection and travel perks

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(including airport lounge access on higher tiers), and bundled digital subscriptions (e.g.,

Headspace, The Times and Condé Nast titles), designed to deliver greater convenience,

savings, and an enhanced everyday experience.

to reduce external vendor expenses, increase internal productivity and better manage global compliance,

regulation and banking operations centrally with fewer employees and more consistency. AI allows us to

drive scale efficiencies greater than what was previously thought possible, allowing our deep talent pool to

focus on innovation and growth.

**Our Solutions and Products** 

We provide consumers and merchants a number of solutions, including payment, advertising and

digital retail banking, through several channels. We offer several commerce features.

Payment Solutions

We provide a broad range of payment options that allow consumers to purchase how they choose,

both online and offline.

• **Pay in Full**. Pay in Full instantly settles purchases at the time of the transaction. Payment methods

vary by market and may include direct debit from bank accounts, credit and debit card or digital wallets.

In a Pay in Full transaction, we charge the merchant a fee after a successful transaction and the

consumer pays no fee. In the fourth quarter of 2025, Pay in Full represented 10% of our GMV.

• **Pay Later**. Pay Later enables consumers to purchase goods or services at the time of the

transaction and pay the full amount at a later date. The most common version of Pay Later is Pay in 30,

where the consumer pays 30 days after purchase. We also offer Pay Later as Pay in "N," which allows the

consumer to split their purchase into multiple installments which begin with a first payment when a

purchase is initially made. The most common installment plans are Pay in 3, when installments are paid

every 30 days, or Pay in 4, when installments are paid every 14 days. All of our Pay Later products are

designed to be fee- and interest-free for the consumer. As a result, Klarna pays the merchant on behalf of

the consumer when the order is placed and, generally, our consumers do not pay a fee or interest, with our

fees being generated from merchants who offer the payment method.

In a Pay Later transaction, we charge the merchant a fee after a successful transaction, and the

consumer pays no interest on the deferred or installment payments unless the consumer chooses to

utilize one of our payment flexibility features. In the fourth quarter of 2025, Pay Later represented 78% of

our GMV.

• **Fair Financing**. Fair Financing allows consumers to pay for their purchase over a longer duration,

which ranges from three to 48 months.

In a Fair Financing transaction, we charge the merchant a fee after a successful transaction. In

addition, consumers typically pay interest for this payment method. In the fourth quarter of 2025, Fair

Financing represented 12% of our GMV.

Advertising Solutions

Our commerce solutions have enabled us to build a highly differentiated advertising solution based on

the close relationship we maintain with our consumers and merchants and the vast amounts of data they

entrust to us.

• **Sponsored Search**. Sponsored search allows merchants to reach consumers with intent. Sponsored

search allows merchants to pay for premium placement of their products in consumers' search results.

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• **Affiliate Program**. Merchants can partner with Klarna as a premium publisher to place shoppable

inventory in front of high-intent Klarna consumers. For example, we offer a dedicated shelf, which is a full

carousel in a consumer's home feed for a merchant to promote various products.

• **Brand Ads**. Brand ads are delivered via a programmatic advertising ecosystem (i.e., automated

process of buying and selling digital advertising through the use of programmatic software) in which we

partner with third-party providers that connect us to advertisers. As a publisher, Klarna offers access to

ads inventory, which is the total amount of ad placements or ad space a publisher has available for

advertisers to purchase, and consumer audiences, which drives awareness and traffic for advertisers. We

also partner with third-party providers, such as advertising supply-side platforms, to scale beyond our

current merchant reach.

We generate advertising revenue from fees we collect from merchants using our advertising solutions.

Typically, fees from sponsored search and brand ads solutions are charged using a cost-per-click and

cost-per-mille (i.e., cost per thousand impressions) fee rate, respectively. Fees from our affiliate program

are based on a cost-per-action or a cost-per-click rate or the merchant pays a flat fee for the entire

campaign. In the year ended December 31, 2025, we recognized advertising revenue of $190 million in the

aggregate from our affiliated program, sponsored search and brand ads solutions.

Digital Retail Banking Solutions

• **Klarna Balance**. Consumers can hold a positive monetary balance with Klarna by using our Klarna

balance solution. They can also add money and withdraw money, settle existing Klarna debt or receive

refunds or cashback (currently, up to 10% when shopping using the Klarna app).

Klarna balance also offers additional features in select markets, such as flex accounts, which are sub-

accounts that allow consumers to compartmentalize money and create savings goals, and fixed-term

accounts, which are savings accounts at market-leading higher interest rates.

• **Deposit and Savings Accounts**. Consumers in geographies where we offer deposit accounts can hold

a variety of accounts, including fixed-term deposits, savings and bank accounts. We focus on providing

secure, easy-to-access and cost-effective savings solutions.

• **Financial Insights**. Consumers can manage their personal finances through the Klarna app. We offer

insights into spending patterns and behavior over time. For example, consumers can view reports that

show spending by category, and analyze their spending activities in comparison to their saving activities.

Based on these insights, consumers can set a monthly budget and a personal limit on their Klarna

spending to help them stay within their budget.

We do not charge fees for utilizing our digital retail banking solutions. However, we may earn interest

income on consumer funds deposited with us.

Channels

Consumers and merchants connect to our network through a number of different channels. Our

payment methods are offered in these channels.

• **Klarna Payments**. Klarna payments allows merchants to add Klarna as a payment method to their

online checkout, on our website or the Klarna app. Merchants can choose how they integrate with Klarna

payments—directly through our API or via their preferred platform, such as one of our partner PSPs.

• **Klarna App**. The Klarna app creates one holistic commerce destination experience for consumers.

It also presents merchants with a single streamlined location to reach our consumers. Merchants can

reach our consumers with shoppable inventory, stores that link to their own websites and relevant

advertisements, all within the Klarna app.

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Consumers can also request a virtual one-time card within the Klarna app, browser extension or

website or pay with our payment methods at any online or physical store that accepts Visa. Consumers

check out with the merchant as if they were using any other Visa card and then receive a payment plan

with Klarna, which they can manage on the Klarna app. With a one-time card, consumers can use our

payment methods at almost any merchant.

• **Klarna Card**. The Klarna card allows consumers to access our payment methods in any physical

store or online setting without the need for merchant integration to the Klarna network. The Klarna card

differs from a traditional credit card in that it allows consumers to choose any of Klarna's payment

methods at the time of each transaction, offering differentiated flexibility and choice. The Klarna card has

no annual or other ownership fee and customers are not charged interest on their purchases made with

our Pay Later payment option or foreign exchange fees when using the Klarna card abroad. The Klarna

card is available virtually and physically, and can be used with Google Pay and Apple Pay. The Klarna card

is available today in Sweden, Germany, the U.K. and the United States.

• **Apple Pay and Google Pay**. Apple Pay users in the United States and the U.K. have access to Klarna's

flexible payment options, including Pay Later and Fair Financing, while Google Pay users can access them

in the United States. This integration makes our solutions even more accessible to consumers as they now

can make purchases using Klarna directly on an iPhone, iPad or another mobile device, in the Klarna app

and online with Apple Pay or Google Pay.

• **Klarna In-Store**. Klarna in-store provides a seamless, flexible and consistent payment experience

designed for physical stores. All of the payment methods available online can be offered in-store.

Membership Program

We launched a membership program in conjunction with the Klarna Card offering. During the Klarna

Card sign-up process, consumers can choose between four membership tiers—Core, Plus, Premium, or

Max. Benefits vary by plan and may include up to 2% cashback on debit purchases, access to selected

third-party subscriptions, travel and purchase protection, exclusive offers, and dedicated customer

support. Depending on usage and tier, the combined value of these benefits can be significant over the

course of a year.

As consumers increasingly seek flexible and cost-effective ways to manage their spending, Klarna's

membership model is designed to meet these evolving preferences by combining everyday payment

functionality with added value services in a single offering.

Commerce Features

We offer multiple commerce features for consumers and merchants throughout the commerce

journey.

• **Personalized Inspiration**. We present consumers with an AI-powered shopping feed organized into

sections filled with merchant-specific stores or products categorized by type, key trends or deals. Our

shopping feed typically includes relevant advertisements as well. In 2024, this feature had an eight times

higher click-through rate than ads displayed on a leading social media platform (based on our internal data

and industry information collected by Filip Konecny), and from December 2023 to November 2024,

generated more than 950 million impressions. We believe that personalized, curated advertising offerings

are critical to effectively drive merchant success as more consumers become tired of intrusive and

inefficient online ad campaigns. In 2024, 31.5% of internet users worldwide reported using an ad blocker,

according to Backlinko.

• **Product Search and Price Comparison**. Our search functionality is designed to assist consumers in

finding the perfect product and address the many deficiencies of the on-site search experience of online

retailers. According to Nosto, leading retailers surveyed across North America and the U.K. attribute

approximately 39% of all traffic bouncing (i.e., shoppers leaving immediately) to poorly performing search

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features and shoppers failing to find relevant products. For example, 44% of shoppers reported that it took

at least three minutes to find the product they need in the search results. In the search for the right

product, sponsored adds are often prioritized over more helpful and relevant search results. For example,

in the fourth quarter of 2021, shopping adds accounted for 59% of all clicks on Google paid advertising.

Our consumers can search for specific products by using the search field or filters on the "Shop" tab

of the Klarna app. Our search field or filters explore inventory across multiple merchants so that

consumers are not confined to a single merchant's inventory, allowing them to explore a wide range of

products seamlessly. In December 2024, there were on average more than 91 million products available for

search on the Klarna app every day, an increase of more than six times year over year.

We also provide a price comparison tool that tracks the price history of any item, showing how the

price of any item has fluctuated over time. This tool empowers consumers with the information they need

to decide whether to buy now or wait for a better deal.

We also provide rich product content within our search results, including reviews and shipping

information. All of these features help consumers make informed purchase decisions.

• **Cashback Offers and Merchant Deals**. We offer multiple ways for consumers to save while shopping

on our network. We present cashback offers on certain purchases. We utilize cashback strategically to

boost Klarna app shopping frequency and volume. Unlike many other cashback and loyalty programs, our

cashback system is straightforward—all cashback earned is reflected on our consumer's Klarna balance as

cash that can be used at any of our merchant stores. We believe that this simplicity encourages our

consumer to take advantage of more cashback offers, which contributes to the continued use of our

Klarna balance solution.

We also present merchant deals to help consumers take advantage of discounts. Deals are merchant-

funded discounts that merchants offer our consumers to increase conversion and drive sales. Some of our

past campaigns have led to an increase in incremental GMV by up to 200% during the promotional period

and have also increased new customer acquisition for our merchants.

• **Wish Lists**. Consumers can save products, buy again, create collections and continue shopping in a

single convenient location with their wish list. These wish lists can be shared among consumers.

Consumers creating wish lists provide us with strong intent signals about their future purchases. Wish lists

are also an integral part of the modern e-commerce for many consumers. For example, as of the third

quarter of 2023, approximately 39% of consumers used wish lists to save products they wanted to

purchase later, compared to 12% of consumers, who used shopping carts for that purpose, according to

Bizrate Insights. In 2024, every day there were on average approximately 31 thousand products saved on

the Klarna app and approximately 10 thousand price drop alerts sent. In 2024, our consumers saved

approximately 42.5 million items to their collections.

• **Loyalty Cards**. We provide consumers a single place to store and access digital loyalty cards. This

provides a streamlined way to collect points at consumers' favorite stores.

• **Delivery Tracking, Returns and AI-Enabled Support**. Delivery tracking allows consumers to track their

orders in the Klarna app, which provides status updates and live tracking of package location. Tracking

gives consumers increased visibility and control over their deliveries.

Consumers can also begin a return and track return status on the Klarna app. We provide customer

support, enabled by our AI capabilities, for the returns process and for a number of other consumer

inquiries that may appear throughout the commerce journey as well.

• **Klarna Memberships**. Klarna Memberships, our subscription program, allows consumers to choose

between four membership tiers—Core, Plus, Premium, or Max. Benefits vary by plan and may include up to

2% cashback on debit purchases, access to selected third-party subscriptions, travel and purchase

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protection, exclusive offers, and dedicated customer support. Depending on usage and tier, the combined

value of these benefits can be significant over the course of a year.

• **On-site Messaging**. On-site messaging allows merchants to promote Klarna as a payment method

during the consumers' commerce journey. Merchants are able to inform shoppers about promotions,

credit availability and the option to use Klarna as a payment method. This is a highly effective method to

increase conversion.

• **Express Checkout**. Express Checkout helps merchants increase conversion and minimize cart

abandonment. Express Checkout pre-fills consumers' details at checkout, creating a faster, more

enjoyable shopping experience. Express Checkout is available to all merchants who use Klarna Payments

and can be placed at any step of the checkout journey, for example, at product pages or in the shopping

cart.

• **Sign in with Klarna**. Sign in with Klarna allows users to quickly sign up or sign in to a website or

application using their existing Klarna account. This eliminates the need for passwords and offers a pre-

filled checkout, which saves time for consumers and enhances conversion rates for merchants.

• **Klarna Merchant Portal.** Klarna Merchant Portal provides merchants, including H&M and Sephora,

valuable business intelligence and analytics. Merchant tools include daily sales overviews, summary high

priority to-do lists, a view of both online and in-store sales, the ability to fulfill multiple orders on the go

with a single click, summarized consumer disputes in one place, customized settlement reports to best

suit merchants' chosen accounting system and immediate answers via Klarna's Help tool, which is

available 24/7 via chat, phone or email.

**Consumer Credit Underwriting**

Some of our payment methods, including Pay Later and Fair Financing, involve extending consumer

credit. Pay Later enables consumers to purchase goods or services at the time of the transaction and pay

the full amount at a later date. Fair Financing allows consumers to pay for their purchase over a longer

duration. We have designed our short-term credit products to serve a wide range of consumers, including

those with varying credit histories and borrowing needs. Rather than targeting a specific credit segment,

our underwriting processes aim to responsibly provide our credit products across a broad customer base.

To that end, we operate an ML-enabled, high-frequency, large-scale, real-time underwriting process. We

target smaller-ticket transactions with a risk framework that we believe offers a more limited, standardized

credit range (compared to traditional multi-product banks) and minimizes counterparty and consumer

credit exposure. Our goal is for our consumer credit portfolio to be resilient during volatile economic

conditions.

Historically, we have been able to improve our operating results and expand our transaction margin

dollars following each new market launch. As markets mature, returning customers increase, leading to

more frequent use. Higher frequency has driven increased scale, which improves the data we use to

underwrite, reducing losses for both new and existing consumers. This approach has led to decreasing

operating losses and allowed all 10 markets that we launched before 2020 to generate positive transaction

margin dollars in year ended December 31, 2025.

Consumer Credit Underwriting Process

We undergo a five-step consumer credit underwriting process. The entire process is automated and

takes place in real time as consumers navigate through checkout:

(1)**Identification**. We seek to understand if the consumer is new to Klarna. Using a combination of

internally built identification models, external data and common practice authentication tools, we match

consumers' inputs to our internal databases of existing consumers.

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(2)**Policy Rules**. We seek to understand what types of credit we can extend to the consumer. We

maintain comprehensive credit and fraud policies, which determine product eligibility, such as total debt

limits, restrictions against lending to consumers with a history of fraud and abuse, restrictions against

lending to consumers in default and age restrictions.

(3)**Risk Scoring (ML-Based Model)**. We seek to understand the consumer's creditworthiness. We assess

the consumer's probability of default based on transactional data, consumer data (internal purchase and

payment history) and credit bureau data and utilize external factors such as merchant data.

(4)**Debt Limits and Real-Time Unit Economic Decisions**. We seek to understand if lending to a consumer

is aligned with our risk appetite.

(5)**Decision**. We assess transaction fraud risk and issue a final credit decision separately for each

transaction. The final credit decision is determined based on our credit risk model score, the consumer's

total Klarna debt relative to transaction limits and other defined rules such as income, affordability or

certain high-risk merchant categories.

Dynamic Underwriting

Our underwriting model is dynamic, optimized for sustainable lending that puts the consumer first. This

compares to the more traditional credit card-based underwriting that is typically done only once when a

consumer signs up for a credit card and is designed to maximize profitability for the lender.

Our underwriting is defined by:

• **Real-Time Consumer Data**. We build real-time views of a consumer's financial situation when

underwriting, by combining credit bureau data, internal insights and open banking data.

• **Underwriting Decision for Every Transaction**. For every purchase, we make a new real-time

underwriting decision and fraud assessment. We utilize advanced proprietary decisioning capabilities that

leverage our vast data sets, dynamic API calls, early abuse detection and pattern recognition.

• **Small First Purchase Capacity and Gradual Increases**. New consumers start with a small spending

capacity, which increases gradually subject to repayment history. Accounts are frozen if payments are

missed.

• **Clear Repayment Terms That Promote the Ability to Repay**. We provide consumers clear repayment

terms that are fixed and short-term. We also do not allow consumers to borrow in cash or withdraw money

from an ATM.

As we process more transactions, our credit models continuously improve to achieve increased

performance in credit modeling and scoring. The predictive accuracy of our models is demonstrated by a

notable improvement in our Gini score over time. In the credit scoring context, a Gini score is a scale of

predictive power from 0 to 1, with a higher Gini score indicating higher predictive power. For example, in

the United States, our Gini score improved from 0.36 in 2019 to 0.78 in the fourth quarter of 2025, while

also representing a significant advantage over the models used by credit bureaus such as VantageScore

4.0, which had a Gini score of 0.43 in the fourth quarter of 2025, according to our credit scoring model. As

a result, our Gini score in the United States, where we expanded in 2019, approached a similar level to our

Gini score in Germany, one of our most mature markets, showing the increased predictive power of our

models as we mature our presence and operations in a new market.

Our high credit modeling and scoring performance allows us to responsibly extend credit to

consumers with different credit scores while maintaining the quality of our loan portfolio. For example, in

the United States and the United Kingdom, our financing products are used by a broad customer base that

includes consumers with both subprime and super prime credit scores (as defined by the VantageScore

4.0 and Experian methodology commonly used in those markets, respectively). At the same time, our loan-

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weighted average consumer credit score in those markets in 2025 qualified as near-prime and prime,

respectively. We also expect that, as we continue to expand our consumer base and further mature our

operations in these markets, in particular the United States, the weighted average credit score of our

consumers will further increase, in line with our most mature markets, including Sweden and Germany. In

addition, our geographical diversification adds further resilience to our underwriting model as our loan

portfolio is not heavily concentrated in a single market. For example, in the year ended December 31, 2025,

Germany and the United States represented 32% and 21% of our GMV (which is closely tied to our loan

portfolio distribution), respectively, with Sweden and the United Kingdom accounting for 13% and 12%,

respectively.

![Screenshot 2026-02-25 211432.jpg](klar-20251231_g11.jpg)

________________

• Gini score indicates the model's discriminatory power, namely, the model's effectiveness in

differentiating between "bad" borrowers, who will default in the future, and "good" borrowers, who

will not default in the future. Our Gini score above was calculated for our Pay in 4 payment option

(for the United States) and our Pay Later payment option (for Germany).

• \*U.S. Benchmark Gini is calculated using the VantageScore 4.0 model. German Benchmark Gini is

calculated using the Schufa Bank 3.0 model.

Effectively Steering Credit Risk

In addition to our dynamic credit underwriting model, the diversification of our credit portfolio and the

short duration of loans on our balance sheet contribute to our low credit loss rates as compared to the

industry averages in the United States.

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We maintain a diversified portfolio of loans with principal balances across multiple industries and

markets. As of December 31, 2025, we made our financing solutions available in 26 markets to our 118

million active Klarna consumers. This results in diversification across markets and merchant segments.

The charts below show the breakdown of our GMV across various markets and verticals which

contributes to the diversification of our revenue sources and loan portfolio.

![49917](klar-20251231_g12.gif)

![49919](klar-20251231_g13.gif)

Our average order value ("AOV") in the year ended December 31, 2025 was 103, our average balance

per active Klarna consumer was $124 (Pay in Full: $0; Pay Later: $120 Fair Financing: $393). Our consumers

typically purchase low-value, everyday items with our financing products, which contributes to our ability

to manage credit risk given limited potential losses upon consumer defaults. During in the year ended

December 31, 2025, 86% of our orders were $500 or less.

**Distribution of Consumers per Average Order Value in the Year ended December 31, 2025**

![50475](klar-20251231_g14.gif)

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We also leverage our short-duration balance sheet to quickly react to market changes. In the year

ended December 31, 2025, based on contractual repayment schedules, the weighted average life (WAL) of

our loans was approximately 39 days (27 days for Pay Later and 109 days for Fair Financing), compared to

a typical loan duration of more than five years for a typical Nordic bank in 2024 (according to publicly

available information) and an average of 2.9 years for a typical U.S. personal bank loan in 2022 (according

to the U.S. Federal Reserve). In the year ended December 31, 2025, 84% of our loans were three months or

less in duration, and 97% of them were one year or less. This allows us to swiftly adjust our portfolio risk

profile. For example, if we decided to implement changes in the underwriting process, as of December 31,

2025, it would only take two months to renew 79% of our loan portfolio.

**Time to Renewal**

![51365](klar-20251231_g15.gif)

At the start of the COVID-19 pandemic and before the effects of the pandemic on the e-commerce

industry were known, we implemented changes to our underwriting process in light of the expected

macroeconomic distress. The first changes were adopted in just three days and were designed to lower

our risk exposure with respect to new consumers in the United States, a market that we entered a year

before. As a result of those changes, from March to April 2020, our approval rates for the Pay in 4 payment

solution in the United States decreased by 10 percentage points from 67% to 57%. The results were

immediate—our credit losses for our March 2020 purchase cohort to our April 2020 purchase cohort

decreased by 60%, despite record high unemployment rates. We implemented similar changes in the U.K.,

Germany, the Nordics and the Netherlands. As a result, our credit losses in those markets in 2020

decreased by 20% year over year while our GMV decreased by just 3%.

**Our Technology**

Our global network is built on an AI-powered single cloud native platform. Our technology platform

connects to the many constituents of our network—including consumers, merchants, PSPs, affiliate

networks, credit bureaus and banks—to create a seamless user experience. Our platform uses our data

advantage to deliver streamlined payments, intelligent underwriting, card issuing, open banking, targeted

ads and personalized discovery. Key attributes of our technology platform include the following:

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Fraud Detection and Monitoring Capabilities

We continuously work to prevent, identify and mitigate fraudulent activity. We use a new class of ML

models purpose-built to detect credit abuse and digital fraud. Key inputs to our anti-fraud models include:

• **Proprietary Risk Engine**. Our sophisticated in-house risk engine is built on data collected over the

last 20 years of operations. When a consumer attempts a purchase, we check over 100 data points as well

as third-party vendors for verification.

• **Identity Checks**. We verify the identity and addresses of all our consumers against external data

sources, as well as conduct credit checks. Where we do not have sufficient data or cannot receive

sufficient confirmation from our independent data providers, we reject transactions.

• **Authentication Checks**. We require further authentication checks for certain higher-risk purchases,

where we request additional identity verification information using methods such as knowledge-based

questioning.

Merchant Risk Management

Merchant counterparty risk primarily arises when we act as a payment facilitator and assume the

responsibility of refunding consumers if the merchant does not fulfill its contract with the consumer. Our

technology models leverage our access to significant amounts of data to help manage merchant risk. We

monitor merchant exposures against daily risk limits and take action where appropriate to ensure

exposures remain within established risk appetites. We can mitigate exposures through payment delays,

rolling reserves, insurance and withholding payments.

Ease of Integration

Our technology platform is designed with flexibility and ease of use to make integration as effortless as

possible.

• **API Connectivity**. We provide a single API for merchants and partners to seamlessly connect to our

network through various channels, such as Klarna Payments and Klarna In-store. For merchants, Klarna API

provides a simple and flexible way to initialize, authorize and manage payments. Payment service

providers can also use our API to enable Klarna as a payment method for multiple merchants.

• **Mobile Software Development Kit ("SDK")**. Our mobile SDK is the best way to integrate Klarna's

payment methods into mobile apps. The mobile SDK offers a seamless and straightforward way to render

individual payment methods through our various channels, including allowing consumers to pay with

Klarna Payments, enabling on-site messaging or gaining access quickly to any number of our other

merchant solutions.

• **Platform Partnerships**. We maintain a robust partner ecosystem that helps merchants and other

partners connect to our network. For example, we partner with other payment providers, e-commerce

enablement platforms, in-store solution providers, marketing software providers and numerous other

partners all of which help their own customers become Klarna merchants.

Our global network thrives on data-driven insights. We aggregate and analyze significant volumes of

data to optimize consumer and merchant experiences.

Our technology platform is:

• **Flexible and Fast**. ML decisions typically have less than one second latency, ensuring that our

decision-making is quick and efficient for our consumers and merchants.

• **Reliable**. In the year ended December 31, 2025, our technology platform had 99.979% uptime on

average, ensuring that our networks' services remained virtually always available.

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• **Scalable**. We continuously deploy new updates—with an average of over 80,000 new monthly

deployments in the year ended December 31, 2025—to keep our platform at the forefront of innovation and

user needs. Our single technology platform powers our business globally. Every product we bring to market

can be launched globally with only limited local adaptations required.

• **Intuitive**. The intuitive nature of our technology makes it easier to onboard new engineers.

• **Secure**. Security is paramount. We aim to identify and patch known vulnerabilities within days of

being identified, ensuring our integrations are not only fast but also secure and compliant with industry

standards.

**Sales and Marketing**

We believe our global, universally recognized and well-loved brand is central to our sales and

marketing strategy.

Our brand is defined by culture, personalization, human connection and purpose, and we believe these

characteristics allow it to resonate deeply with consumers. We use global multimedia campaigns and

celebrity partnerships, such as with Snoop Dogg and Paris Hilton, to enhance our brand.

We use additional marketing strategies to attract consumers and merchants, including Klarna app

messaging, digital campaigns across search engines, social media presence across multiple platforms and

promotions to incentivize consumers to increase their engagement on our network. Many merchants

onboard the Klarna network using our self-serve capabilities. We also operate a global dedicated sales

team that identifies, onboards and supports merchants, including those who advertise with us.

Our powerful go-to-market strategy is complemented with partnerships that extend our reach to

merchants, such as our deep integration with PSPs. For example, by making Klarna a default payment

method at partners like Stripe, Adyen and Worldpay, we plan to make Klarna available at thousands of

more merchants.

**Our Consumer and Merchant Support**

Customer Support

Our customer support provides assistance to consumers at every step of their commerce journey,

including help with purchases, account management, returns and merchant disputes. We provide instant

support in any language, callback functionality through the Klarna app and live chat 24/7.

AI is central to our efforts to continuously streamline customer support. Our AI assistant enhances the

shopping and payment experience for our consumers by managing tasks like customer service, refunds,

and returns. Since we launched our AI assistant in February 2024, it has achieved the same consumer

satisfaction as human agents (according to internal consumer satisfaction surveys), resolved issues more

accurately than human agents, reduced repeat inquiries by 25% (based on the number of repeat inquiries

before and after the launch of our AI assistant) and resolved queries in two minutes compared to 12

minutes on average for human agents, as of September 2024, based on our service chat log data. We plan

to continue to leverage our AI assistant to improve customer support.

Merchant Support

Our merchant support team assists merchants across our solutions, including onboarding and sales

management help. We also offer merchants support in their interactions with consumers. For example, we

help them market products and manage orders. Much of this Klarna-facilitated customer support is

provided in the Klarna Merchant Portal.

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We also maintain a merchant-focused website with a list of responses for the most frequently asked

questions to facilitate self-support. If merchants cannot find the information they seek on that website, we

also offer multi-channel merchant support, including online chat as well as email and phone

communication.

**Our Employees, Culture and Values**

Klarna's culture is built on integrity, inclusivity and a commitment to our contributors, consumers and

merchants. We take pride in our diverse team of employees who are located in offices across three

continents and represent more than 100 nationalities.

We strive to unlock the full potential of our employees to drive our success. Key attributes of working

at Klarna include:

• **Supportive Team Dynamics**. We promote positive and collaborative work environments.

• **Autonomy and Trust**. We empower employees with independence and trust from their leads, which

fosters role autonomy.

• **Impactful Work**. We enable meaningful contributions from our team and encourage our employees

to embrace challenging tasks for their own professional growth.

• **Recognition and Appreciation**. We value employee contributions through recognition, awards and

competitive compensation.

• **Supportive Leadership**. We provide constructive feedback and clear expectations on development.

• **Clear Organizational Goals**. We ensure a working environment of open dialogue, transparency and

alignment with company objectives.

Klarna's culture is foundational to our success, driven by ethical values, inclusivity and employee well-

being. We foster a supportive environment such that our employees thrive and significantly contribute to

our achievements.

As of December 31, 2025, 2024, and 2023, we had approximately 2,831, 3,422, and 4,352 full-time

employees, respectively. The reduction in the number of full-time employees resulted from our strategic

decision to reduce our overall headcount and drive operational efficiency by leveraging AI in our business

and focusing on what really matters to our mission. We expect the number of employees to continue to

decrease in future periods.

As of December 31, 2025, over 1,500 of our positions, or approximately 53% of our entire organization,

were engineering and data science positions.

As of December 31, 2025, 1,166 and 530 of our employees in Sweden and Germany, respectively, were

affiliated with labor unions and workers councils, respectively. We believe we have a constructive

relationship with these organizations, and we have not experienced a material strike, work stoppage or

disputes leading to any form of downtime.

**Competition**

The markets in which we operate are competitive and evolving rapidly, including with respect to

consumer preferences and regulatory landscape. Our network connects consumers and merchants with

comprehensive payment and advertising solutions across multiple markets in Europe, North America,

Australia and New Zealand.

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As a result, depending on the market and a particular product or solution, our network may compete

with any of the following:

• Alternative payment methods, such as credit and debit cards—including those provided by card-

issuing banks such as J.P. Morgan Chase, Citibank, Bank of America, HSBC, BNP Paribas, Barclays, Credit

Agricole, Santander or American Express—and payment networks such as Affirm, Block or PayPal;

• Traditional credit card networks, such as Visa, Mastercard, American Express, Capital One or

Discover;

• Neobanks, such as Revolut or NuBank;

• "Buy now, pay later" solutions, such as AfterPay; and

• E-commerce platforms with merchant enablement solutions, including advertising solutions, and

integrated payment capabilities, such as Shopify, Amazon or Walmart.

We believe the key competitive factors in our market include:

• product and solution quality, for both consumers and merchants;

• operating efficiency;

• early adoption of AI;

• engineering talent;

• brand recognition;

• security and trust;

• our technology platform; and

• our regulatory authorization portfolio.

Our ability to innovate quickly further differentiates our platform from our competition. We believe we

are positioned favorably when seeking to attract consumers because we provide consumers with more

relevant and more convenient commerce experiences. We also compete for merchants and believe we

provide merchants with better consumer acquisition, drive higher AOV and increase conversion, all while

providing them the ability to control their brands.

See "Risk Factors—Risks Related to Our Business and Industry—We operate in an industry of

substantial and increasingly intense competition and may be unable to compete successfully."

**Regulatory Environment**

We operate in a complex and rapidly evolving regulatory environment. As a result, we are subject to

extensive regulation, both directly and indirectly (e.g., because of our relationships with bank partners,

including originating bank partners such as WebBank, PSPs and card networks), in various jurisdictions,

including the EU, the United States and the U.K. These laws and regulations cover multiple aspects of our

business and operations and include, among others, banking, lending and financial services laws,

consumer protection laws and privacy laws. They also impact our contractual relationships and

obligations. We could become subject to additional legal and regulatory requirements following future

changes to the applicable regulatory regime in jurisdictions in which we presently operate or may operate

in the future and/or as a result of entering into new geographies or introducing new products, solutions or

services. Such new requirements may require us to obtain additional regulatory approvals or licenses,

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such as for lending, brokering, servicing, collections or money transmission. Our bank partners, including

originating bank partners, also operate in a highly regulated environment, and many laws and regulations

that apply directly to our bank partners are directly and indirectly applicable to us as a counterparty or a

service provider to our bank partners.

Our payment options and consumer lending solutions are relatively novel and must comply with

regulatory regimes applicable to consumer credit transactions, electronic money transactions and

payment services. The regulatory framework applicable to us and our bank partners is evolving and

uncertain as supranational bodies and national, federal and state governments consider the application of

existing laws and adoption of new laws to regulate these structures. Certain banking laws and regulations

apply to Klarna Bank, our banking subsidiary that holds a banking license in Sweden and passports it to

other markets in the EEA, and its branches and subsidiaries, and may also apply to WebBank and our other

bank partners, including those with whom we may seek to partner in the future. In addition, we continue to

monitor the impact changes in U.S. government policies and priorities over the past 12 months will have on

our business going forward. These include continued reforms of trade tariffs, immigration reform and

changes at the agencies that regulate us or our banking partners, including the modification, rescission,

withdrawal or changes to the approach and enforcement of, rules and guidance relating to business

models like ours. We have policies and procedures in place to help us navigate the various and changing

regulatory environments in which we operate, with the goal of managing the long-term viability and

flexibility of our business model, including the manner in which we rely on bank partners. As such, we have

established a business model pursuant to which we may originate loans directly through our network

under our banking, lending, servicing and brokering licenses across various jurisdictions, and we may also

purchase loans originated by our originating bank partners through our network.

For more information on the risks relating to our regulatory environment, see "Risk Factors—Risks

Related to Our Regulatory Environment."

Banking Regulation

**Regulatory capital and liquidity requirements**

We are subject to extensive capital adequacy and liquidity requirements, including, among others, the

Basel III framework (including its recent reforms referred to as "Basel IV"), CRD V and CRR. CRD V and CRR

are supplemented and complemented by a set of binding technical standards developed by the EBA. The

capital adequacy framework specifies minimum amounts and types of capital—CET1 capital, AT1 capital

and Tier 2 capital—that we need to maintain (Pillar I of the Basel III framework) sets forth rules for the

internal capital adequacy process and internal liquidity adequacy assessment process ("ICLAAP") as well

as the supervisory review and evaluation process (Pillar II of the Basel III framework), and specifies

regulatory disclosure requirements (Pillar III of the Basel III framework). The minimum amount of regulatory

capital that we must hold is primarily determined based on our risk-weighted exposure amounts, which

consist of on-balance sheet assets and off-balance sheet exposures weighted according to their

associated risk. These requirements are supplemented by certain capital buffer requirements. .

In addition to capital adequacy requirements, Klarna is subject to regulatory liquidity and funding

requirements. These include, in particular, the Liquidity Coverage Ratio ("LCR"), which requires us to

maintain a sufficient buffer of High Quality Liquid Assets to withstand a severe 30-day liquidity stress

scenario, and the Net Stable Funding Ratio ("NSFR"), which is intended to ensure that our assets are

funded with a sufficient amount of stable funding over a longer-term horizon.

Capital adequacy requirements consist of the following components:

• Pillar I minimum regulatory requirement for credit, credit valuation adjustments, market and

operational risks;

• Pillar II capital requirement for other risks not covered by Pillar I;

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• Capital conservation buffer of 2.50% of our risk-weighted exposure, designed to allow us to remain

a going concern during times of severe financial distress;

• Countercyclical capital buffer of 0.00 to 2.50% of our risk-weighted exposure, designed to allow us

to build up capital during favorable business conditions, set quarterly by the SFSA; and

• Any Pillar 2 requirement that may be communicated by supervisory authorities, intended to

address risks that are not sufficiently covered by other regulatory capital requirements.

In addition, we may be required to hold additional capital following internal capital stress tests conducted

in accordance with the ICLAAP.

Klarna is also subject to a capital requirement based on a leverage ratio, which is calculated based on

total on-balance sheet assets and certain off-balance sheet exposures and does not take risk weights or

capital buffer requirements into account. In addition, supervisory authorities periodically communicate a

guidance, indicating their supervisory expectation for Klarna's minimum capitalization. While this is not

considered a binding requirement, failure to maintain capital equal to the Pillar 2 Guidance may trigger

supervisory measures including increased capital requirements.

The capital adequacy calculations are conducted for Klarna Bank and on a consolidated basis in

accordance with applicable regulations. See "Management's Discussion and Analysis of Financial

Condition and Results of Operations—Regulatory Capital Requirements" and Note 3 to our audited

consolidated financial statements included elsewhere in this filing for more information on our capital

adequacy analysis. We are obligated annually to prepare and publish risk management and capital

adequacy reports in accordance with CRR and applicable regulations of the SFSA as well as the EBA

guidelines. As a result of these requirements, we are required to monitor and manage our asset

composition and balance sheet more generally to ensure that we continue to meet the minimum capital

adequacy and liquidity requirements. Any failure to meet such requirements could result in one or more of

our regulators placing limitations or conditions on our operations or growth initiatives, which could affect

our brand and reputation as well as customer and investor confidence, increase our funding costs, or limit

the ability of our regulated subsidiaries to distribute funds to us or our ability to pay dividends in the future

on our ordinary shares.

**Bank recovery and resolution regime**

We are subject to the EU special resolution regime for credit institutions established by BRRD. BRRD

requires EU credit institutions, including Klarna Bank, to prepare and maintain recovery plans specifying

steps to be taken to restore the long-term viability of the credit institution in the event of a material

deterioration of its financial condition. Credit institutions are also required under BRRD to meet the MREL

Requirement determined by the relevant resolution authority, which in Sweden is the Swedish National

Debt Office (*Riksgäldskontoret*), acting in accordance with the Resolution Act. BRRD also contains several

resolution tools and powers which may be used by the applicable resolution authority under certain

conditions. Such tools and powers (which may be used alone or in combination with others) include,

among others, a general power to write down all or a portion of the principal amount of, or interest on,

certain eligible liabilities, whether subordinated or unsubordinated, of the institution in resolution and/or to

convert certain unsecured debt claims, including senior and subordinated notes, into other securities,

which could then also be subject to the general bail-in provisions. This means that most of such

institution's debt is subject to bail-in provisions, except for certain classes of debt, such as certain

deposits and secured liabilities. Under the Resolution Act, the resolution authority furthermore has the

power to take control of the credit institution in distress and, for example, facilitate its sale to private

investors or to a publicly controlled entity pending a private sector arrangement. Such actions of the

relevant resolution authority can be taken without any prior shareholder (or other) approval. The MREL

Requirement includes a minimum Pillar 1 subordination requirement for systemically important institutions.

Because Klarna Bank is not classified as a systemically important institution by the Swedish National Debt

Office, our MREL Requirement is currently lower than our applicable capital adequacy requirements.

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However, there can be no certainty that Klarna Bank will not be designated a systemically important

institution in the future and thereby become subject to a higher MREL Requirement. As a result of these

requirements, we must continuously monitor the growth and complexity of our products and services to

ensure that we maintain the capability to prepare and execute a recovery plan in the event of a material

deterioration of our financial condition.

Regulatory Supervision

**Banking license requirements and regulatory supervision in Sweden**

Klarna Bank operates as a Swedish banking association and is licensed and supervised by the SFSA

under the Swedish Banking Act. We utilize the EU-established passporting system for banks and financial

services companies to provide banking or payment services in other EEA member states under our

Swedish banking license, and as such, are subject to various requirements, including a requirement to

maintain our banking license in Sweden. Our banking license has no expiration date. However, it can be

revoked by the SFSA in certain circumstances. As a Swedish bank, we are required to provide payment

services through general payment systems such as RIX, and accept deposits which, upon notice of

withdrawal, are available to the depositor no later than 30 days following the notice. In addition, if we

cease to carry out our banking activities for six consecutive months, the SFSA may issue a warning to us or

even revoke our banking license. Further, to offer our services in the EEA under CRD IV, we must qualify as

a credit institution. This, in turn, requires that we provide credit to the public. If we cease to accept

deposits or provide credit to the public, we would no longer be entitled to offer our services in other EEA

member states under our Swedish banking license. As a Swedish bank that operates in other EEA member

states, we are subject to an expanding regulatory framework consisting of EU and Swedish laws,

regulations and guidelines and, to a lesser extent, laws, regulations and guidelines adopted in other EEA

member states in which we operate, including Germany, France, Spain and Denmark. Under the EEA's

principle of home state supervision, the SFSA is our main supervisory authority and as such is principally

responsible for monitoring and enforcing our compliance with applicable regulatory requirements. The

SFSA is also the head of our supervisory college that comprises our principal regulators in various

geographies, including Germany and the U.K. The SFSA has a range of supervisory tools available to it for

this purpose, including, but not limited to, meetings with management, desk-based reviews, making

recommendations and on-site inspections, as well as the right to issue sanctions in the form of

administrative fines in case of breaches of applicable laws and regulations.

**German regulatory supervision** 

We offer financial services in Germany through Klarna Bank, German Branch. As a domestic branch of

a Swedish EU credit institution, Klarna Bank, German Branch is generally subject to the supervision of the

SFSA. Only certain provisions of the German Banking Act (*Kreditwesengesetz* or the "KWG") apply to Klarna

Bank, German Branch. This includes, for example, the requirement to review the creditworthiness of

customers before entering into a consumer credit agreement, as well as certain reporting requirements or

organizational requirements in relation to AML prevention. Similarly, any solutions, products and services

that we offer in Germany on a cross-border basis are generally subject to Swedish laws, regulations and

supervision, while solutions, products and services that we may offer locally in Germany, such as bank

accounts, are subject to German laws, regulations and supervision. In addition, Klarna Bank, German

Branch, as a domestic branch of an EU credit institution, is subject to the requirements of the GwG.

Compliance with the GwG is supervised by BaFin. BaFin's statutory objective is to ensure the proper

functioning, stability and integrity of Germany's financial system. As such, BaFin ensures that financial

services, including payment or banking services, are provided in Germany only by appropriately licensed

entities and that such entities comply with the GwG. Within its statutory mandate, BaFin is also obliged to

protect the collective interests of consumers and, to that end, may issue orders to supervised institutions

that are necessary to prevent or eliminate consumer rights' abuses.

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**U.K. regulatory supervision** 

We offer certain financial products and services in the U.K. through our indirect subsidiary, KFSUK. In

the past, we also provided financial services in the U.K. through a U.K. branch of Klarna Bank, which

offered limited services under the U.K.'s supervised run-off regime until March 28, 2024. KFSUK is

authorized and regulated by the FCA to conduct certain consumer credit activities, the issuance of

electronic money under the Electronic Money Regulations 2011 and for the provision of payment services

under the Payment Services Regulations 2017. The FCA has various statutory objectives that inform its

operations and regulatory and enforcement priorities. The FCA's strategic objective is to ensure that

financial services markets function well. The FCA's operational objectives are securing an appropriate

degree of protection for consumers, protecting and enhancing the integrity of the U.K. financial system

and promoting effective competition in the interests of consumers. The FCA is responsible for supervising

KFSUK's regulated consumer credit activities, electronic money issuance and payment services. In

exercising its supervisory functions, the FCA follows a preemptive approach based on making forward-

looking judgments about a firm's business model, product strategy and operational efficacy. The FCA has a

wide range of supervisory tools available to it and extensive powers to intervene in the affairs of

authorized firms, including, but not limited to, meetings with management, desk-based reviews, making

recommendations and on-site inspections. The FCA also has various disciplinary and enforcement powers,

which include powers to (i) limit or withdraw a firm's permissions, (ii) suspend individuals from performing

certain functions, (iii) impose restitution orders and (iv) fine, censure or impose other sanctions on firms or

individuals.

Consumer Protection Laws

**EU consumer protection requirements**

We must comply with various EU consumer protection and payment services regimes pursuant to EU

regulations that are directly applicable to us and EU directives that are implemented through national

legislation, including, but not limited to, the following regulations and directives as well as any related

delegated and implementing acts and guidelines from relevant EU and national authorities, each as

amended through the date of this report:

• PSD2, which governs transparency and information requirements for payment services as well as

respective rights and obligations of PSPs in the provision of payment services;

• Directive 2014/49/EU on deposit guarantee schemes, which establishes rules and procedures

relating to the establishment and the functioning of deposit guarantee schemes, including a requirement

for every credit institution to join a deposit guarantee scheme;

• CCD1, which regulates consumer credit agreements, including information requirements, interest

rate and fee limits and changes;

• Regulation 2021/1230/EU on cross-border payments, which sets forth rules on cross-border

payments and the transparency of currency conversion charges within the EU;

• Directive 2011/83/EU on consumer rights, which sets forth uniform standards for distance and off-

premises contracts, including information requirements and termination rights;

• Directive 2002/65/EC concerning the distance marketing of consumer financial services, which

regulates marketing of financial services by means of distance communication, including online or by

email;

• Directive 2005/29/EC concerning unfair business-to-consumer commercial practices in the

internal market, which prohibits unfair commercial practices, including aggressive marketing techniques;

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• Directive 2009/110/EEC on the taking up, pursuit and prudential supervision of the business of

electronic money institutions, which sets forth the rules for electronic money institutions, including

providers of prepaid electronic payment products; and

• Regulation (EU) 2015/751 on interchange fees for card-based payment transactions, which sets

forth uniform technical and business requirements for card-based payment transactions carried out within

the EU.

We are also subject to regulations and general guidance issued by the Swedish supervisory authorities,

including the SCA, the Swedish Resolution Authority and the SFSA. These authorities may undertake

supervisory actions to assess our compliance with applicable consumer protection laws and regulations,

including investigations, administrative fines and mandated changes to our operations, services and

products, including the marketing and advertising thereof, as well as internal policies and procedures.

The Swedish parliament has recently adopted a number of legislative proposals relating to the

extension of consumer credit, with the goal of reducing over-indebtedness and strengthening consumer

protection. The change, among others, introduce restrictions on repeated extensions of credit and caps on

arrangement fees, lower interest rate caps and limit the tax deductibility of certain unsecured loans. We

believe that these changes are consistent with our mission of providing fairer, more sustainable financing

solutions to consumers and, as a result, do not expect that our operations will be materially and adversely

affected by them.

**U.S. federal and state consumer protection requirements**

We are subject to various U.S. federal consumer protection regimes, both as a counterparty or a

service provider to our bank partners, including our originating bank partners, and as a loan originator with

respect to loans we originate directly, including, but not limited to, the following laws and regulations:

• the Truth in Lending Act and Regulation Z promulgated thereunder, which require certain

disclosures to consumers regarding the terms and conditions of their loans and credit transactions;

• Section 5 of the Federal Trade Commission Act, which prohibits unfair and deceptive acts or

practices in or affecting commerce, and Section 1031 of the Dodd-Frank Act, which prohibits unfair,

deceptive or abusive acts or practices in connection with any consumer financial product or service;

• the ECOA and Regulation B promulgated thereunder, which prohibit creditors from discriminating

against credit applicants on the basis of race, color, sex, age, religion, national origin, marital status, the

fact that all or part of the applicant's income derives from any public assistance program or the fact that

the applicant has in good faith exercised any right under the Federal Consumer Credit Protection Act or

any applicable state law. In addition to acts of intentional discrimination, the ECOA has been interpreted

by federal regulators and courts to prohibit creditors from maintaining policies and practices that, while

facially neutral, result in a disproportionate, adverse impact on applicants or consumers in protected

groups. For this reason, a loan decisioning or credit scoring model must not use any variable that may be

deemed a proxy for a protected characteristic such as race, ethnicity or sex. Further, the variables used in

the model must be supported by documented, legitimate business justifications where the model results in

a disproportionate effect on applicants or consumers of certain demographic groups;

• the Fair Credit Reporting Act, as amended by the Fair and Accurate Credit Transactions Act, and

Regulation V promulgated thereunder, which promote the accuracy, fairness and privacy of information in

the files of consumer reporting agencies;

• the Fair Debt Collection Practices Act, Regulation F promulgated thereunder and the Telephone

Consumer Protection Act, each of which provide guidelines and limitations concerning the conduct of

certain creditors and third-party debt collectors in connection with the collection of consumer debts;

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• the Gramm-Leach-Bliley Act, which includes limitations on use and disclosure of nonpublic

personal information about a consumer by a financial institution;

• the U.S. Bankruptcy Code, which limits the extent to which creditors may seek to enforce debts

against parties who have filed for bankruptcy protection;

• the Federal Trade Commission's Holder in Due Course Rule (the "Holder Rule"), and equivalent

state laws, which require holders of a consumer credit contract to include the required notice and become

subject to all claims and defenses that a borrower could assert against the seller of goods or services;

• the Electronic Fund Transfer Act and Regulation E promulgated thereunder, which provide

disclosure requirements, guidelines and restrictions on the electronic transfer of funds from consumers'

bank accounts;

• the Electronic Signatures in Global and National Commerce Act and similar state laws, particularly

the Uniform Electronic Transactions Act, which authorize the creation of legally binding and enforceable

agreements utilizing electronic records and signatures;

• the Military Lending Act and similar state laws, which provide disclosure requirements, interest

rate limitations, substantive conduct obligations and prohibitions on certain behavior relating to loans

made to covered borrowers, which include both servicemembers and their dependents; and

• the Servicemembers Civil Relief Act and similar state laws, which allow active-duty military

members to suspend or postpone certain civil obligations so that the military member can devote his or

her full attention to military duties.

In addition, many states and local jurisdictions have consumer protection laws analogous to, or in

addition to, the federal laws listed above, such as usury laws, state debt collection practices laws and

requirements regarding loan disclosures and terms, credit discrimination, credit reporting, money

transmission, recordkeeping, the arranging of loans made by third parties and unfair or deceptive business

practices.

We are also subject to regulation by the CFPB under the Dodd-Frank Act and other acts described

herein, and we are subject to the CFPB's enforcement authority with respect to our compliance with these

requirements as a facilitator, servicer, originator or acquirer of consumer credit and provider of consumer

financial services. As such, the CFPB have in the past requested, and may in the future request, reports or

other information concerning our organization, business conduct, markets and activities. In addition,

depending on regulatory changes and further development of our network and the products and services

that we offer through it, the CFPB may begin to supervise us in the future. The CFPB's supervision will

enable it, among other things, to conduct comprehensive and rigorous examinations to assess our

compliance with consumer financial protection laws, which could result in investigations, enforcement

actions, regulatory fines and mandated changes to our business products, policies and procedures.

The CFPB is authorized to pursue administrative inquiries, proceedings or litigation for violations of

federal consumer financial laws. In these proceedings, the CFPB can obtain cease-and-desist orders

(which can include orders for restitution or rescission of contracts, as well as other kinds of affirmative

relief) and monetary penalties. Also, where a company has violated Title X of the Dodd-Frank Act or CFPB

regulations under Title X, the Dodd-Frank Act empowers state attorneys general and state regulators to

bring civil actions for the kind of cease-and-desist orders available to the CFPB (but not for civil penalties).

In May 2022, the CFPB issued an Interpretive Rule to clarify the authority of states to enforce federal

consumer financial protection laws under the Consumer Financial Protection Act of 2010 (the "CFPA").

Specifically, the CFPB confirmed that states can enforce the CFPA, including the provision making it

unlawful for covered persons or service providers to violate any provision of federal consumer financial

protection law; the enforcement authority of states under section 1042 of the CFPA is generally not

subject to certain limits applicable to the CFPB's enforcement authority, such that states may be able to

bring actions against a broader cross-section of companies than the CFPB; and state attorneys general

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and regulators may bring (or continue to pursue) actions under their CFPA authority even if the CFPB is

pursuing a concurrent action against the same entity. The CFPB subsequently rescinded this interpretive

rule in May 2025. Nevertheless, if the CFPB or one or more state officials find that we have violated the

foregoing laws, they could exercise their enforcement powers in ways that could adversely affect our

business.

In addition, the Biden administration brought an increased focus on enforcement of federal consumer

protection laws and appointed consumer-oriented regulators at federal agencies such as the CFPB, the

OCC and the FDIC. It is possible that such regulators could promulgate rulemakings, initiate inquiries and

bring enforcement actions that ultimately materially impact our business and the business of our

originating bank partners. These regulators may augment requirements that apply to loans facilitated by

our network or impose new programs and restrictions and could otherwise revise or create new regulatory

requirements that apply to us or our bank partners, including our originating bank partners. For example, in

May 2024, the CFPB issued an interpretive rule that extended certain provisions of Subpart B and Subpart

G of Regulation Z to "lenders that issue digital user accounts used to access credit, including to those

lenders that market loans as 'Buy Now, Pay Later,'" which prompted us to alter the manner and format in

which we provide certain lending disclosures to borrowers. The CFPB subsequently rescinded this

interpretive rule in May 2025 and further announced that it would not prioritize enforcement actions under

it.

Further, we are subject to the enforcement authority of other federal, state and local governmental

and regulatory authorities in analogous or similar ways as discussed above. We closely review any new or

modified products and services in light of applicable consumer protection laws. To that end, we have

developed policies and procedures designed to assist in this process. However, no assurance can be given

that our compliance policies and procedures will be effective in all instances, if at all. We have in the past

been, and may in the future be, subject to findings of breach of consumer protection requirements.

National, State and Local Licensing Requirements

We must observe applicable laws and regulations in each individual country, state, territory and

province in which we operate. Certain states, provinces and localities have adopted laws regulating and

requiring licensing, registration, notice filing or other approval by parties that engage in certain activity

relating to consumer finance transactions, including facilitating and assisting such transactions in certain

circumstances, debt collection or servicing and/or purchasing or selling consumer loans. We have engaged

in discussions with regulatory agencies in various jurisdictions regarding requirements to obtain licenses

from those agencies or register in such jurisdictions, including in countries or states where we have

determined that we are not required to obtain such a license or be registered with the state, and we may

have similar such discussions in future. In addition, we are subject to licensing requirements, supervision

and examination by applicable regulatory authorities in certain jurisdictions in which we operate, and we

have obtained or are in the process of obtaining necessary licenses in these jurisdictions. Licensing

statutes vary from country to country and state to state and prescribe different requirements, including,

but not limited to, restrictions on loan origination and servicing practices (including limits on the type,

amount and manner of fees), solicitation activities, interest rate limits, disclosure requirements, periodic

examination requirements, surety bond and minimum specified net worth requirements, periodic financial

reporting requirements, notification requirements for changes in principal officers, share ownership or

corporate control, restrictions on advertising and requirements that loan forms be submitted for review,

among others. The application of country, state and provincial licensing requirements to our business

model is not always clear, and while we believe that as of the date of this report we are in compliance with

material applicable licensing, registration or other regulatory requirements, regulators may request or

require that we obtain (or we may independently determine that we should obtain) additional

Authorizations in the future. There can be no assurance that we will be able to obtain them in a timely

manner, if at all.

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U.S. Federal and State Interest Rate Requirements and Lending Laws

We and our originating bank partners may also be subject to federal and state law interest rate

limitations on personal consumer loans in the United States. Certain jurisdictions have no such limitations,

while other jurisdictions impose a maximum rate on such loans. In addition, the applicable maximum

interest rate may vary based on the location of the transaction parties, the nature of the transaction, the

status of the borrower (e.g., military service member) and other factors. If any of the loans facilitated

through our network were found to impose rates higher than the maximum rate for the applicable

jurisdiction, such loans could be in violation of interest limitation laws, which could result in such loans

being unenforceable, or which may reduce or extinguish the principal and/or interest (paid or to be paid)

on such loans, or result in fees, damages and penalties to us or our originating bank partners.

Through our partnerships with our originating bank partners—including WebBank, an FDIC-insured

Utah state-chartered industrial bank through whom a portion of the loans facilitated through our network

in the United States are originated—our model automates the underwriting process in accordance with our

originating bank partners' underwriting policies, which only our originating bank partners may change and

which we must follow in reviewing, approving and administering loans facilitated by our network. When

originating loans through our network, our originating bank partners may contract to charge interest based

on authority granted to state-chartered, FDIC-insured banks under U.S. federal law and based upon legal

principles detailed in the FDIC's final rule relating to the Federal Interest Rate Authority. Section 27 allows

an FDIC-insured bank such as our originating bank partners to charge interest to consumers on a

nationwide basis based on the rates allowed by the state where the loan is made. When a borrower is

charged interest, in most cases, we rely on our originating bank partners' authority under applicable law to

establish interest rates and charge interest on the loans our originating bank partners originate through

our network.

However, if the legal structure underlying our relationship with our originating bank partners was

successfully challenged, we may be found to be in violation of state licensing requirements and state laws

regulating interest rates and other aspects of consumer lending. In the event of such a challenge or if our

arrangements with our originating bank partners were to change or end for any reason, we would need to

rely on an alternative bank relationship, find an alternative bank partner, rely on existing state licenses,

obtain new state licenses, pursue a federal or state bank charter and/or be subject to the interest rate

limitations and loan product requirement limitations of certain states. There are three examples of claims

that have been raised that could each, separately or jointly, result in this outcome in some or all states.

• The first of these is a challenge to the FDIC's codification of the "valid when made" doctrine via its

final rule relating to the Federal Interest Rate Authority. Under this rulemaking by the FDIC, the interest

rate applicable to a loan originated by a state-chartered bank regulated by the FDIC (such as our

originating bank partners) on the date of origination will carry with the loan irrespective of ownership (i.e.,

the interest rate is "valid when made"). The OCC has issued a similar rule with respect to loans originated

by national banks. Both rules were unsuccessfully challenged shortly after their adoption in separate suits

by state attorneys general who alleged that they had statutory and/or administrative procedural

deficiencies. However, it is uncertain whether these or other state attorneys general will file similar suits

with respect to any other rule regarding the permissibility of interest rates by the FDIC, the OCC or other

regulators. It is also unclear whether these rules will be given effect by courts and regulators in a manner

that actually mitigates risks relating to state interest rate limits and related risks to us, our originating bank

partners, any other program participant or the loans facilitated through our network.

• The second challenge relates to which entity is the "true lender" for a loan. There have been both

private litigation and governmental enforcement actions seeking to recharacterize a lending transaction,

claiming that the named lender was not the true lender, and that instead another entity was the true

lender or the de facto lender. These claims are traditionally based on state lending laws, other statutory

provisions or state common law through which a private litigant or governmental agency could seek to

license, regulate or prohibit the activities of the entity they consider the true lender or *de facto* lender.

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• The FDIC and OCC rules addressing the "valid when made" doctrine underscore that they do not

address the question of whether a bank within each agency's respective jurisdiction is a real party in

interest with respect to a loan or has an economic interest in the loan under state law, i.e., which entity is

the "true lender." Following a rulemaking during the first Trump administration under which the OCC

promulgated a true lender rule, President Biden signed a Congressional Review Act resolution to repeal the

OCC's rule, as a result of which the OCC may not issue any substantially similar rule without subsequent

statutory authorization.

• The third challenge relates to the Depository Institutions Deregulation and Monetary Control Act of

1980 ("DIDMCA"), which preempts state interest rate caps and permits state-chartered banks to lend up to

the federal limit or the state limit where the bank is located, whichever is greater. States are permitted to

opt out of the interest rate preemption provision of DIDMCA with respect to loans "made in" the opt-out

state. Multiple jurisdictions have introduced or adopted legislation to opt out of this provision of DIDMCA

with the intention of enforcing lower in-state interest rate caps against out-of-state bank lenders. In NAIB,

et al. v. Weiser, et al., trade groups sought and received a preliminary injunction against one such state,

Colorado, by arguing that loans are not "made in" Colorado for purposes of the DIDMCA if the lender is

located in another state.

Any litigation or enforcement action with respect to a loan facilitated through our network, whether

based on a challenge to the true lender, the legal interest rate or another theory, against us, any successor

servicer, prior owners or subsequent transferees of such loans (including our originating bank partners)

could subject them to claims for damages, disgorgement or other penalties or remedies. While most

enforcement and litigation has historically targeted high-interest rate programs (i.e., > 100% APR), which we

consider to be predatory and contrary to our mission of providing fairer, more sustainable financing

solutions to our consumers, we nonetheless could be subject to litigation, whether private or

governmental, or administrative actions regarding the above claims. An adverse determination could

prevent us from collecting on our loans at the interest rates contracted for or result in licensing violations,

our loans being found to be unenforceable or void, the reduction of interest or principal or other penalties

or damages. Third-party purchasers of loans facilitated through our network may also be subject to

scrutiny or similar litigation, whether based on the inability to rely upon the "valid when made" doctrine or

because a party other than the originating bank is deemed the true lender.

In addition, certain states have adopted or are considering adopting laws that subject us to the state's

lending licensing and/or maximum interest rate requirements if we have a predominant economic interest

in the loan or other material relationship with the borrower or loan, even if such loans are originated by our

originating bank partners. Where such circumstances exist, we must comply with applicable state licensing

requirements, interest rate limitations and other laws with respect to those loans.

We maintain various Authorizations pertaining to brokering, servicing, collections and lending to

operate across U.S. states, and we believe that, as of the date of this report, we are in compliance with all

material applicable licensing, registration or other regulatory requirements necessary to conduct these

activities. In connection with these Authorizations, various state regulators have supervisory authority over

us, with the primary objective of protecting consumers, but also various other objectives, such as

enhancing the integrity of the financial system, increasing access to financial services and promoting

effective competition in the marketplace.

Money Transmission

Through our indirect subsidiary, Klarna Inc., we hold licenses to operate as a money transmitter (or its

equivalent) in certain states and jurisdictions of the United States, and we believe that, as of the date of

this report, we are in compliance with all material applicable licensing, registration or other regulatory

requirements necessary to conduct these activities. Klarna Inc. is actively seeking additional licenses and

certifications of this nature. As a licensed money transmitter, we are subject to net worth requirements,

bonding requirements, liquidity requirements, restrictions on our investment of customer funds, reporting

requirements, AML compliance requirements and cybersecurity requirements, among others. We may

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expand our stored value product offerings in reliance on our money transmitter licenses, which stored

value products generally do not have the benefit of FDIC deposit insurance or other insurance. As such,

state money transmission regulators may place increased focus on our net worth, liquidity and other

capital adequacy requirements.

In connection with our money transmitter licenses, various state regulators have supervisory authority

over us, with the primary objective of protecting consumers, but also various other objectives, such as

enhancing the integrity of the financial system, increasing access to financial services and promoting

effective competition in the marketplace.

As a result, we have developed policies, procedures and controls designed to maintain compliance

with applicable licensing requirements and to ensure that the licenses and various certifications that we

hold remain valid and appropriately reflect the current scope of our products and services offered in

various jurisdictions. However, no assurances can be given that our compliance policies and procedures

will be effective in all instances, if at all.

AML, Sanctions and Anti-corruption Requirements

Klarna is subject to international anti-money laundering and counter-terrorist financing (AML/CFT)

laws and regulations and is required to implement measures to prevent money laundering, terrorist

financing, and other illicit financial activities in the jurisdictions in which we operate.

In accordance with applicable legal and regulatory requirements, we have established and operate a

risk-based, group-wide AML/CFT compliance framework designed to mitigate the risk that our operations

are misused for financial crime. The framework is supported by governance arrangements intended to

promote compliance with applicable laws and regulatory expectations.

Our AML/CFT framework includes, among other things, measures to monitor for and report suspicious

activity, comply with relevant transaction reporting obligations, and meet applicable recordkeeping

requirements. The framework incorporates policies, procedures, reporting protocols, and internal controls

designed to identify, assess, manage, and mitigate financial crime risks and is subject to ongoing review

and enhancement to address evolving risks, regulatory developments, and business changes. We apply

risk-based due diligence processes for customers, vendors, and other third parties, including screening of

products and services offered through our network.

In addition, Klarna is subject to economic sanctions laws and regulations across multiple jurisdictions,

including those of the European Union (and its member states), the United Kingdom, the United States, and

other applicable international regimes. We maintain a risk-based sanctions compliance framework

designed to promote compliance with applicable sanctions and export control requirements and to

prevent our network from being used to facilitate prohibited activities involving sanctioned countries,

regions, individuals, or entities.

Klarna is also subject to anti-corruption and anti-bribery laws and regulations in the jurisdictions in

which we operate. These laws generally prohibit improper payments or other corrupt practices involving

public officials, private counterparties, or third parties. We maintain policies, procedures, and controls

designed to promote compliance with applicable anti-corruption and anti-bribery requirements and to

mitigate related risks across our operations and third-party relationships.

While we believe our compliance frameworks are appropriately designed and implemented, no

assurance can be given that these policies, procedures, and controls will be effective in all circumstances.

Trust, integrity, and responsible business conduct are fundamental to Klarna's long-term success and

to the value it creates for customers, society, and shareholders. As a regulated financial institution, Klarna

recognises that preventing financial crime is an essential part of its responsibility to protect the integrity of

the financial system and to support sustainable economic activity.

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Klarna maintains a low tolerance for financial crime risk and is committed to preventing the misuse of

its products and services for money laundering, terrorist financing, sanctions evasion, corruption, or other

illicit activities. The company applies a risk-based financial crime framework that is embedded in its

governance and enterprise risk management structures, with oversight by senior management and the

Board. The framework is designed to be scalable and resilient, supporting Klarna's growth while ensuring

that risks are identified, understood, and managed in line with regulatory expectations and the company's

risk appetite.

A strong culture of ethics and compliance underpins Klarna's approach. The company invests in skilled

teams, data-driven controls, and continuous improvement of systems and processes to strengthen

financial crime prevention capabilities over time. Klarna does not engage in activities or relationships

where financial crime risks cannot be adequately understood, monitored, or mitigated.

Financial crime risk is an inherent aspect of financial services and cannot be fully eliminated. Klarna's

approach is therefore focused on managing these risks responsibly, proportionately, and transparently. By

doing so, Klarna contributes to a safer and more trustworthy financial ecosystem, supports regulatory

confidence, and reinforces the foundations for long-term, sustainable value creation.

**Data Privacy and Cybersecurity**

In the course of our operations, we collect, use, store, disclose, transfer and otherwise process a wide

variety of personal information. Accordingly, we are subject to a number of U.S. federal, state and foreign

laws and regulations and industry standards regarding data privacy and cybersecurity. These

requirements, and their application, interpretation and amendment, are constantly evolving.

For example, at the U.S. federal level, we are subject to, among other laws and regulations, the rules

and regulations promulgated under the authority of the Federal Trade Commission (which has the

authority to regulate and enforce against unfair or deceptive acts or practices in or affecting commerce,

including acts and practices with respect to data privacy and cybersecurity). Additionally, we are subject

to certain data privacy and cybersecurity laws and regulations that regulate financial entities in the United

States. For example, we are considered a "financial institution" or service provider to "financial

institutions" under Title V of the Gramm-Leach-Bliley Act (GLBA). The GLBA regulates, among other things,

the use of certain information about individuals ("non-public personal information") in the context of the

provision of financial services, including by banks and other financial institutions. The GLBA includes both

a "Privacy Rule," which imposes obligations on financial institutions relating to the use or disclosure of non-

public personal information, and a "Safeguards Rule," which imposes obligations on financial institutions

and, indirectly, their service providers to implement and maintain physical, administrative and

technological measures to protect the security of non-public personal financial information. Moreover, the

U.S. Congress has recently considered, and is currently considering, various proposals for more

comprehensive data privacy and cybersecurity legislation, to which we may be subject if passed.

Additionally, we regularly receive requests for access to data from government bodies, including law

enforcement agencies, tax authorities and customs offices, and we are subject to the Right to Financial

Privacy Act and similar state laws that protect the privacy of consumer financial records.

At the U.S. state level, we are subject to laws and regulations such as the California Consumer Privacy

Act (CCPA), which broadly defines personal information and requires businesses that process personal

information of California residents to, among other things: (i) provide certain disclosures to California

residents regarding the business's collection, use and disclosure of their personal information; (ii) receive

and respond to requests from California residents to access, delete and correct their personal information

or to opt out of certain processing of their personal information; and (iii) enter into specific contractual

provisions with service providers that process California resident personal information on the business's

behalf. Numerous other states also have enacted, or are in the process of enacting or considering,

comprehensive state-level data privacy and cybersecurity laws and regulations that share similarities with

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the CCPA. Moreover, laws in all U.S. states require businesses to provide notice under certain

circumstances to consumers whose personal information has been disclosed as a result of a data breach.

Additionally, the New York State Department of Financial Services (the "NYDFS") issued in 2017

Cybersecurity Requirements for Financial Services Companies (23 NYCRR Part 500), which require banks,

insurance companies and other financial services institutions regulated by the NYDFS to establish and

maintain a cybersecurity program designed to protect consumers and ensure the safety and soundness of

New York State's financial services industry. The cybersecurity regulation includes specific requirements

for these institutions' cybersecurity compliance programs and imposes an obligation to conduct ongoing,

comprehensive risk assessments. Further, on an annual basis, covered entities are required to submit

either a Certification of Material Compliance for the prior calendar year or an Acknowledgement of

Noncompliance. An Acknowledgement of Noncompliance must identify the provisions of Part 500 with

which the entity has not materially complied, describe the nature and extent of such noncompliance, and

include a remediation plan and timeline or confirmation that remediation has been completed..

Furthermore, as we accept debit and credit cards for payment, we are subject to the PCI-DSS, issued

by the Payment Card Industry Security Standards Council. PCI-DSS contains compliance guidelines with

regard to our security surrounding the physical and electronic storage, processing and transmission of

cardholder data. Costs and potential problems and interruptions associated with the implementation of

new or upgraded systems and technology, such as those necessary to achieve compliance with PCI-DSS or

with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of

our operations.

At the international level, we are subject to the EU GDPR and the UK GDPR, each of which imposes

stringent operational requirements on both data controllers and processors, and introduces significant

penalties for noncompliance. The EU GDPR and U.K. GDPR impose various data privacy compliance

obligations in relation to our collection and use of data relating to an identifiable living individual or

"personal data." The EU GDPR and U.K. GDPR impose obligations, including a principle of accountability

and the obligation to demonstrate compliance through policies, procedures, training and audits. The EU

GDPR and UK GDPR also impose additional requirements for the processing of special categories of

personal data such as biometric data, precise geolocation data and data regarding trade union

membership. For instance, we are only allowed to process such data where we have a proper legal basis

and meet one of the conditions for processing special categories of personal data, such as explicit

consent of the individual, and more stringent security requirements should be applied to our processing of

such data.

Furthermore, the evolving regulatory framework complicates data transfers across borders. For

example, legal developments in the EEA and the UK have created complexity and uncertainty regarding

processing and transfers of personal data from the EEA and the UK to the United States and other so-

called third countries outside the EEA and the UK that have not been determined by the relevant data

protection authorities to provide an adequate level of protection for privacy rights. Ongoing legal

challenges and changes in adequacy decisions, such as the EU-US Data Privacy Framework, may further

restrict our ability to transfer personal data internationally, potentially disrupting our operations. In many

cases, these laws and regulations apply not only to third-party transactions, but also to transfers of

information among our entities.

We are also required to observe laws and regulations relating to the security of our network and

information systems supporting our operations, including DORA, which became effective in the EU in

January 2025. DORA's goal is to strengthen the IT security of financial entities such as banks, insurance

companies and investment firms and make sure that the financial sector in Europe is able to stay resilient

in the event of severe operational disruptions. It establishes a harmonized and comprehensive digital

operational resilience framework across the whole EU financial sector by requiring a wide range of

financial institutions, including banks, to manage their ICT risks in a robust and effective way through

internal governance, control and risk frameworks. DORA also requires financial institutions to report major

ICT-related incidents to regulatory authorities and undertake digital operational resilience testing.

Enforcement of DORA is carried out by national-level authorities and primary EU supervisory authorities,

KLARNA GROUP PLC127

including the European Banking Authority for the banking sector. The authorities have powers to carry out

on-site inspections, compel information from regulated entities, require remedial measures, and impose

administrative and criminal penalties for DORA violations.

The intended launch of a stablecoin and other digital-asset offerings exposes us to additional

cybersecurity and privacy risks, including risks related to private-key compromise, blockchain

infrastructure vulnerabilities, irreversible transactions, and incidents affecting third-party custody, wallet,

or blockchain service providers.

We contract with third-party service providers, including shared cloud computing services, to store or

process data (including personal data) on our behalf in compliance with applicable laws, regulations, rules

and standards. To that end, we seek to enter into data processing agreements with all our third-party

providers to clearly define the services being provided and the nature of the engagement, for example the

protection and ownership of the data being processed by the service provider. We also maintain

processes designed to oversee and identify cybersecurity risks associated with third-party service

providers, including cloud service providers, through due diligence, contractual requirements, and ongoing

monitoring. However, such measures may not in all circumstances fully mitigate the risk of claims,

proceedings, liability, or adverse publicity arising from data privacy or cybersecurity matters, and

limitations may exist in the scope and effectiveness of our data processing agreements..

If laws and regulations relating to data privacy and cybersecurity are implemented, interpreted or

applied in a manner inconsistent with our current or future practices or policies, or if we fail to comply with

applicable laws or regulations, we could be subject to investigations, enforcement actions and other

proceedings. See "Risk Factors—We are subject to complex and evolving laws, regulations, rules,

standards, contractual obligations and other requirements regarding data privacy and cybersecurity" and

"—We or our third-party providers may fail to protect confidential information, including personal

information, and/or experience data breaches or other cybersecurity incidents" for more information

regarding other risks related to data privacy and cybersecurity.

**Intellectual Property**

We believe that our intellectual property rights, including those in our proprietary technology, software,

data, processes, know-how and brand, are important to the success of our business. We rely on a

combination of patent, trademark, copyright, trade secret and other intellectual property laws in the

United States and certain foreign jurisdictions, as well as contractual arrangements, to obtain, maintain,

protect and enforce our intellectual property rights.

We strive to require all of our employees and third parties who develop intellectual property on our

behalf to enter into confidentiality and invention assignment agreements and third parties with whom we

share our confidential proprietary information to enter into nondisclosure and confidentiality agreements

or to be bound by professional, fiduciary or other contractual obligations requiring the applicable

employee or third party to protect our trade secrets, proprietary know-how and other confidential

proprietary information, including those related to our material proprietary AI models. However, we cannot

guarantee that we have entered into agreements containing such obligations with each party that has

been involved in the development of intellectual property for us or that has, or may have had, access to

our trade secrets, proprietary know-how and other confidential proprietary information.

We have an ongoing trademark registration program pursuant to which we register our brand names

and product names and a patent program to identify and protect a portion of our intellectual property in

technologies relevant to our business to the extent we determine them to be appropriate and cost-

effective. As of December 31, 2025, we owned (i) 17 registered trademarks and 2 pending trademark

applications in the United States, (ii) 254 registered trademarks and 35 pending trademark applications in

37 foreign jurisdictions, (iii) 27 issued patents and 1 pending patent applications in the United States and

(iv) 3 issued patents and 4 pending patent applications in 6 foreign jurisdictions.

KLARNA GROUP PLC128

We intend to pursue additional intellectual property protection to the extent we believe it would be

beneficial and cost-effective. However, despite our efforts to protect our intellectual property rights, they

may not be respected in the future or may be invalidated, circumvented, reduced in scope, deemed

unenforceable or otherwise challenged, and our contractual arrangements may be breached or may

otherwise not effectively prevent disclosure of, or control access to, our trade secrets, proprietary know-

how or other confidential proprietary information. The efforts undertaken to protect our intellectual

property and confidential proprietary information may not be sufficient or effective. See "Risk Factors—We

may be unable to sufficiently obtain, maintain, protect or enforce our intellectual property and other

proprietary rights."

**Facilities**

We lease office space under operating leases with various expiration dates through 2031. We do not

own any real property. Our registered office is located at 10 York Road, London SE1 7ND, United Kingdom

and is subject to a membership agreement with an affiliate of WeWork Inc. for co-working space. We have

leased offices in several other locations, including Germany, the United States and the Netherlands.

The table below sets forth additional information regarding our principal facilities as of December 31,

2025:

---

| | | | |
|:---|:---|:---|:---|
| **Location** | **Type** | **Ownership** | **Size**<br>**(in sq. feet)**<br>|
| Stockholm, Sweden .......................................................................................... | Office | Leased | 189714 |
| Berlin, Germany ................................................................................................. | Office | Leased | 83733 |
| Giessen, Germany ............................................................................................. | Office | Leased | 48491 |
| Munich, Germany .............................................................................................. | Office | Leased | 35725 |
| **Total** .................................................................................................................... |  |  | **357663** |

---

In addition, we have membership agreements for co-working space in various locations, including

Madrid, Spain, Milan, Italy, New York, United States, Paris, France, Shanghai, China, Tokyo, Japan and

Warsaw, Poland.

As part of our strategic decision to drive operational efficiency, leverage AI and reduce administrative

costs in our business, we have decided to reduce the size of our office space. Accordingly, the operating

leases for our facilities located in Mannheim, Germany and Amsterdam, Netherlands have been

terminated, with the terminations becoming effective on September 29, 2025 and June 30, 2025,

respectively. We believe that our existing facilities are sufficient for our current needs. We continue to

periodically review our facility requirements and may further consolidate or dispose of additional rented

facilities that are no longer required or, where appropriate, lease additional space to meet the needs of our

business, including in new geographies.

KLARNA GROUP PLC129

**Legal Proceedings**

From time to time, we may be subject to legal proceedings and claims in the ordinary course of

business. We are not presently a party to any legal proceedings that, if determined adversely to us, would

individually or taken together have a material adverse effect on our business, results of operations,

financial condition and future prospects. The results of any current or future litigation cannot be predicted

with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of

defense and settlement costs, diversion of management resources and other factors.

**Organizational Structure**

Klarna Group plc is a public limited company incorporated in England and Wales and serves as the

holding company for the Klarna group. The Company conducts its business through a number of

subsidiaries and affiliated entities organized across multiple jurisdictions.

The principal operating entity of the Klarna group is Klarna Bank AB (publ), a Swedish public limited

liability company that is licensed as a bank and supervised by the Swedish Financial Supervisory Authority.

Klarna Bank AB provides the core payment, financing and banking services offered to consumers and

merchants and operates through subsidiaries, branches and passported activities in various jurisdictions

within the European Economic Area and the United Kingdom.

In addition, the Klarna group includes subsidiaries that support technology development, product

distribution, merchant services, marketing and regional operations. Klarna Group plc does not itself

conduct banking operations and functions as the ultimate holding company of the group.

For further information regarding the Company's principal subsidiaries, see Exhibit 8.1\*

**Corporate Information**

We are a public company with limited liability incorporated pursuant to the laws of England and Wales

on November 7, 2022 as Klarna UK II PLC and renamed as Klarna Group plc on December 13, 2023. We are

registered with the Registrar of Companies in England and Wales under number 14467769. Our registered

office is located at 10 York Road, London SE1 7ND, United Kingdom, and the telephone number at that

office is +44 8081 893 333.

Our banking operations in the EEA are conducted through Klarna Bank AB. Klarna Bank AB was

incorporated as a public limited company with the legal name Kreditor Finans AB under Swedish law on

September 5, 2007, with the company number 556737-0431. After its incorporation, Kreditor Finans AB

changed its legal name to Klarna Finans AB and, following the receipt of a license to carry out banking

activities under the supervision of the SFSA, subsequently changed its legal name to Klarna Bank AB on

June 19, 2017. Klarna Bank AB is a subsidiary of Klarna Holding AB (publ). As a result of our corporate

reorganization in May 2024, Klarna Holding AB(publ) and Klarna Bank AB (publ) became indirect

subsidiaries of Klarna Group plc.

Our main U.S. subsidiary is Klarna Inc., a Delaware corporation. Its principal office is located at 800 N.

High St., Ste. 400, Columbus, Ohio 43215, and the telephone number at that office is +1 (844) 552 7621.

Our website address is www.klarna.com. We have included our website address in this annual report

solely as an inactive textual reference. Information contained on, or that can be accessed through, our

website is not incorporated by reference into this annual report, and you should not consider information

on our website to be part of this annual report.

Our agent for service of process in the United States is Klarna Inc.

KLARNA GROUP PLC130

**Item 4A. Unresolved Staff Comments**

None.

**Item 5. Operating and Financial Review and Prospects**

**Results of Operations**

The following table sets forth our results of operations for the periods presented. Historical results for

any prior period are not necessarily indicative of results expected in any future period. For example, in the

fourth quarter of 2024, we completed the divestment of KCO, our online checkout solution, to a

consortium of investors. As a result of this disposition, our revenue and growth figures for the year ended

December 31, 2025 may appear lower on a comparative basis as a result of this disposition. To illustrate

that point, after adjusting for the sale of KCO, our revenue and operating loss in the year ended

December 31, 2024 was $2,749 million and $164 million, respectively.

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
|  | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** |
| **Revenue:** |  |  |  |
| Transaction and service revenue ................................................................... | 2500 | 2136 | 1768 |
| Gain on sale of consumer receivables .......................................................... | 73 |  |  |
| Interest income .................................................................................................. | 937 | 675 | 508 |
| **Total revenue .......................................................................................................** | **3509** | **2811** | **2276** |
| Processing and servicing costs ....................................................................... | (809) | (596) | (541) |
| Provision for credit losses ................................................................................ | (794) | (495) | (353) |
| Funding costs ...................................................................................................... | (667) | (503) | (297) |
| Technology and product development ......................................................... | (486) | (444) | (389) |
| Sales and marketing .......................................................................................... | (414) | (328) | (381) |
| Customer service and operations .................................................................. | (207) | (203) | (240) |
| General and administrative .............................................................................. | (306) | (281) | (270) |
| Depreciation, amortization and impairments .............................................. | (55) | (82) | (128) |
| **Total operating expenses ..................................................................................** | **(3739)** | **(2932)** | **(2599)** |
| Operating loss .................................................................................................... | (230) | (121) | (323) |
| Other income (expense) ................................................................................... | (11) | 154 | 19 |
| **Profit (loss) before taxes ....................................................................................** | **(241)** | **33** | **(304)** |
| Tax (expense) benefit ....................................................................................... | (32) | (12) | 60 |
| **Net profit (loss) ....................................................................................................** | **(273)** | **21** | **(244)** |

---

***Year ended December 31, 2025 Compared to the Year ended December 31, 2024***

KLARNA GROUP PLC131

**Revenue**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | | | | | **% Change on a**<br>**Like-for-Like**<br>**basis** <sup>1</sup> |
|  | **2025** | **2024** | <br>**$ Change** | <br>**% Change** | **% Change on a**<br>**Like-for-Like**<br>**basis** <sup>1</sup> |
|  | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** |
| Transaction and service revenue ...... | 2500 | 2136 | 364 | 17% | 17% |
| Gain on sale of consumer <br>receivables .............................................<br>| 73 |  | 73 | n.m. | n.m. |
| Interest income ...................................... | 937 | 675 | 262 | 39% | 34% |
| **Total revenue** ......................................... | **3509** | **2811** | **698** | **25%** | **24%** |

---

n.m. = not meaningful

____________

<sup>1</sup>Year-over-year change on a like-for-like basis is calculated by adjusting our revenue for (1) the sale of KCO and (2) the impact of

foreign currency fluctuations. The impact of foreign currency fluctuations is calculated by translating the reported amounts in the

current period using the exchange rates in use during the comparative prior period. In year ended December 31, 2024, KCO

contributed $62 million to our Transaction and service revenue. The year-over-year impact of foreign currency fluctuations on our

Transaction and service revenue and interest income for the year ended December 31, 2025 was $73 million and $31 million,

respectively.

Total revenue

Total revenue for year ended December 31, 2025 increased by $698 million, or 25% (24% on a like-for-

like basis), compared to year ended December 31, 2024. This increase was generally in line with the

increase in our GMV of $22.8 billion, or 21% (20% on a like-for-like basis). In 2025, we saw increased interest

income, as a result of accelerated GMV growth through primarily consumer adoption of our Fair Financing

product. We also saw growth driven by the continued expansion of our merchant network and distribution

partnerships, as well as gains recognized from the sale of consumer receivables, as a result of entering

into new arrangements with structured entities during 2025.

Transaction and service revenue

Transaction and service revenue for the year ended December 31, 2025 increased by $364 million, or

17% (17% on a like-for-like basis), compared to the year ended December 31, 2024. This increase was

generally in line with the increase in our GMV, which grew 21%, compared to the year ended December 31,

2024 but was lower primarily due to product mix, as a higher proportion of GMV was generated from Fair

Financing products, for which revenue is predominantly recognized in interest income rather than

transaction and service revenue. Transaction and service revenue grew primarily driven by increases in

merchant revenue from Pay Later and Pay in Full GMV, increases in fees from the Klarna card, in line with

increases in card volume, in particular in the U.S.

Gain on sale of consumer receivables

During the year ended December 31, 2025, the Company entered into entered into sales agreements of

Fair Financing receivables comprising both an initial sale of existing portfolio and additional forward flow

agreements. These sales of receivables resulted in a gain on sale $73 million. There was no comparable

revenue for the year ended December 31, 2025.

Interest income

Interest income for the year ended December 31, 2025 increased by $262 million, or 39% (34% on a

like-for-like basis), compared to the year ended December 31, 2024. This increase was primarily driven by

the acceleration of Fair Financing, where GMV accelerated sequentially throughout the year, with GMV

increasing 123% year-over-year, reaching 165% in the fourth quarter of 2025. This supported a 61% ($213

million) increase in interest income from Fair Financing products, as well as an increase of $19 million from

KLARNA GROUP PLC132

government bonds, driven by increased holdings, along with an increase in "snooze fees" of $32.5 million,

driven by an increased volume of Pay Later transactions.

**Operating Expenses**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | | |
|  | **2025** | **2024** | <br>**$ Change** | <br>**% Change** |
|  | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** |
| Processing and servicing costs ........................................ | (809) | (596) | (213) | 36% |
| Provision for credit losses ................................................. | (794) | (495) | (299) | 60% |
| Funding costs ....................................................................... | (667) | (503) | (164) | 33% |
| Technology and product development .......................... | (486) | (444) | (43) | 10% |
| Sales and marketing ............................................................ | (414) | (328) | (87) | 26% |
| Customer service and operations .................................... | (207) | (203) | (4) | 2% |
| General and administrative ............................................... | (306) | (281) | (25) | 9% |
| Depreciation, amortization and impairments ................ | (55) | (82) | 28 | (34)% |
| **Operating expenses ..............................................................** | **(3739)** | **(2932)** | **$(807)** | **28%** |

---

Total operating expenses

Total operating expenses for the year ended December 31, 2025 increased by $807 million, or 28%,

compared to the year ended December 31, 2024. This was primarily driven by increases in our transaction

costs and operating expenses as more fully described below.

Processing and servicing costs

Processing and servicing costs for the year ended December 31, 2025 increased by $213 million, or

36%, compared to the year ended December 31, 2024. Processing and servicing costs as a percentage of

GMV increased from 0.57% to 0.63% for the year ended December 31, 2024 and 2025, respectively,

predominantly driven by the U.S. market, which has structurally higher payment fees, growing as a share of

our GMV, as well as an increase in card issuing and processing fees.

Provision for credit losses

Provision for credit losses for the year ended December 31, 2025 increased by $299 million, or 60%,

compared to the year ended December 31, 2024. The provision for credit losses as a percentage of GMV

rose from 0.47% to 0.63% for the year ended December 31, 2024 and 2025, respectively.

This increase was primarily driven by changes in product mix, in particular growth in our Fair Financing

product, which has higher upfront provisions in comparison to our Pay Later product. Fair Financing GMV

accelerated sequentially throughout the year, with GMV increasing 123% year-over-year, reaching 165% in

the fourth quarter of 2025.

Funding costs

Funding costs for the year ended December 31, 2025 increased by $164 million, or 33%, respectively,

compared to the year ended December 31, 2024. Funding costs as a percentage of GMV increased from

0.48% to 0.52% for the year ended December 31, 2024 and 2025, respectively. The increase in funding

costs to $667 million for the year ended December 31, 2025, compared to $503 million for the year ended

December 31, 2024, was primarily driven by a $133 million increase in fair value adjustments on loans sold

and held for sale, which amounted to $163 million in 2025 driven by increases in Pay Later forward flow

arrangements. The increase was further supported by higher other funding costs and increased expenses

related to liabilities to credit institutions. These effects were partially offset by lower costs associated with

consumer deposits.

KLARNA GROUP PLC133

Technology and product development

Technology and product development expenses for the year ended December 31, 2025 increased by

$43 million, or 10%, respectively, compared to the year ended December 31, 2024. This increase was

primarily driven by increase in cloud-computing costs, as well as labor-related technology costs from

higher share-based compensation and consulting costs.

Sales and marketing

Sales and marketing expenses for the year ended December 31, 2025 increased by $87 million, or 26%,

respectively, compared to the year ended December 31, 2024. This increase primarily resulted from higher

share-based payments expenses, as well as increased marketing spend to support product adoption.

Customer service and operations

Customer service and operations expenses for the year ended December 31, 2025 increased by $4

million, or 2%, compared to the year ended December 31, 2024. Cost increased at a slower pace than

volumes, with volumes up 32% year-over-year and transactions up 25% year-over-year, indicating

continued operating leverage.

General and administrative

General and administrative expenses for the year ended December 31, 2025 increased by $25 million,

or 9%, respectively, compared to the year ended December 31, 2024. The increase primarily resulted from

higher share-based payments expenses and professional services costs.

Depreciation, amortization and impairments

Depreciation, amortization and impairments for the year ended December 31, 2025 decreased by $28

million, or 34%, respectively, compared to the year ended December 31, 2024. The decrease was primarily

driven by the write-off of certain intangible assets, resulting in lower amortization expenses for intangible

assets, offset by impairment charges on right-of-use assets following a decision to reduce certain office

spaces to better align our leased space with our hybrid work model and current office, during the year

ended December 31, 2024.

**Other (Expense) Income**

Other (expense) income decreased $165 million for the year ended December 31, 2025, compared to

the year ended December 31, 2024. This was primarily driven by the divestment of KCO, recycling of

currency translation effects from other comprehensive income, and partially offset by the remark and

administrative fine of issued by the SFSA, all occurring during the year ended December 31, 2024.

**Income Taxes**

Tax expense for the year ended December 31, 2025 of $32 million increased $20 million, compared to

the tax expense of $12 million in the year ended December 31, 2024. The increase was primarily related to

release of deferred tax liability related to the year ended December 31, 2024.

***Year Ended December 31, 2024 Compared to the Year Ended December 31, 2023***

Total revenue

Total revenue for the year ended December 31, 2024 increased by $535 million, or 23% (25% on a like-

for-like basis), compared to the year ended December 31, 2023. This increase was primarily driven by an

increase in our GMV of $12.5 billion, or 14% (15% on a like-for-like basis), in that period. The increase in GMV

was driven by the expansion of our network, including the increase in customer engagement, with our

KLARNA GROUP PLC134

ARPAC growing from $27 to $30, as well as the growth in the number of active Klarna consumers, which

grew by 9 million, or 11%, compared to the year ended December 31, 2023. Our revenue in the year ended

December 31, 2024 grew faster than our GMV, primarily driven by higher take rates in various geographies,

as discussed under "Transaction and service revenue" below.

Transaction and service revenue

Transaction and service revenue for the year ended December 31, 2024 increased by $368 million, or

21% (23% on a like-for-like basis), compared to the year ended December 31, 2023. The increase was

primarily driven by a strong growth in GMV and revenue in the United States, the U.K. and Germany. Given

that both the United States and the U.K. have higher take rates than our average take rate, higher GMV in

those markets translated into disproportionately higher merchant revenue, which increased by $267

million year over year. Transaction and service revenue growth was also driven by higher consumer service

revenue, which increased by $107 million year over year, due to an increase in revenue from consumer

fees in various markets, including Germany, the United States and the U.K., corresponding to our higher

GMV in the period.

Interest income

Interest income for the year ended December 31, 2024 increased by $167 million, or 33% (32% on a

like-for-like basis), compared to the year ended December 31, 2023. This increase was partly driven by an

increase of $69 million in the interest income earned on our interest bearing debt securities, resulting from

a higher balance of treasury bills held at central banks which resulted in increased interest income earned

on them. The remaining portion of the increase was primarily driven by increases in interest income from

Fair Financing transactions of $65 million and interest income from "snooze" fees of $32 million due to

increased volumes of Fair Financing and Pay Later transactions, respectively.

**Operating Expenses**

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | | |
|  | **2024** | **2023** | <br>**$ Change** | <br>**% Change** |
|  | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** | **(in $ millions, except for percentages)** |
| Processing and servicing costs ........................................ | (596) | (541) | (55) | 10% |
| Provision for credit losses ................................................. | (495) | (353) | (143) | 40% |
| Funding costs ....................................................................... | (503) | (297) | (207) | 70% |
| Technology and product development .......................... | (444) | (389) | (54) | 14% |
| Sales and marketing ............................................................ | (328) | (381) | 53 | (14)% |
| Customer service and operations .................................... | (203) | (240) | 37 | (15)% |
| General and administrative ............................................... | (281) | (270) | (11) | 4% |
| Depreciation, amortization and impairments ................ | (82) | (128) | 46 | (36)% |
| **Operating expenses ..............................................................** | **(2932)** | **(2599)** | **$(333)** | **13%** |

---

Total operating expenses

Total operating expenses for the year ended December 31, 2024 increased by $333 million, or 13%,

compared to the year ended December 31, 2023. This was primarily driven by an increase in our funding

costs and provision for credit losses, as more fully described below.

Processing and servicing costs

Processing and servicing costs for the year ended December 31, 2024 increased by $55 million, or 10%,

compared to the year ended December 31, 2023. This increase was primarily driven by growth in our GMV,

which grew 14% during the same period, partially offset by a reduction in authentication and scoring costs.

KLARNA GROUP PLC135

Provision for credit losses

Provision for credit losses for the year ended December 31, 2024 increased by $143 million, or 40%,

compared to the year ended December 31, 2023, growing as a percentage of GMV from 0.38% to 0.47%.

This increase was primarily driven by a change in our market mix, with the United States contributing a

larger share of our GMV. The U.S. market is at an earlier stage of development compared to our more

mature geographies, leading to a higher provision credit losses on a consolidated basis. A change in

product mix also contributed to the increase in our provision for credit losses, as the share of transactions

utilizing our Fair Financing product in our GMV increased.

Funding costs

Funding costs for the year ended December 31, 2024 increased by $207 million, or 70%, compared to

the year ended December 31, 2023, which represented a 4.8 percentage point increase in our funding

costs as a percentage of total revenue. This increase was primarily driven by an increase in our interest

expense on consumer deposits of $153 million, resulting from higher prevailing interest rates in our

European geographies between 2023 and 2024. In addition, our cost of securitizations increased by $42

million, primarily as a result of the cost of the 2024 forward flow transaction involving the sale of our U.K.

Pay Later (30) and Pay in 3 receivables. As a result, our funding costs as a percentage of GMV grew from

32 basis points in the year ended December 31, 2023 to 48 basis points in the year ended December 31,

2024. Technology and product development

Technology and product development expenses for the year ended December 31, 2024 increased by

$54 million, or 14%, compared to the year ended December 31, 2023. This increase was primarily driven by

an increase in labor-related technology costs of $47 million resulting from an increase in compensation

expenses and a lower amount of capitalized expenses year over year. We currently only recruit for a

limited number of engineering roles, focusing our investments on product development and AI to enhance

customer experiences and internal efficiency

Sales and marketing

Sales and marketing expenses for the year ended December 31, 2024 decreased by $53 million, or

14%, compared to the year ended December 31, 2023, which represented a 5.1 percentage point decrease

in sales and marketing expenses as a percentage of our total revenue. In the year ended December 31,

2024, we were able to continue to efficiently allocate our marketing spend, resulting in a decrease in our

sales and marketing costs, partially offset by an increase in commission costs for third-party partners as a

result of our GMV growth.

Customer service and operations

Customer service and operations expenses for the year ended December 31, 2024 decreased by $37

million, or 15%, compared to the year ended December 31, 2023, which represented a 3.3 percentage point

decrease in customer service and operations expenses as a percentage of our total revenue. This

decrease was primarily driven by a decrease in customer service costs as we continued to make

significant efforts to optimize and manage such costs.

General and administrative

General and administrative expenses for the year ended December 31, 2024 increased by $11 million,

or 4%, compared to the year ended December 31, 2023. The increase primarily resulted from an increase

in professional services costs related to the inital public offering and the related preparations to become a

publicly listed company in the United States.

KLARNA GROUP PLC136

Depreciation, amortization and impairments

Depreciation, amortization and impairments for the year ended December 31, 2024 decreased by $46

million, or 36% compared to the year ended December 31, 2023. The decrease was primarily driven by

decreased impairment of certain property and equipment of $29 million, including right-of-use assets, and

decreased depreciation and amortization of $16 million.

**Other (Expense) Income**

Other income for the year ended December 31, 2024 primarily related to a net gain of $171 million as a

result of the divestment of KCO, as more fully described in Note 11 to the consolidated financial statements

included elsewhere in this report. Other income for the year ended December 31, 2024 also included the

recycling of currency translation effects from other comprehensive income of $18 million. These impacts

were partially offset by the remark and administrative fine of $47 million issued by the SFSA in December

2024. Other income for the year ended December 31, 2023 primarily related to a gain of $13 million on the

repurchase of convertible notes, as more fully described in the section titled "Certain Relationships and

Related Party Transactions―Convertible Notes Repurchase" elsewhere in this report.

**Income Taxes**

Tax expense for the year ended December 31, 2024 was $12 million compared to a tax benefit of $60

million for the year ended December 31, 2023. The change to a tax expense from a tax benefit was primarily

due to us generating a net profit before taxes of $33 million for the year ended December 31, 2024,

compared to a net loss before taxes of $304 million, and the recognition of certain deferred tax assets and

liabilities of $73 million in the year ended December 31, 2023.

**Non-IFRS Financial Measures**

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| **Transaction Margin Dollars** .............................................................................. | $1238 | $1217 | $1085 |
| **Transaction Margin** ........................................................................................... | 35% | 43% | 48% |
| **Adjusted Operating Profit (Loss)** .................................................................... | $65 | $181 | $(49) |
| **Adjusted Operating Margin** ............................................................................. | 1.9% | 6.4% | (2.2)% |

---

We use certain non-IFRS financial measures to supplement our consolidated financial statements,

which are presented in accordance with IFRS. These non-IFRS financial measures include transaction

margin dollars, transaction margin, adjusted operating profit (loss) and adjusted operating margin. We use

these non-IFRS financial measures to facilitate the review of our operational performance and as a basis

for strategic planning. We also present period-over-period changes in certain metrics on a like-for-like

basis, which are calculated by adjusting the applicable metric for (1) the sale of KCO and (2) the impact of

foreign currency fluctuations. The impact of foreign currency fluctuations is calculated by translating the

reported amounts in the current period using the exchange rates in use during the comparative prior

period. We believe that presenting changes in our revenue and transaction margin dollars on a like-for-like

basis, which exclude the impact of the recent sale of KCO and foreign currency fluctuations, provides

useful information regarding our underlying business trends and facilitates comparisons of our financial

performance over prior periods on a consistent basis.

Transaction margin dollars and transaction margin are key performance measures used by our

management to measure our ability to attain efficiency and scale and to grow these metrics over time.

They measure our success in growing revenue while effectively managing our processing and servicing

KLARNA GROUP PLC137

costs, provision for credit losses and funding costs in both maturing markets (which include the Nordics,

Germany, Netherlands, Austria, Switzerland and the U.K.) and new markets (which include the remaining

markets in which we currently operate, including the United States). We primarily strive to grow our

revenue by increasing the number of our active Klarna consumers and ARPAC as well as expanding into

additional markets. In parallel, we seek to drive efficiencies in our processing and servicing costs and to

effectively manage our credit losses by improving our underwriting capabilities, in particular in our new

markets, while maintaining low and stable funding costs. Our management uses transaction margin dollars

and transaction margin in assessing our success in meeting these objectives.

In addition, by excluding certain items that are nonrecurring or not reflective of the performance of our

normal course of business, we believe that adjusted operating profit (loss) and adjusted operating margin

provide meaningful supplemental information regarding our performance. Accordingly, we believe that

these non-IFRS financial measures are useful to investors and others because they allow investors to

supplement their understanding of our financial trends and evaluate our ongoing and future performance

in the same manner as management. However, there are several limitations related to the use of non-IFRS

financial measures as they reflect the exercise of judgment by our management about which expenses are

excluded or included in determining these non-IFRS measures. These non-IFRS measures should be

considered in addition to, not as a substitute for or in isolation from, our financial results prepared in

accordance with IFRS. Other companies, including companies in our industry, may calculate these non-

IFRS (or similar non-GAAP) financial measures differently or not at all, which reduces their usefulness as

comparative measures.

Transaction margin dollars is defined as total revenue less total transaction costs, consisting of

processing and servicing, provision for credit losses and funding costs. Transaction margin is calculated by

dividing transaction margin dollars by our total revenue. Adjusted operating profit (loss) is defined as

operating profit (loss) excluding (i) depreciation, amortization and impairments, (ii) share-based payments

expense, (iii) severance-related restructuring costs and (iv) expenses related to the preparation to initial

public offering not connected to the issue and sale of ordinary shares by us in initial public offering.

Adjusted operating margin is defined as adjusted operating profit (loss) divided by our total revenue.

Depreciation, amortization and impairments below include amounts recorded within Technology and

product development expenses in our consolidated statements of profit and loss. We consider the

exclusion of certain nonrecurring or noncash items in calculating adjusted operating profit (loss), adjusted

operating margin and adjusted non-transaction-related operating expenses to provide a useful measure

for investors and others to evaluate our operating results and expenses in the same manner as

management.

The following table presents a reconciliation of our operating income (loss) and our operating margin,

the most directly comparable financial measures presented in accordance with IFRS, to our transaction

margin dollars and transaction margin:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| **Total revenue .....................................................................................................** | **$3509** | **$2811** | **$2276** |
| **Operating loss ....................................................................................................** | **$(230)** | **$(121)** | **$(323)** |
| Operating margin .............................................................................................. | (6.6)% | (4.3)% | (14.2)% |
| Adjustments: |  |  |  |
| Technology and product development ....................................................... | $486 | $444 | $389 |
| Sales and marketing ......................................................................................... | $414 | $328 | $381 |
| Customer service and operations ................................................................. | $207 | $203 | $240 |
| General and administrative ............................................................................ | $306 | $281 | $270 |
| Depreciation, amortization (excluding software) and impairments ...... | $55 | $82 | $128 |
| **Transaction margin dollars ...............................................................................** | **$1238** | **$1217** | **$1085** |
| **Transaction margin ............................................................................................** | **35.3%** | **43.3%** | **47.7%** |

---

KLARNA GROUP PLC138

Note: Amortization of acquired and internally developed software is included in Technology and

product development.

In the year ended December 31, 2024 and December 31, 2023, KCO contributed $240 million, and $72

million, respectively, to our transaction margin dollars. The year-over-year impact of foreign currency

fluctuations on our transaction margin dollars in the year ended December 31, 2025, 2024, and 2023 was

$47 million, $6 million, and $10 million, respectively.

The following table presents a reconciliation of our operating income (loss) and our operating margin,

the most directly comparable financial measure presented in accordance with IFRS, to our adjusted

operating profit (loss) and adjusted operating margin:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| **Total revenue .....................................................................................................** | $3509 | $2811 | $2276 |
| Operating loss ................................................................................................... | $(230) | $(121) | $(323) |
| Operating margin .............................................................................................. | (6.6)% | (4.3)% | (14.2)% |
| **Adjustments:** |  |  |  |
| Depreciation, amortization and impairments ............................................. | $106 | $189 | $227 |
| Share-based payments expense .................................................................. | $156 | $93 | $43 |
| Severance-related restructuring costs ........................................................ | $15 | $6 | $4 |
| IPO-related costs ............................................................................................. | $17 | $14 | $— |
| Adjusted operating profit (loss) .................................................................... | $65 | $181 | $(49) |
| Adjusted operating margin ............................................................................. | 1.9% | 6.4% | (2.1)% |

---

The following table presents a calculation of changes in our revenue and transaction margin dollars on

a like-for-like basis:

KLARNA GROUP PLC139

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December** <br>**31,** | **For the Year Ended December** <br>**31,** | **% Change** |
|  | **2025** | **2024** | **% Change** |
| **Revenue** | **Revenue** | **Revenue** | **Revenue** |
| Transaction and service revenue (as reported) ....................................... | $2500 | $2136 | 17% |
| Impact of KCO disposition .............................................................................. | N/A | $(62) | N/A |
| Impact of foreign currency translation ........................................................ | $(73) | $— | N/A |
| Transaction and service revenue (like-for-like basis) ............................. | $2427 | $2074 | 17% |
| Gain on sale of consumer receivables (as reported) ................................ | $73 | N/A | N/A |
| Impact of KCO disposition .............................................................................. | N/A | N/A | N/A |
| Impact of foreign currency translation ........................................................ | $(2) | N/A | N/A |
| Gain on sale of consumer receivables (like-for-like basis) ..................... | $71 | N/A | N/A |
| Interest income (as reported) ....................................................................... | $937 | $675 | 39% |
| Impact of KCO disposition .............................................................................. | N/A | N/A | N/A |
| Impact of foreign currency translation ........................................................ | $(2) | $— | N/A |
| Interest revenue (like-for-like basis) ............................................................ | $935 | $675 | 39% |
| Total revenue (as reported) ........................................................................... | $3509 | $2811 | 25% |
| Total revenue (like-for-like basis) ................................................................. | $3433 | $2749 | 25% |
| **Transaction margin dollars** | **Transaction margin dollars** | **Transaction margin dollars** | **Transaction margin dollars** |
| Transaction margin dollars (as reported) ................................................... | $1238 | $1217 | 2% |
| Impact of KCO disposition .............................................................................. | $— | $(43) | (100)% |
| Impact of foreign currency translation ........................................................ | $47 | $— | N/A |
| Transaction margin dollars (like-for-like basis) ......................................... | $1285 | $1174 | 9% |

---

**Segment Results of Operations** 

We manage our business as one operating segment. As a result, our consolidated financial statements

included elsewhere in this report have been presented and disclosed as one reportable operating

segment.

**Geographic Breakdown of Revenue**

In the year ended December 31, 2025, 2024, and 2023, our main geographic markets by revenue were

Germany, the United States, and the U.K. No other market contributed more than 10% of revenues. Please

refer to Note 3 to our interim condensed consolidated financial statements and Note 4 to our audited

consolidated financial statements included elsewhere in this report for more information about the

breakdown of our total revenue by geographic market.

**Quarterly Results of Operations**

The following table sets forth our unaudited quarterly interim condensed consolidated results of

operations for each of the twelve quarters in the period from January 1, 2023 to December 31, 2025. The

information for each of these quarters has been prepared on a basis consistent with our audited annual

consolidated financial statements included elsewhere in this report and, in the opinion of management,

include all adjustments necessary to present fairly our results of operations and financial conditions for

the periods presented. The following unaudited interim condensed consolidated quarterly financial data

should be read in conjunction with our annual consolidated financial statements, including the notes

thereto, included elsewhere in this report. These quarterly results are not necessarily indicative of our

operating results for a full year or any future period.

KLARNA GROUP PLC140

---

| | | | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** | **Three Months Ended** |
|  | **Q1**<br>**March 31,** <br>**2023**<br>| **Q2**<br>**June 30,** <br>**2023**<br>| **Q3**<br>**September** <br>**30, 2023**<br>| **Q4**<br>**December** <br>**31, 2023**<br>| **Q1**<br>**March 31,** <br>**2024**<br>| **Q2**<br>**June 30,** <br>**2024**<br>| **Q3**<br>**September** <br>**30, 2024**<br>| **Q4**<br>**December** <br>**31, 2024**<br>| **Q1**<br>**March 31,** <br>**2025**<br>| **Q2**<br>**June 30,** <br>**2025**<br>| **Q3**<br>**September** <br>**30, 2025**<br>| **Q4**<br>**December** <br>**31, 2025**<br>|
|  | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** | **(in $ millions)** |
| **Revenue:** |  |  |  |  |  |  |  |  |  |  |  |  |
| Transaction and <br>service revenue ........<br>| 368 | 418 | 441 | 541 | 486 | 518 | 532 | 600 | 519 | 604 | 634 | 743 |
| Gain on sale of <br>consumer <br>receivables .................<br>| – | – | – | – | – | – | – | – | – | – | – | 73 |
| Interest income ......... | 116 | 116 | 134 | 142 | 157 | 164 | 173 | 181 | 182 | 219 | 269 | 267 |
| **Total revenue** ............. | **484** | **534** | **575** | **683** | **643** | **682** | **705** | **781** | **701** | **823** | **903** | **1082** |
| Processing and <br>servicing costs ...........<br>| (128) | (131) | (133) | (149) | (136) | (148) | (151) | (161) | (164) | (187) | (208) | (250) |
| Provision for credit <br>losses ..........................<br>| (73) | (88) | (72) | (120) | (117) | (106) | (116) | (156) | (136) | (174) | (235) | (250) |
| Funding costs ............ | (57) | (62) | (78) | (100) | (113) | (120) | (123) | (147) | (130) | (147) | (180) | (210) |
| Technology and <br>product <br>development ..............<br>| (88) | (95) | (91) | (115) | (99) | (103) | (107) | (135) | (115) | (120) | (123) | (128) |
| Sales and marketing . | (76) | (86) | (81) | (138) | (79) | (78) | (70) | (101) | (91) | (93) | (102) | (128) |
| Customer service <br>and operations ..........<br>| (63) | (54) | (53) | (70) | (57) | (48) | (44) | (54) | (51) | (51) | (53) | (52) |
| General and <br>administrative ............<br>| (64) | (63) | (53) | (90) | (51) | (64) | (65) | (101) | (94) | (65) | (77) | (70) |
| Depreciation, <br>amortization and <br>impairments ...............<br>| (37) | (33) | (18) | (40) | (19) | (19) | (17) | (27) | (10) | (32) | (8) | (4) |
| **Total operating** <br>**expenses** ....................<br>| **(586)** | **(612)** | **(579)** | **(822)** | **(671)** | **(686)** | **(693)** | **(882)** | **(791)** | **(869)** | **(986)** | **(1093)** |
| **Operating profit (loss)**  | **(102)** | **(78)** | **(4)** | **(139)** | **(28)** | **(4)** | **12** | **(101)** | **(90)** | **(46)** | **(83)** | **(11)** |
| Other income <br>(expense) ...................<br>| 4 | (4) | 8 | 11 | 3 | 2 | 2 | 147 | (2) |  | (4) | (5) |
| **Profit (loss) before** <br>**income taxes** .............<br>| **(98)** | **(82)** | **4** | **(128)** | **(25)** | **(2)** | **14** | **46** | **(92)** | **(46)** | **(87)** | **(16)** |
| Tax benefit | 55 | (10) |  | 15 | (5) |  | (2) | (6) | (7) | (7) | (8) | (10) |
| **Net profit (loss)** .......... | **(43)** | **(92)** | **4** | **(113)** | **(30)** | **(2)** | **12** | **40** | **(99)** | **(53)** | **(95)** | **(26)** |

---

**Liquidity and Capital Resources** 

Sources and Uses of Funds

We have maintained a deliberate balance of growth and profitability, generating positive net income

from 2005 to 2018. From 2019 to 2022, we invested to accelerate global revenue growth, specifically in the

United States. While our expansion in the United States has contributed to an increase in our GMV, it has

also led to operating and net losses in recent periods. Our Retained Earnings (Accumulated deficit)

equaled $2,170 million and $(2,081) million as of December 31, 2025 and 2024, respectively.

We are subject to regulatory requirements on liquidity and funding, including, among others, the Basel

III framework (including its recent reforms known as "Basel IV"), CRD IV and CRR. See "—Regulatory Capital

Requirements" below. Our funding needs are determined by the size and growth of our consumer loan

portfolio and the size of our liquidity buffer. The funding needs are met primarily with consumer deposits

as well as wholesale market funding and loan sale arrangements.

We introduced deposit offerings in 2012. As of December 31, 2025, we held $13 billion of consumer

funds. We believe that consumers find our deposit platform attractive due to its ease of account opening,

its intuitive digital platform and the competitive interest rates that we offer. We currently offer savings

accounts directly to residents of Sweden, Germany, Austria, the Netherlands, Finland, France, Belgium,

Spain, Ireland, Italy, Norway, Poland, Denmark and Portugal. We also raise deposits in Germany, the

KLARNA GROUP PLC141

Netherlands, France, Spain, Finland and Ireland pursuant to a partnership with a third-party platform

operated by Raisin. We do not take deposits in the United States, including interest-bearing deposits, as we

do not maintain the necessary banking licenses to take U.S. deposits. Given our access to a variety of

funding sources, as described below, and our decreasing net losses in recent periods, expanding our

deposit-taking operations into the United States is not currently a part of our funding strategy.

In addition to maintaining and growing our deposit base, we pursue a number of additional funding

strategies. Through our subsidiaries, we utilize credit facilities as well as issue commercial paper,

regulatory capital notes and other debt securities, including senior and subordinated notes under our Euro

and Swedish Medium Term Note Programs, as more fully discussed under "—Indebtedness" below. We also

utilize forward flow sale agreements, pursuant to which we sell loans originated on our network. See "—

Securitization and Forward Flow Arrangements." Accordingly, we believe that we have sufficient access to

funding sources necessary to appropriately support our operations and future growth.

We have a centralized funding model whereby substantially all deposits and other funding (e.g.,

wholesale market funding) is raised by Klarna Bank. Klarna Bank then provides, by utilizing currency swaps

when needed, necessary funding to other entities within our consolidated group, including to enable our

geographical expansion and growth in new markets outside of the EEA. There are currently no regulatory

restrictions on the amount of such funding to our entities that are within the regulated banking group,

which comprises Klarna Holding and its subsidiaries, including Klarna Inc., our U.S. operating subsidiary,

and KFSUK, our U.K. operating subsidiary. Any funding from Klarna Bank to group entities outside the

regulated banking group is subject to limits under large exposures rules, which restrict the amount of such

funding to 25% of the regulated banking group's Tier 1 capital.

Our primary needs for liquidity are driven by regulatory requirements and our internal risk limits for

liquidity risk. We take a conservative approach to liquidity. As of December 31, 2025, our LCR and NSFR

were 892% and 193%, respectively, many times higher than the LCR and NSFR of major Nordic banks. We

also had HQLA of $4,543 million as of December 31, 2025, 65% of which composed of cash held at various

central banks and other demand deposits. Our liquidity risk arises through the need to fund withdrawals of

consumer deposits as well as extending loans to our consumers, capital expenditures and working capital.

Our future contractual obligations and outstanding indebtedness, respectively, are further discussed

under "―Contractual Obligations" and "―Indebtedness" below.

We had $3,803 million and $3,243 million of cash and cash equivalents as of December 31, 2025 and

2024, respectively. The $560 million increase in cash as of December 31, 2025 as compared to

December 31, 2024 was primarily due to increases in consumer deposits, offset by an increase in

consumer receivables.

We believe that our existing cash and cash equivalent balances, projected cash inflows from

operations, including from consumer deposits and repayment of consumer loans and loan sale

arrangements, will be sufficient to meet our future liquidity needs for at least the next 12 months. Our long-

term funding requirements may vary materially from those currently planned and will depend on many

factors, including, but not limited to, our loan portfolio growth rate, the development of our network and

introduction of new products, services and offerings, potential entrance into new geographies or adjacent

categories or merger and acquisition activity, other strategic initiatives, increased regulatory requirements,

credit losses, headcount, sales and marketing activities, capital expenditures and volatility in capital

markets and overall economic conditions.

To the extent that current and anticipated future sources of funding are insufficient to fund our future

business activities and requirements, we may be required to seek additional equity or debt financing or

further increase the amount of our consumer deposits. The sale of additional equity securities would result

in additional dilution to shareholders. Incurring debt financing would result in debt service obligations. The

instruments governing such debt could provide for operating and financing covenants that may restrict our

operations. There can be no assurance that we will be able to raise additional funds on terms that are

KLARNA GROUP PLC142

attractive to us or at all. The inability to raise funds may adversely affect our business, results of

operations, financial condition and future prospects.

See "Risk Factors—Risks Related to Our Business and Industry—We may be unable to maintain our

funding model based on consumer deposits or otherwise maintain, renew or replace our other funding

arrangements."

Regulatory Capital Requirements

We are subject to extensive capital adequacy requirements, including, among others, the Basel III

framework (including its recent reforms known as "Basel IV"), CRD VI and CRR III. The capital adequacy

framework specifies, among other things, minimum amounts and types of capital that we need to maintain,

including CET1 capital and Tier 1 capital in relation to our risk-weighted exposure amounts.

The table below presents a summary of capital adequacy and liquidity information on a consolidated

basis, consistent with our presentation of such information in our Pillar 3 Reports, for the periods

presented. We are required to prepare such reports on an annual basis. In addition, we publish select

capital adequacy and liquidity information quarterly.

---

| | | | |
|:---|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** | **As of December 31,** |
|  | **2025** | **2024** | **2023** |
| **Own funds:** |  |  |  |
| CET1 capital ...................................................................................................... | 1583 | 1176 | 1159 |
| Tier 1 capital ..................................................................................................... | 1764 | 1326 | 1176 |
| Total capital ..................................................................................................... | 1947 | 1497 | 1251 |
| **Total risk-weighted exposure amount .........................................................** | 10062 | 6986 | 7150 |
| **Capital ratios and requirements:** <sup>(1)</sup> |  |  |  |
| CET1 capital requirement .............................................................................. | 8.6% | 8.6% | 8.6% |
| CET1 capital ratio ............................................................................................ | 15.7% | 16.8% | 16.2% |
| Tier 1 capital requirement ............................................................................. | 10.3% | 10.3% | 10.4% |
| Tier 1 capital ratio ........................................................................................... | 17.5% | 19.0% | 16.4% |
| Overall capital requirement .......................................................................... | 12.5% | 12.6% | 12.4% |
| Total capital ratio ............................................................................................ | 19.4% | 21.4% | 17.5% |
| **Leverage ratio and requirements:** |  |  |  |
| Total leverage ratio exposure amount ....................................................... | 18717 | 13371 | 13130 |
| Leverage ratio requirement <sup>(2)</sup> ..................................................................... | 5.3% | 5.3% | 6.0% |
| Leverage ratio <sup>(3)</sup> ............................................................................................. | 9.4% | 9.9% | 9.0% |
| **Liquidity coverage ratio (LCR):** <sup>(4)</sup> |  |  |  |
| HQLA ................................................................................................................. | 4543 | 3143 | 2909 |
| LCR .................................................................................................................... | 891.9% | 570.9% | 723.6% |
| **Net Stable Funding Ratio (NSFR):** <sup>(5)</sup> |  |  |  |
| Total available stable funding ...................................................................... | 14296 | 10749 | 11702 |
| Total required stable funding ....................................................................... | 7423 | 6014 | 5974 |
| NSFR .................................................................................................................. | 192.6% | 178.7% | 195.9% |

---

Note: Tier 1 capital is calculated as a sum of CET1 capital and AT1 capital. Total capital includes Tier 1

capital and Tier 2 capital.

____________

<sup>1</sup>Capital ratios requirements include the minimum requirement, Pillar 2 requirement as well as any counter-cyclical and capital

conservation buffer for the period.

<sup>2</sup>Includes minimum leverage ratio requirement of 3% as well as any additional Pillar 2 guidance for the period.

KLARNA GROUP PLC143

<sup>3</sup>Leverage ratio is calculated by dividing Tier 1 capital by the total leverage ratio exposure amount. A higher leverage ratio

indicates a less levered institution.

<sup>4</sup>LCR is calculated by dividing HQLA by projected net cash outflows during a 30-day stressed period. This ratio should be equal

to at least 100% on an ongoing basis.

<sup>5</sup>NSFR is defined as the amount of available stable funding relative to the amount of required stable funding. This ratio should

be equal to at least 100% on an ongoing basis.

As illustrated by the table above, while the amount of own funds, high-quality liquid assets and

available stable funding have fluctuated over the periods presented, they at all times remained

significantly above the applicable regulatory requirements. Such fluctuations were mostly driven by our

discretionary capital allocation decisions made in the ordinary course of business to support our growth

and effectively manage our operations. They also reflect changes in our net loss (income) for the relevant

period.

In line with the applicable regulations, distributions from Klarna Bank and Klarna Holding are subject to

ongoing compliance with capital requirements and to permission from the SFSA. For more information

about the various capital adequacy regulations applicable to us and our capital adequacy analysis, see

"Business—Regulatory Environment—Regulatory capital and liquidity requirements" and Note 3 to our

consolidated financial statements included elsewhere in this report, respectively.

Cash Flow Information

The following table sets forth our consolidated cash flow information for the periods presented:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| Cash provided by (used in): |  |  |  |
| Operating activities .......................................................................................... | $(1032) | $587 | $808 |
| Investing activities ............................................................................................ | $(30) | $154 | $(83) |
| Financing activities ........................................................................................... | $988 | $312 | $(62) |

---

***Year ended December 31, 2025 Compared to the Year ended December 31, 2024***

Operating activities

Cash inflow from operating activities, excluding the impact of movements in operating assets and

liabilities, increased to $1,455 million in the year ended December 31, 2025, a year-over-year increase of

$703 million. This increase was primarily driven by a $1,022 million, increase in interest income due to Fair

Financing growth , an increase in the Provision for credit losses to $980 million, as well as an increase in

share-based payment expenses to $157 million.

Cash outflows from changes in operating assets and liabilities totaled $1,533 million, primarily due to

year-over-year growth of Fair Financing and Pay Later receivables of $1.2 billion, as well as an increase in

other working capital movements of $1,288 million, primarily driven by an increase in bonds and treasury

bills with maturity > 90 days. This was offset by an increase in consumer deposits of $1,328 million, as we

continue to raise consumer deposits to support our GMV growth, with cash inflows from such deposits

reaching $2,148 million in 2025, compared to $820 million in the prior year.

Investing activities

Cash outflow from investing activities was $30 million in the year ended December 31, 2025, compared

to cash inflow from investing activities of $154 million in the year ended December 31, 2024. The year-over-

year decrease of $184 million in cash flow from investing activities was primarily due to the net cash

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received of $187 million related to the divestment of KCO in 2024. This was partially offset by a year-over-

year decrease in investments in intangible assets of $17 million.

Financing activities

Cash inflow from financing activities was $988 million for the year ended December 31, 2025,

compared to cash inflow from financing activities of $312 million in the year ended December 31, 2024. The

year-over-year increase of $676 million in cash flow from financing activities was primarily due to $191

million from the issuance of shares related to the September 2025 IPO, the issuance of $165 million in

senior unsecured bonds in Klarna Bank AB, the receipt of $589 million from our credit facility, and notes

payable redeemed in Klarna Bank AB of $86 million. This was offset by $142 milion of issuances of AT1

securities and subordinated debt of $100 million in Klarna Holding during the year ended December 31,

2024. Operating activities

Cash inflow from operating activities, excluding the impact of movements in operating assets and

liabilities, increased to $752 million in the year ended December 31, 2024, a year-over-year increase of

$311 million. This increase was driven by underlying improvements in our profitability, as reflected in our

profit before taxes of $33 million compared to a loss before taxes of $304 million in the prior year.

Cash outflows from changes in operating assets and liabilities totaled $530 million primarily due to a

$696 million year-over-year decrease in cash flows from consumer deposits. We continue to raise

consumer deposits to support our GMV growth, with cash inflows from such deposits reaching $820 million

in 2024, compared to $1,516 million in the prior year. These outflows were partially offset by other working

capital movements.

Investing activities

Cash inflow from investing activities was $154 million in the year ended December 31, 2024, compared

to cash outflow from investing activities of $83 million in the year ended December 31, 2023. The year-over-

year increase of $237 million in cash flow from investing activities was primarily due to net cash received

of $187 million from the divestment of KCO, as more fully described in Note 11, and a year-over-year

decrease in investments in intangible assets of $40 million.

Financing activities

Cash inflow from financing activities was $312 million for the year ended December 31, 2024, compared

to cash outflow from financing activities of $62 million in the year ended December 31, 2023. The year-

over-year increase of $374.00 million in cash flow from financing activities was primarily due to a year-

over-year increase in cash inflow from issuances of notes payable and other borrowings of $160 million,

including new issuances of $142 million of senior unsecured bonds under the Swedish Medium Term Note

Program (as defined below), and new issuances of AT1 securities of $142 million in the year ended

December 31, 2024.

Indebtedness

**Swedish Medium Term Note Program**

Klarna Bank established a medium term note program (the "Swedish Medium Term Note Program") for

the issuance of medium term notes denominated in EUR, NOK and SEK (such notes, "Swedish MTN Notes").

Swedish MTN Notes may be issued in minimal denominations of EUR 100,000 (or the equivalent in any

other available currency) and with a minimum term of one year. Klarna Bank has agreed that the total

principal amount of Swedish MTN Notes will not exceed SEK 10 billion (approximately $1,086 million, using

the SEK/USD exchange rate of 0.1086000 in effect as of December 31, 2025) at any time. Swedish MTN

Notes may bear a fixed or floating interest rate determined by reference to a benchmark such as

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EURIBOR, NIBOR or STIBOR. Swedish MTN Notes are senior unsecured obligations of Klarna Bank and rank

equally in right of payment to all of Klarna Bank's existing and future senior debt and senior in right of

payment to all of Klarna Bank's existing and future subordinated debt. Neither Klarna Group plc nor any of

its subsidiaries guarantees Swedish MTN Notes. The terms and conditions governing Swedish MTN Notes

include certain covenants that, among others, limit Klarna Bank's ability to consolidate, merge or transfer

all or substantially all of its assets and require Klarna Bank to maintain a license to conduct banking and/or

financing activities as required under the Swedish Banking Act as well as make certain information

available to noteholders. Swedish MTN Notes are subject to the application of the bail-in tool, as more fully

described in the section of this report titled "Risk Factors―Risks Related to Our Regulatory

Environment―We are subject to regulatory requirements to facilitate the orderly resolution of large

financial institutions, which may negatively affect our operations, the value of our outstanding debt

securities and the value of your investment in our ordinary shares."

**Euro Medium Term Note Program**

Klarna Holding and Klarna Bank established a medium term note program (the "Euro Medium Term

Note Program") for the issuance of medium term notes in DKK, EUR, NOK, GBP, SEK and USD (such notes,

"Euro MTN Notes"). Euro MTN Notes may be issued in minimal denominations of EUR 100,000 (or the

equivalent in any other available currency) and with a minimum term of one year. Klarna Holding and

Klarna Bank have agreed that the total principal amount of Euro MTN Notes will not exceed EUR 3,000

million (approximately $3,540 million, using the EUR/USD exchange rate of 1.18 in effect as of December 31,

2025) at any time. Euro MTN Notes may bear a fixed or floating interest rate determined by reference to a

benchmark such as EURIBOR, NIBOR, STIBOR, SOFR or CIBOR, or may be non-interesting bearing. Euro

MTN Notes may be issued on a senior preferred basis ("Senior Preferred Notes"), on a senior non-

preferred basis ("Senior Non-Preferred Notes") or on a subordinated basis. The Senior Preferred Notes and

the Senior Non-Preferred Notes are intended to be available to meet any MREL Requirement applicable to

us. Neither Klarna Group plc nor any of its subsidiaries guarantees Euro MTN Notes. Euro MTN Notes are

subject to the application of the bail-in tool, as more fully described in the section of this report titled "Risk

Factors―Risks Related to Our Regulatory Environment―We are subject to regulatory requirements to

facilitate the orderly resolution of large financial institutions, which may negatively affect our operations,

the value of our outstanding debt securities and the value of your investment in our ordinary shares."

**AT1 Notes**

Klarna Bank issues from time to time notes that are intended to be treated as Additional Tier 1 Capital

(such notes, "AT1 Notes"). AT1 Notes have no set maturity date but Klarna Bank may, subject to the SFSA's

pre-approval, redeem such notes in its discretion five years after issuance. AT1 Notes may bear a fixed or

floating interest rate determined by reference to a benchmark such as EURIBOR, NIBOR or STIBOR. AT1

Notes are junior unsecured obligations of Klarna Bank and rank equally in right of payment to all of Klarna

Bank's existing and future Additional Tier 1 Capital instruments, senior to all ordinary shares and other

instruments that rank junior to AT1 Notes and junior in right of payment to all of depositors of Klarna Bank,

other unsubordinated creditors of Klarna Bank, any non-preferred creditors, as defined in the Swedish

Rights of Priority Act, and any subordinated creditors, including holders of instruments that qualify as Tier

2 Capital of Klarna Bank. AT1 Notes are subject to write-down upon occurrence of a trigger event, as set

forth in the applicable terms and conditions governing the particular series of AT1 Notes. In addition, AT1

Notes are subject to the application of the bail-in tool, as more fully described in the section of this report

titled "Risk Factors―Risks Related to Our Regulatory Environment―We are subject to regulatory

requirements to facilitate the orderly resolution of large financial institutions, which may negatively affect

our operations, the value of our outstanding debt securities and the value of your investment in our

ordinary shares."

**Tier 2 Notes**

Klarna Holding issues from time to time notes that are intended to be treated as Tier 2 Capital (such

notes, "Tier 2 Notes"). Tier 2 Notes may bear a fixed or floating interest rate determined by reference to a

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benchmark such as EURIBOR, NIBOR or STIBOR. Tier 2 Notes are junior unsecured obligations of Klarna

Bank and rank equally in right of payment to all of Klarna Holding's existing and future Tier 2 Capital

instruments, senior in right of payment to all of Klarna Bank's existing and future Additional Tier 1 Capital

instruments and all ordinary shares and other instruments that rank junior to Tier 2 Capital instruments

and junior in right of payment to all of depositors of Klarna Bank, other unsubordinated creditors of Klarna

Bank, and any non-preferred creditors, as defined in the Swedish Rights of Priority Act. The terms and

conditions governing Tier 2 Notes include certain covenants that, among others, require Klarna Holding to

make certain information available to the noteholders. Tier 2 Notes may be issued under the Swedish

Medium Term Note Program or the Euro Medium Term Note Program, or in a standalone offering. In each

case, Tier 2 Notes are subject to the application of the bail-in tool, as more fully described in the section of

this report titled "Risk Factors―Risks Related to Our Regulatory Environment―We are subject to

regulatory requirements to facilitate the orderly resolution of large financial institutions, which may

negatively affect our operations, the value of our outstanding debt securities and the value of your

investment in our ordinary shares."

**Notes currently outstanding**

The table below includes details regarding series of notes outstanding as of December 31, 2025. The

amounts in U.S. dollars included below were translated from SEK, where applicable, using the SEK/USD

exchange rate of 0.1090 in effect as of December 31, 2025, and rounded to one decimal.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Notes** | **Maturity Year** | **Interest Rate** | **Program** | **Outstanding** <br>**Indebtedness**<br>|
| Senior Unsecured Floating Rate Notes ..................................... | 2026 | Three-month <br>STIBOR plus <br>2.250%<br>| Swedish <br>Medium Term <br>Note Program<br>| $54.3 million |
| Senior Unsecured Floating Rate Notes ..................................... | 2026 | Three-month <br>STIBOR plus <br>1.800%<br>| Swedish <br>Medium Term <br>Note Program<br>| $81.5 million |
| Senior Unsecured Floating Rate Notes ..................................... | 2027 | Three-month <br>STIBOR plus <br>2.050%<br>| Swedish <br>Medium Term <br>Note Program<br>| $27.2 million |
| Senior Preferred Floating Rate Notes ........................................ | 2027 | Three-month <br>STIBOR plus <br>1.550%<br>| Euro Medium <br>Term Note <br>Program<br>| $65.2 million |
| Senior Preferred Floating Rate Notes ........................................ | 2028 | Three-month <br>STIBOR plus <br>1.750%<br>| Euro Medium <br>Term Note <br>Program<br>| $97.8 million |
| Tier 2 Subordinated Unsecured Floating Rate Notes ............. | 2033 | Three-month <br>STIBOR plus <br>7.500%<br>| N/A | $54.3 million |
| Tier 2 Subordinated Unsecured Floating Rate Notes ............. | 2033 | Three-month <br>STIBOR plus <br>7.500%<br>| N/A | $27.2 million |
| Tier 2 Subordinated Unsecured Floating Rate Notes ............. | 2034 | SOFR plus <br>7.000%<br>| Euro Medium <br>Term Note <br>Program<br>| $100.0 million |
| AT1 Subordinated Unsecured Floating Rate Notes ................ | No maturity | Three-month <br>STIBOR plus <br>7.000%<br>| N/A | $30.0 million |
| AT1 Subordinated Unsecured Floating Rate Notes ................ | No maturity | Three-month <br>STIBOR plus <br>9.500%<br>| N/A | $162.9 million |
| **Total** .................................................................................................. |  |  |  | **$700.4 million** |

---

**Warehouse Financing facility**

To supplement our deposit-based funding strategy and further diversify our available funding sources,

during the third quarter of 2025, we entered into a warehouse financing facility (the "warehouse facility")

with an affiliate of Banco Santander S.A. through a special-purpose consolidated subsidiary structured as

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a funding trust, as the funder, and Klarna Bank, as the borrower. Under the warehouse facility, we can

borrow up to €1.4 billion ($1.6 billion) on a revolving basis. Any borrowings under the warehouse facility are

secured by our German "Pay in 30" receivables and will be limited to 80% of the unpaid principal balance

of the collateralized loans. Interest on the borrowings accrues at a variable rate by reference to one-month

EURIBOR plus an applicable margin. Such borrowings will be classified within Notes payable and other

borrowings in our consolidated balance sheets. The documents governing the facility contain customary

representations and covenants reflective of our investment grade credit rating, including portfolio

performance triggers. The warehouse facility is structured through a bankruptcy-remote special-purpose

vehicle in which creditors do not have recourse against the general creditors of Klarna. As of the date of

this report, $589 million was outstanding under the warehouse facility.

**Securitization and Forward Flow Arrangements**

We enter into synthetic securitization transactions with unconsolidated securitization vehicles

("SPVs"), pursuant to which we economically transfer a portion of credit risk for certain pools of consumer

receivables (the "referenced pools") to the SPV. The SPV then issues credit-linked notes to investors.

Klarna retains contractual rights to receive the cashflows of the referenced pools and does not

derecognize these consumer receivables from its consolidated balance sheet. Klarna pays a fee to the

SPV for the transfer of credit risk that is recorded as incurred in Funding costs. The Company incurred

fees of $30.7 million, $32.3 million and $21.9 million for 2025, 2024 and 2023, respectively, in connection

with such transactions. The total consumer receivable pool was $1.3 billion, $2.1 billion and $1.7 billion as of

December 31, 2025, 2024 and 2023, respectively.

In 2024, we entered into a forward flow arrangement involving the sale of U.K. Pay Later receivables to

an external securitization vehicle financed by the issuance of senior and junior notes to third parties. We

derecognize these receivables upon transferring the contractual rights to the cash flows and substantially

all associated risks and rewards, which is deemed to occur on the sale date. We also continue to service

the sold receivables on behalf of the SPV. The structure has a maximum total consumer receivable pool of

GBP 818 million ($1,104 million using the GBP/USD exchange rate of 1.3500000 in effect as of December 31,

2025).

During the second quarter of 2025, we entered into a new forward flow arrangement involving the sale

of U.S. Pay Later receivables to an external securitization vehicle, under which the sale of receivables is

expected to begin during the third quarter of 2025, up to a maximum program size of $777 million.

In the fourth quarter of 2025, we entered into a new forward flow and whole-loan sale program with a

third party investor. The arrangement included the sale of $800 million of the Group's existing portfolio of

U.S. Fair Financing term loans and ongoing sale of newly originated receivables with a maximum facility

size of $1 billion and up to $6.5 billion of originations over its duration.

The total consumer receivables originated at fair value through profit and loss or at fair value through

OCI during 2025 totaled $18 billion, of which $786 million was unsold as of December 31, 2025.

Tabular Disclosure of Contractual Obligations

The following table summarizes our contractual obligations as of December 31, 2025.

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** | **Payments Due by Period** |
| <br>**Contractual Obligations**<sup>1</sup> | **Total** | **< 1 year** | **1-5 years** | **> 5 years** |
|  | **(in $ million)** | **(in $ million)** | **(in $ million)** | **(in $ million)** |
| Consumer deposits ............................................................ | $13337 | $11043 | $2294 | $— |
| Notes payable and other borrowings ........................... | 1565 | 450 | 876 | 240 |
| Lease liabilities ................................................................... | 85 | 26 | 54 | 5 |
| **Total** ...................................................................................... | **$14987** | **$11518** | **$3224** | **$245** |

---

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____________

<sup>1</sup> Includes principal amount and any interest and other amounts payable.

Note: Our loan funding commitments are disclosed in Note 19 to our consolidated financial statements

included elsewhere in this report. Obligations related to our securitization transactions had contractual

maturities less than 12 months and are disclosed in Note 16 to our consolidated financial statements

included elsewhere in this report.

KLARNA GROUP PLC149

**MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND** 

**RESULTS OF OPERATIONS**

The following discussion of our financial condition and results of operations should be read in

conjunction with our consolidated financial statements and the notes thereto, included elsewhere in this

report, as well as the information presented under "About this report—Financial Statements" and "Annual

Report Summary—Summary Consolidated Financial and Other Data."

The following discussion contains forward-looking statements that involve risks and uncertainties. Our

actual results and the timing of events may differ materially from those expressed or implied in such

forward-looking statements as a result of various factors, including those set forth in "Cautionary Note

Regarding Forward-Looking Statements" and "Risk Factors."

**Overview**

Our Mission and Vision

Our mission is to reimagine how consumers spend and save in their daily lives. We help people save

time, money and put them in control of their finances through AI-powered, transparent and flexible

financial services.

Our vision is a world where Klarna empowers everyone, everywhere, through seamless commerce

experiences—as a personalized, trusted AI-enabled assistant making financial empowerment effortless.

Our Company

We are a global digital bank and flexible payments provider building the next-generation AI-powered

commerce network.

We have built one of the largest commerce networks in the world, measured by the number of

consumers and merchants, serving approximately 118 million active Klarna consumers and approximately

966 thousand merchants in 26 countries as of December 31, 2025, and facilitating $128 billion of GMV in

the year ended December 31, 2025. Our flexible and personalized products, trusted consumer brand,

global distribution and proprietary scalable infrastructure are the foundations enabling us to become our

consumers' everyday spending and saving partner, available everywhere and for everything. Through our

history, we have consistently innovated and challenged the status quo, evolving our network from a

consumer-focused payments tool to a global commerce network that enables merchant success. Klarna

was built to address the manifold pain points in commerce today, including inefficiency, lack of trust,

prevalence of fraud, impersonal relationships between consumers and merchants and high interest and

credit-related fees that are harmful to consumers, merchants and society at large.

We began by pioneering a new approach to online payments, designed to bridge uncertainty in the

transactions between consumers and merchants by providing short-term flexible credit that is

predominantly interest-free and accelerating growth for merchants. Our approach leverages differentiated

underwriting capabilities, utilizes bank deposits and other low-cost funding sources and is monetized

primarily by driving increased GMV for merchants on our network rather than from only charging interest

to consumers. For the year ended December 31, 2025, 97% of transactions conducted on our network

were interest-free. This results in lower fees, which we believe drives consumers and, in turn, our

merchants, to shift more of their commerce activity onto our network, aligning the financial success of our

consumers and merchants with our long-term ambition of durable growth. We have also built a unique

advertising solution, connecting engaged consumers to advertisers in a personalized, commerce-centric

environment.

Consumers come to Klarna to pay flexibly and securely, to find goods, services and experiences that

are relevant to them, and to manage their purchases and savings, all in a trusted environment. We

designed our network to provide consumers with more control and flexibility over their payments, to save

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them time and money and to help them worry less about their finances. This allows us to become an

important growth partner for merchants of all sizes, enabling them to grow their businesses and acquire

new customers, convert more transactions with higher Average Order Values ("AOVs") and retain

customers with increased loyalty, all while establishing and fostering personal relationships with their

customers. Just as card networks revolutionized the way merchants and consumers received and made

payments decades ago, we have created a new type of network built upon fairness, sustainability and

innovation, while removing intermediaries, complexity and fees along the way.

We accelerate commerce by connecting consumers and merchants with comprehensive AI-powered

payment and performance-based advertising solutions, both online and offline. Our payment options

provide consumers with the choice to pay however they prefer: Pay in Full for immediate settlement, Pay

Later allows consumers to complete a purchase today while deferring payment to a later date or into

installments and Fair Financing allows consumers to settle payments over longer, fixed-term schedules

with transparent pricing. We offer the benefits of both open and closed networks. We open our network to

a broad consumer and merchant ecosystem, similar to Visa, MasterCard and Amex, but also benefit from

our proprietary closed-loop network where we issue, fund, process and settle the entire payment, while

retaining a direct relationship with our consumers. Payment options are facilitated across numerous

channels, including directly at our merchants' online or in-store checkouts, in the Klarna app, with the

debit-first Klarna card or using Apple Pay or Google Pay.

We have achieved global consumer and merchant scale. Our 118 million active Klarna consumers are

diverse—from a wide range of income levels and educational backgrounds—and representative of the

broader population. In Sweden, our most mature market, approximately 85% of adults were active Klarna

consumers as of December 31, 2025, according to our estimates. Our consumers are financially

responsible, too—in the year ended December 31, 2025, Provision for credit losses were less than 1% of

originated Gross Merchandise Volume. Merchants view Klarna as an important growth partner because of

our consumer scale and global reach. Our approximately 966 thousand merchants include some of the

largest global brands—on average, 48% of the top 100 merchants in each of the major markets we serve,

which include the United States, the U.K., the Nordics, Germany, Austria, Belgium, Spain, France, Italy, the

Netherlands and Switzerland (based on data from eCommDB and Digital Commerce 360) used Klarna in

the last twelve months ended July 31, 2025 to facilitate payments, while an even greater percentage (66%)

advertised on our network during the same period. Our broad adoption across merchants contributes to

our GMV diversification, with no single merchant representing more than 10% of our GMV in any of our

major markets in the year ended December 31, 2025. Through both our payment and advertising solutions,

we help our merchants attract new customers, drive higher AOV with higher purchase frequency and offer

frictionless commerce and higher conversion rates. We do all of this while allowing merchants to

seamlessly integrate Klarna into their existing operations and infrastructure, retaining full control over their

brands.

Klarna sits at the center of a global ecosystem. We connect an array of different financial services and

commerce organizations, from PSPs, traditional banks, card networks and open banking providers, to

commerce enablers, technology partners, in-store payments providers and shipping and return logistics

providers, to improve the commerce experience for our consumers and merchants through a unique AI-

powered global network. We continue to grow our network across verticals and geographies to better

serve consumers and merchants.

We believe that our credit underwriting capabilities, enabled by our proprietary data from

approximately 3.4 million transactions made on average per day on our network from 118 million active

Klarna consumers in the year ended December 31, 2025, differentiate us from other networks. We are able

to make underwriting decisions in seconds with our fully automated processes and underwrite every

transaction in real time. We also provide a small spending capacity that gradually increases as consumers

responsibly spend more with Klarna, and clear and transparent repayment terms that encourage

borrowers to repay on time. All of this distinguishes our financing solutions from market alternatives. In the

year ended December 31, 2025, our average balance per active Klarna consumer was $124 (Pay in Full: $0;

Pay Later: $120 Fair Financing: $393) (compared to an average balance per credit card of approximately

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$6,961 in the United States in 2025, according to Experian). Based on contractual repayment schedules,

our weighted average life (WAL) was approximately 39 days (27 days for Pay Later and 109 days for Fair

Financing) (compared to a typical loan duration of more than five years at a typical Nordic bank in 2024,

according to publicly available information, and an average of 2.5 years of a typical U.S. personal bank loan

in Q1 2025, according to TransUnion). This allows us to quickly react to market changes and efficiently

manage credit risk. Our underwriting process results in credit losses that are generally lower than the

industry average: for example, our provision for credit losses represented 0.63% of GMV in the year ended

December 31, 2025, while the charge-off rate on consumer loans, issued by all commercial banks reached

2.89% in Q3 2025, according to the Federal Reserve Bank of St. Louis. In addition to lower credit losses, we

believe that our underwriting process provides more value to consumers and merchants than alternative

payment methods, which helps drive our financial performance.

We have been a constant pioneer in our industry. In 2005, when online shopping was still nascent and

marked by distrust, we launched Pay Later products to guarantee consumers would pay only after they

had received goods, while also pioneering a new approach to credit. In 2010, we launched our Pay in Full

product to give consumers more choice and control over how they pay. In 2017, we started building a

disruptive brand to help people streamline their financial lives. As we learned that consumers wanted to

use Klarna everywhere, we launched the Klarna card in 2018. That same year, we launched the Klarna app,

which enables our consumers to track all their purchases in one place, track their shipments, assist with

errands and much more. While we began with payments innovation, in 2019, we started to meaningfully

scale our advertising solutions, which personalize the commerce experience for our consumers by using

our vast proprietary data set, including data they entrust to us. In 2023, we developed an AI assistant

Klarna balance, which makes commerce even more effortless by allowing consumers to Pay in Full or Pay

Later without connecting to a bank account or card. In 2025, we continued to expand and introduce more

digital finance products to help our consumers save time and money and effortlessly put them in control of

their finances. For example, we enhanced the Klarna Card to deepen its role in everyday financial

management and completed its rollout in the United States. The debit-first card integrates our Pay in Full

and Pay Later options within a single product and was upgraded with real-time transfer and deposit

capabilities to support smarter wallet functionality. The Klarna Card continues to scale rapidly, with more

than 4.2 million active consumers globally, reflecting strong consumer demand for simple, flexible and

transparent payment tools. At the same time, we continued reshaping access to credit through the

expansion of our Fair Financing offering—a transparent, non-revolving alternative to traditional credit—now

available at a broader merchant network, including major partners like Walmart. These innovations are all

built on our AI-enabled, cloud-native and global technology platform to which merchants can connect via a

single API. Every product we bring to market can be launched globally, allowing merchants to reach

millions of consumers worldwide almost instantly once connected to our network.

We began operations in Sweden in 2005, and rapidly expanded through the rest of the Nordics. By

2010, we operated in the Nordics, Germany and the Netherlands. By 2016, we were established in nine

markets, including Austria (2012), Switzerland (2014) and the U.K. (2014). Since inception, we have strived to

maintain a deliberate balance of growth and profitability. We remained profitable for the first 14 years as

we scaled our operations in Europe. In 2019, we strategically decided to expand our successful operating

model into additional geographies, with a particular focus on the United States, and in the following three

years expanded into 12 additional markets. While our expansion in the United States has contributed to an

increase in our GMV, it has also led to net losses in recent periods. In 2023, our operating loss started to

decline and we began generating positive transaction margin dollars in the United States, while continuing

to grow our GMV and the number of active Klarna consumers and merchants worldwide.

**Our Network's Growth**

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![Network growth.jpg](klar-20251231_g16.jpg)

For two decades, Klarna has been transforming the commerce landscape. Our growth strategy is an

extension of our ability to innovate and cater to our customers' needs:

• **Klarna at Every Checkout**. We have a proven track record of bringing global leading merchants to

our network, which have been key in amplifying our brand's reach. We also have a unique go-to-market

strategy: by partnering with several of the world's largest PSPs, including Worldpay, Stripe and Adyen, we

can connect with consumers through hundreds of thousands of merchant checkouts. By integrating Klarna

with Apple Pay and Google Pay, our consumers can use Klarna's payment solutions wherever Apple Pay or

Google Pay is available online in the United States as well as, in the case of Apple Pay, in the U.K., without

having the Klarna card. Increasing the availability of our payment methods is imperative to further growth

of our network, as a higher penetration of merchants directly translates to a higher share of checkout.

• **Klarna Card in Every Wallet**. We envision Klarna becoming the default payment method for our

millions of active Klarna consumers and future consumers. With the Klarna card, we are making it easier

for consumers to enjoy our popular flexible payment options, both online and offline.

• **Next-Generation Digital Financial Services.** As a digital-first neobank, Klarna's services are

automated, insight-driven and designed to be transparent, fair and intuitive. We partner with PSPs,

traditional banks, card networks, commerce enablers, technology partners, merchants and shipping and

return logistics providers to improve the commerce experience for our consumers. This breadth of our

ecosystem, coupled with our extensive portfolio of licenses and regulatory authorizations, allows us to

provide consumer services that others cannot, such as instant refunds, cashback, real-time debit or order

and return tracking. These features save consumers time and money and effortlessly put them in control

of their finances.

• **Klarna's Personal Shopping and Money Assistant**. Through a true understanding of our consumers'

needs, we are uniquely positioned to offer them curated shopping assistance and related products that

are truly valuable and relevant to them. Consumers gain access to premium features through subscription

services, enhancing their lifestyle while enjoying convenience and savings. Within the Klarna app, they can

spend, save and shop smarter with the power of an AI assistant designed to understand personal needs

and preferences. From product recommendations to managing expenses, this smart companion is here to

guide the consumer throughout the entire commerce journey. This, we believe, will redefine how

consumers interact and engage with Klarna, creating a deep and sticky customer relationship.

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• **AI-Powered Efficiency**. AI allows us to drive scale efficiencies greater than what was previously

thought possible, allowing our deep talent pool to focus on innovation and growth.

**Our Competitive Advantages**

We enjoy several key competitive advantages that have enabled our continued success since our

founding in 2005:

• **Compounding Network Effects**. Klarna enjoys powerful network effects. Our personalized, highly

engaging consumer experiences drive consumers to our network. As more consumers engage at scale,

more merchants join our network and grow their businesses. As more merchants join the network,

consumers benefit from increased selection across verticals, channels and geographies, and can purchase

more frequently using, and demonstrate preference for, our network. Klarna has established a high-utility,

high-frequency model, enabling the purchase of everyday goods and services that benefits both our

consumers and merchants.

• **Trusted Brand, Global Distribution**. We have built a brand that is distinctly global, universally

recognized and well-loved by consumers and merchants, an accomplishment that we believe is rare

among businesses that provide payments and financial services. Our global NPS in September 2024 was

73, according to our estimates, which is significantly higher than an average NPS of 44 for the finance

industry in our top eight markets as of March 2023, according to CustomerGauge. As of December 2024,

we also had a higher global brand awareness (40%) than the average of our main competitors (28%),

according to our estimates. The strength of our brand contributes to our global scale. Our approximately

118 million active Klarna consumers and approximately 966 merchants in 26 countries as of December 31,

2025. Our merchants include global leaders across verticals, such as Walmart, Airbnb, H&M, Nike, Uber and

eBay. The ability to provide merchants with global access to consumers almost instantly once connected

to our network is a critical competitive advantage.

• **Industry-Leading AI Adoption and Implementation**. Klarna has been an early and leading adopter of

including 2.6 billion data points collected in the year ended December 31, 2025, and the learnings of more

than 6.4 billion transactions conducted on our network to date. . We also utilize ML in our business, in

particular to increase the speed and accuracy of our proprietary underwriting model. Consumers and

merchants entrust us with their data because we use that data for their benefit by improving their

experience with Klarna, as more fully explained below:

• *AI improves conversion and accelerates our revenue*. We present consumers with AI-powered

personalized shopping feeds, leading to more transactions on our network.

• *AI streamlines the consumer experience and reduces our costs*. In February 2024, we

launched our AI assistant in partnership with OpenAI. Our AI assistant has handled 80% of

customer service chats in the year ended December 31, 2025 (according to our service chat

log data), with no drop in consumer satisfaction levels since its introduction (according to

internal consumer satisfaction surveys).

• *ML supplements our credit underwriting*. ML enhances our high-frequency, large-scale and

real-time underwriting.

• *AI transforms our productivity and drives increasing efficiency*. AI adoption—including the

related reduction in the use of third-party suppliers and vendors and the adoption of the AI

copilot to create and review code—has led to internal efficiencies. Our average annual revenue

per employee at period end has increased from approximately $344 thousand in 2022 to

approximately $1,240 thousand in the year ended December 31, 2025.

technology platform that facilitates connections across the global ecosystem. Businesses ranging from

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PSPs, traditional banks, card networks and open banking providers to commerce enablers, technology

partners, in-store payment providers and shipping and and return logistics providers join our network

through a single shared API to enable fast and global connectivity nearly instantly.

• **Diversified and Sustainable Business Model**. Our diversified revenue model, based primarily on

merchant fees, aligns the interests of merchants, consumers and our business. The proportion of our

revenue generated from merchants, consumers and advertising is generally more balanced compared to

many of our competitors in the payments and the banking industries, who tend to depend more heavily

than we do on either merchant revenue or interest income. Our banking license provides us with a

diversified, flexible funding toolkit and enables us to maintain a low-cost, stable funding model based on

consumer deposits as well as the ability to actively manage our balance sheet through a range of

complementary funding and risk-transfer mechanisms as we scale. We currently offer savings accounts

directly to residents of Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the

Netherlands, Norway, Poland, Portugal, Spain and Sweden. We are also able to collect deposits in Germany,

the Netherlands, France, Spain and Ireland pursuant to a partnership with a third-party deposit-taking

platform operated by Raisin. Our banking pedigree adds rigor to our underwriting processes, which are

designed to continuously improve our credit decisioning and monitoring. These factors, combined with our

efficient go-to-market model defined by a recognizable brand and partnerships with top global merchants,

PSPs and commerce platforms, drive leverage in our operating model.

• **Durable Growth Profile, with Scale Efficiencies**. Our network connects millions of consumers and

hundreds of thousands of merchants at scale to power global commerce. Our scale enables our efficient

growth. More consumers attract more merchants to our network, which, in turn, attract more consumers.

As we have scaled our operations over the last 20 years, we have optimized our cost structure and driven

meaningful operating leverage in the business. For example, from 2023 to the year ended December 31,

2025, our operating loss improved by 29% while our transaction margin dollars increased by 14% and

operating margin by 8 percentage points during the same period.

**Our Financial Model**

Our financial model is defined by our ability to deliver sustainable growth and significant margins. We

attract consumers and merchants with our powerful value proposition. Once on our network, our cohorts

compound as consumers and merchants realize increasing value from using Klarna for more of their

commerce needs over time. As network activity grows, so does ARPAC through diversified revenue

streams, based primarily on merchant fees. We also maintain a conservative, cost-effective funding model

and best-in-class underwriting process with low credit losses, which drives transaction margin dollar

efficiency. Finally, we consciously manage operating expenses to drive leverage throughout our model. For

example, our recent initiatives and strategic investments, such as wide-scale AI adoption in various

aspects of our operations, have driven a significant margin expansion.

The foundations of our financial model allow us to make deliberate decisions to invest in product and

global expansion. We believe these decisions play a key role in our success and have allowed us to

successfully compete in various markets and geographies for almost 20 years. We have maintained an

intentional balance of growth and profitability, generating positive net income from 2005 to 2018. From

2019 to 2022, we invested heavily to accelerate our global revenue growth, specifically in the United

States. In 2023, we reached an inflection point when the scale of our U.S. operations allowed us to achieve

a significant operating loss improvement and generate positive transaction margin dollars in that market.

The positive transaction margin dollars in the United States, combined with a blend of operational

discipline and AI-driven efficiencies, allowed us to achieve significant operating margin improvement on a

consolidated basis. While our expansion in the United States has contributed to an increase in our GMV, it

has also led to net losses in recent periods. From 2023 to the year ended December 31, 2025, our

operating margin grew by 8 percentage points.

At the same time, we have achieved significant scale (reaching $128 billion in GMV in the year ended

December 31, 2025), growth (25% year-over-year revenue growth in the year ended December 31, 2025).

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Our GMV has consistently grown faster than the broader market. From 2023 to 2025, our GMV grew at 18%

CAGR, compared to a 5% CAGR for the total spend in the Retail and Travel categories in our current

markets, according to the Market Opportunity Study. We have accomplished this financial performance

while continuously innovating and investing in our growth.

Merchant-Led Fees

The chart below shows an illustrative Pay Later transaction, including its flow and life cycle, where

consumers complete their purchase today, while deferring the full payment to a later date or paying in

installments. We charge the merchant a fee after a successful transaction, and the consumer pays no

interest on the deferred or installment payments unless the consumer chooses to utilize one of our

payment flexibility features.

Merchant fees vary based on several factors, including the geography and transaction type. Similarly,

in the case of Pay in Full, consumers pay for the transaction immediately, and Klarna charges the

merchant a fee after a successful transaction. Fair Financing is similar to Pay Later in that we allow the

consumer to pay over time, but for longer periods (generally over six to twelve months, but can be up to 36

months depending on the purchase). Consumers using Fair Financing may also be charged predetermined

and clearly labeled interest on their outstanding borrowings over the borrowing period. In a Fair Financing

transaction, we may earn interest income on the consumer's use of credit provided by us. Our consumers

can also take advantage of two payment flexibility features for a fee. "Snooze" gives them additional days

to pay for their purchase. For larger purchases, our consumers can also convert their Pay Later

transaction to a Fair Financing product, which helps consumers better manage their finances.

In the quarter ended December 31, 2025, Pay Later represented 77% of our total transactions (78% of

our GMV), Pay in Full (after excluding transactions processed through KCO unbranded channels) 18% of

our total transactions (10%) and Fair Financing the remaining 4% (12%). The increase in the proportionate

share of Fair Financing transactions corresponds to the continued expansion of the full suite of our

payment products across a growing number of merchants. For example, the number of merchants offering

Fair Financing has doubled in two years, from approximately 61k merchants in December 2023 to 194k

merchants in December 2025, including leaders in their respective categories, like Walmart. This

expansion underpinned a 165% year-over-year growth in our Fair Financing GMV in the quarter ended

December 31, 2025.

As an everyday spending partner, 97% of all of our transactions in the year ended December 31, 2025

were interest-free. We anticipate that these interest-free products will continue to account for a significant

majority of our total transactions in the future. At the same time, we expect the relative contribution of our

Fair Financing product to both the total number of transactions and our overall GMV to increase in future

periods. We also believe that any changes in our payment mix will be gradual, given our broad

diversification across merchants, verticals and geographies.

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**Illustrative Pay Later Transaction**

![Take rate graph.jpg](klar-20251231_g17.jpg)

____________

Reflects our average take rate in the year ended December 31, 2025

In addition to the revenue we generate from facilitating transactions on our commerce network, we

also earn revenue from providing value-added services to our consumers and merchants. In the year

ended December 31, 2025, on average, 46 million of our active Klarna consumers opened the Klarna app

every month to track their purchases, use our budgeting and banking tools, or to shop taking advantage of

our AI assistant, our specialized shopping search-engine, our offers, or our inspirational product catalog.

We generate advertising revenue when a consumer clicks on an ad placed on the Klarna app or our

website after their initial search, or purchases an item they have found through the Klarna app. We also

generate consumer service revenue from our consumers using Klarna Membership, our subscription

service that grants consumers access to a variety of features and offers, including special merchant deals.

Advertising revenue reached $190 million in the year ended December 31, 2025, or 5% of our total revenue.

As we continue to build on our lifestyle, shopping and financial services, we believe the composition of

our revenue streams will continue to evolve.

Flexible and Low-Cost Base

We are able to attract consumers and service them at a structurally low cost base.

• **Low Cost to Acquire**. We acquire many consumers organically, thanks to our strong brand and our

intuitive sign-up process, which enables consumers to use us for the first time when registering at the

merchant checkout.

• **Low Cost of Risk and Flexible Credit Issuance.** Our expertise in credit underwriting, built over nearly

two decades of experience and incorporating the latest ML technology, has resulted in our provision for

credit losses representing less than 0.2% of GMV in our most mature markets and 0.63% overall in the year

ended December 31, 2025. The transactional nature of our credit model makes the duration of our average

loan short-term (approximately 39 days in the year ended December 31, 2025, including 27 days for Pay

Later and 109 days for Fair Financing), meaning that changes in our credit policy have an almost

immediate impact on our results of operations.

• **Low Cost of Funding**. Because of the short duration of our credit, our average consumer receivables

in the year ended December 31, 2025 were $9.3 billion, compared to our GMV of $128 billion. Thanks to the

trust of our consumers and our banking license, in the year ended December 31, 2025, we funded 90% of

our lending activities by utilizing consumer deposits, which equaled $13 billion as of December 31, 2025. As

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a result, our average cost of funding was approximately 2.4% compared to xIBOR in Europe of

approximately 2.5% in the year ended December 31, 2025.

• **High Operating Leverage**. Our centralized product development enables us to scale without

proportionally increasing our cost base. Increasing use of AI and a focus on cost optimization is also

supporting our ability to reduce our expenses, more than offsetting any associated increase in salaries and

technology costs. Despite the reduction in our workforce, thanks to AI-driven efficiency gains and normal

course employee attrition, we have continued to innovate, launching our Klarna Card in 16 markets in 2025.

Our focus on cost-disciplined innovation has driven a 54% revenue growth in the year ended December 31,

2025 compared with 2023 while our operating expenses increased by 44% for the same period. Our

average annual revenue per employee at period end has increased from approximately $344,000 in 2022

to approximately $1,240,000 in the year ended December 31, 2025.

**Key Business Metrics**

The following table sets out our key business metrics as of and for the periods indicated. We review

these key business metrics to evaluate our business, measure our performance, identify trends affecting

our business, formulate business plans, and make strategic decisions. In addition, these business metrics

are presented to assist investors to better understand our business and how it operates.

---

| | | | |
|:---|:---|:---|:---|
|  | **As of, or for the Year Ended, December 31,** | **As of, or for the Year Ended, December 31,** | **As of, or for the Year Ended, December 31,** |
|  | **2025** | **2024** | **2023** |
| **GMV (in $ millions)** ............................................................................................... | **127862** | **105015** | **92465** |
| *Year-over-year change (in %)* .......................................................................... | *22%* | *14%* | *N/A* |
| *Year-over-year change on a like-for-like basis\* (in %)* .............................. | *20%* | *15%* | *N/A* |
| **Number of Active Klarna Consumers (in millions)**<sup>1</sup> **...........................................** | **118** | **93** | **84** |
| *Year-over-year change (in %)* .......................................................................... | *27%* | *11%* | *N/A* |
| **ARPAC (in $)**<sup>2</sup> **........................................................................................................** | **29** | **30** | **27** |
| *Year-over-year change (in %)* .......................................................................... | *(3)%* | *11%* | *N/A* |
| *Year-over-year change on a like-for-like basis\* (in %)* .............................. | *(2)%* | *13%* | *N/A* |
| **Transaction Margin Dollars (in $ millions)**<sup>3</sup> **........................................................** | **1238** | **1217** | **1085** |
| *Year-over-year change (in %)* .......................................................................... | *2%* | *12%* | *N/A* |
| *Year-over-year change on a like-for-like basis\* (in %)* .............................. | *9%* | *15%* | *N/A* |

---

n.m. = not meaningful

____________

<sup>1</sup> The year-over-year increase the number of our active Klarna consumers in the year ended December 31, 2025 was partly

driven by the transition of Stocard customers into our network.

<sup>2</sup>The year-over-year decrease in our ARPAC in the year ended December 31, 2025 was driven by the transition of our former

Stocard customers into our network, which resulted in a significant increase in the number of our active Klarna consumers over a

short period of time.

<sup>3</sup>Transaction margin dollars is a non-IFRS measure. See "—Non-IFRS Financial Measures" below.

Note: Our key business metrics presented in the table above include transactions processed through

KCO. Adjusted for the sale of KCO, our key business metrics equalled in the year ended December 31, 2024

and 2023, respectively: (1) GMV: $102,455 million (16% year-over-year change) and $88,665 million; (2)

ARPAC: $30 (15% year-over-year change) and $26; and (3) transaction margin dollars: $1,189 million (17%

year-over-year change) and $1,016 million. The divestment of KCO does not affect the number of active

Klarna consumers nor any fiscal period subsequent to the fourth quarter of 2024 when the sale of KCO

was completed.

\*Year-over-year change on a like-for-like basis is calculated by adjusting the relevant metric for (1) the sale

of KCO and (2) the impact of foreign currency fluctuations. The impact of foreign currency fluctuations is

calculated by translating the reported amounts in the current period using the exchange rates in use

during the comparative prior period. We present like-for-like changes in our metrics when one of the

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comparative periods is, or includes, the fourth quarter of 2024, the period in which the sale of KCO was

finalized.

Gross Merchandise Volume

We define GMV, measured for a period, as the total monetary value of all completed purchases on our

network in that period, excluding any additional fees (such as interest, reminder or other fees) and any

subsequent actions (such as returns, settlements and disputes). GMV does not represent revenue earned

by us. However, GMV is a measure of the scale of our network and is a key driver of our revenue. GMV

growth is driven by an increase in the number of merchants on our network that our consumers can

transact with, the number of active Klarna consumers and the average spend of our consumers. While

GMV is a key indicator of the payment volume of our network, it does not reflect all of the transactions that

are enabled through our network. For example, a customer may purchase products from a merchant in

response to an ad placed by that merchant in the Klarna app but not use a Klarna payment solution to

complete the transaction. In that case, the transaction would not contribute to our GMV or generate

merchant revenue, but would generate advertising revenue for us. In the year ended December 31, 2025,

our GMV was $128 billion, which represented an increase of approximately 38% from 2023. We have

observed a notable acceleration of our GMV growth in recent months, both in the United States and our

more mature markets, driven by Klarna becoming, or on track to become, a default payment option with a

growing number of PSPs, including JP Morgan Payments, Stripe, Nexi and Worldpay, as well as the

continued expansion of our merchant relationships. We believe that such partnerships position us well to

further expand our GMV globally.

![1649267441665](klar-20251231_g18.gif)

We generate GMV from two points of purchase:

• At the merchant's checkout, when a consumer chooses a Klarna payment option to purchase

goods or services from a merchant on our network; and

• Direct-to-consumer, when a consumer uses a Klarna-issued payment card—either the Klarna card

or a one-time card—at any online or physical store that accepts Visa, irrespective of whether the

merchant is on our network.

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The table below shows the breakdown of our GMV between these two points of purchase for the

periods presented:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| **Total (in $ millions)** ............................................................................................... | **127862** | **105015** | **92465** |
| **Merchant checkout (in $ millions)** .................................................................... | **112916** | **95623** | **84642** |
| as share of total GMV (in %) ............................................................................. | 88% | 91% | 92% |
| **Direct-to-consumer (in $ millions)** .................................................................... | **14946** | **9392** | **7823** |
| as share of total GMV (in %) ............................................................................. | 12% | 9% | 8% |

---

In addition, the table below shows the relative breakdown of our GMV among our payment options for

the periods presented:

---

| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| **Pay in Full** ............................................................................................................. | 11% | 16% | 21% |
| **Pay Later** .............................................................................................................. | 80% | 79% | 75% |
| **Fair Financing** ...................................................................................................... | 9% | 5% | 4% |

---

Note: Data in the table above excludes GMV generated through KCO unbranded channels.

Number of Active Klarna Consumers

We define active Klarna consumers as consumers who have made a purchase or a payment using a

Klarna-branded product or logged into the Klarna app within the past 12 months. As a result, this metric

represents consumers who have engaged in a revenue-generating activity in a relevant period, either by

making a purchase or a payment using Klarna (therefore generating merchant and/or interest revenue) or

logging into the Klarna app (therefore generating advertising revenue). In the year ended December 31,

2025, the number of active Klarna consumers increased 28% year-over-year compared to the year ended

December 31, 2024, reaching approximately 118 million, primarily driven by our growth in key markets,

including the United States and the U.K., as well as the successful conversion of Stocard users into our

active Klarna consumers. In the year ended December 31, 2025, on average, 46 million of our active Klarna

consumers opened the Klarna app every month.

The number of active Klarna consumers excludes consumers using Sofort (an online payments

company acquired by us in 2014, operating primarily in Germany and consolidated into Klarna Bank in

December 2024), Billpay (a German online payments company acquired by us in 2017), Pricerunner (a

comparison price leader acquired by us in 2022) as well as consumers who have transacted through

unbranded channels. We continuously work to better integrate our acquired businesses into our

operations and network and, as a result, to transition their users that we have engaged with us over time

into active Klarna consumers. For example, we recently transitioned Stocard users to the Klarna app. This

migration integrated Stocard's active users into Klarna's ecosystem, enhancing their experience with

loyalty card management and flexible payment options. The successful integration of Stocard users has

significantly contributed to the recent growth in Klarna's active consumer base, strengthening our position

as a leading global payments and shopping platform.

Average Revenue per Active Consumer

We define ARPAC as our total revenue divided by the number of active Klarna consumers over the

period. We monitor our ARPAC to track the value we generate across all our active Klarna consumers in a

given period. ARPAC is a key indicator of consumer success on the Klarna network because it quantifies

the spending behavior and engagement of active Klarna consumers on our network over time. When we

are successful in growing our active Klarna consumers and average spend per user, our ARPAC expands.

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Our ARPAC grew by 7% from 2023 to the year ended December 31, 2025, despite being temporarily

negatively affected in recent periods by the Stocard user integration discussed above.

ARPAC is driven by purchase frequency, AOV and take rate. Typically, purchase frequency, which is

defined as the total number of transactions on our network over the past 12 months divided by the number

of active Klarna consumers in the same period, increases as our market penetration and maturity grow.

For example, in Sweden, where we launched in 2005, consumers transacted on average 33 times per year

in the year ended December 31, 2025, as compared to 30 times per year in 2023. In the United States,

where the Klarna app launched in 2019, consumers transacted on average 6 times per year in the year

ended December 31, 2025, as compared to 5 times per year in 2023. We aim to further increase purchase

frequency by expanding our network into new verticals and through various initiatives, including the Klarna

card, our shopping browser extension and additional PSP integrations, in particular with MoRs, each of

which increases the merchant adoption of our network and its relevance to consumers.

**Expanding Purchase Frequency**

![Expanding purchase frequecny.jpg](klar-20251231_g19.jpg)

________________

Note: The chart above refers to the year ended December 31, 2025 for Klarna. The "Years since

launch" axis does not apply to the Klarna card or the typical U.S. credit card frequency data point. U.S.

credit card use frequency based on data by Capital One.

Purchase frequency is the primary driver of ARPAC growth. Typically, consumers transact more

frequently the longer they are on our network, as they experience the benefits and increased value our

network provides over time. There is also a correlation between the number of merchants using our

network in a geography and the consumer purchase frequency in that geography, reflecting the network

effects we have created.

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---

| |
|:---|
| **New Cohort Purchase Frequency Accelerating Faster** <br>**than Older Cohorts**<br>|
| ![Purchase frequency.jpg](klar-20251231_g20.jpg) |

---

________________

Note: Consumer cohorts are based on the date of first purchase on our network. Purchasing

consumers refers to consumers who have made a purchase using a Klarna payment method.

ARPAC generally increases the longer consumers have been using our network. In addition, as we have

expanded, new cohorts typically have a higher starting point for average revenue per purchasing

consumer resulting from a higher initial purchase frequency and feature usage.

Transaction Margin Dollars

We define transaction margin dollars as total revenue less total transaction costs, which consist of

processing and servicing costs, provision for credit losses and funding costs.

From 2024 to the year ended December 31, 2025, our transaction margin dollars grew 2% to $1,238

million from $1,217 million. In contrast GMV grew 22% in 2025, reflecting mix and timing effects from the

rapid expansion of Fair Financing. As Fair Financing scales, we provision expected credit losses upfront

while revenue is recognized over subsequent quarters. In 2025, this drove an increase in provision for

credit losses ($794 million vs. $495 million), creating near-term margin pressure. The result is deferred

profitability, with growth in higher-duration Financing products weighing on current-year Transaction

Margin Dollars.

We expect the relative portion of Fair Financing products in our overall payment option mix to increase

as we continue to expand the availability of our full suite of payment products across our growing

merchant network, including at leading merchants in their respective categories, like Walmart. In line with

IFRS accounting standards, we recognize a provision for credit losses at the time of each Fair Financing

transaction, even though we will generate interest income on such transactions over the life of the loan. As

a result of this provisioning process, we have seen a near-term negative impact to our transaction margin

dollars in 2025 driven by increased provisions for credit losses as we continue to increase our GMV

generated from Fair Financing. At the same time, our transaction margin dollars are expected to increase

as we recognize interest income from such Fair Financing products over time in excess of the provision for

credit losses originally taken, as illustrated below.

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**Illustrative Impact of Fair Financing on Income Statement Over Time**

![Graph 36.jpg](klar-20251231_g21.jpg)

**Other Key Metrics Underlying Our Financial Model**

Revenue

Our revenue is driven by the number of consumers transacting through our network and ARPAC

associated with these transactions. Revenue is influenced by three factors: the primary and overarching

factor is growth of GMV on which we generate transaction and service revenue, followed by advertising

revenue from the use of the Klarna app and consumer service revenue from the use of Klarna

Membership.

**Take rate**

We define take rate as our total revenue as a percentage of GMV. Our take rate increased from 2.5% in

2023 to 2.7% in the year ended December 31, 2025. Take rate is a function of multiple dynamics of our

business, which are continuously evolving as we expand our offerings and enter additional markets,

including geographic, product, channel and vertical mix. For example, generally the U.S. market has higher

take rates than our other geographies, so any increase in the share of the U.S. market in our GMV is

expected to, all other things being equal, result in a higher overall take rate. Similarly, longer duration

financing products have higher take rates compared to Pay in Full or the Klarna card. In turn, higher

purchase frequency verticals, such as services, have generally lower take rates. Finally, our revenue

increases as we add value to consumers and merchants through the use of the Klarna app, driving

advertising and consumer service revenue without an associated increase in GMV.

We divide our revenue into two categories: (i) transaction and service revenue and (ii) interest income.

The majority of our revenue is transaction and service revenue, which primarily consists of merchant

revenue.

**Transaction and service revenue**

Transaction and service revenue represented 71%, 76% and 78% of our total revenue in the year ended

December 31, 2025 , 2024, and 2023, and grew 17% and 21% year over year, respectively. Transaction and

service revenue is composed primarily of the following:

• **Merchant Revenue**. Merchant revenue primarily refers to fees paid by our merchants, generated

when consumers transact on our network and also includes interchange revenue and fees for settling

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disputes. In the year ended December 31, 2025 and in 2024 and 2023, merchant revenue represented 74%,

75%, and 76%, respectively, of our transaction and services revenue. This revenue is derived from the

volume of transactions we process multiplied by the fees we charge, which vary across our geographies.

Our pricing is a combination of value-based and fixed pricing, charged either *ad valorem* (proportional to

the estimated value of goods and services transacted through our network) or fixed fees on each

transaction, or a mix of both, depending primarily on the merchant vertical. Our growth in the United States

was a meaningful driver of the merchant revenue growth, given the higher take rates in the U.S. market.

• **Advertising Revenue**. We define advertising revenue as revenue paid by merchants who advertise

on our network. In the year ended December 31, 2025 , 2024, and 2023, advertising revenue represented

7%, 8%, and 9%, respectively, of our transaction and service revenue. We earn advertising revenue from

search solutions as well as affiliate and brand ads placed on our network.

• **Consumer Service Revenue**. We define consumer service revenue as revenue we earn from fees

charged to consumers. In the year ended December 31, 2025 , 2024, and 2023, consumer service revenue

represented 15%, 16%, and 13% of our transaction and services revenue, respectively. A declining share of

our consumer service revenue comes from reminder fees, which represented 66%, 74%, and 83% of our

consumer service revenue in the year ended December 31, 2025 , 2024, and 2023, respectively. Klarna's

reminder fees are flat, capped, clearly disclosed and applied only when a payment is several days late.

Reminder fees are always preceded by multiple friendly reminders (e.g., push notifications, emails and app

reminders). These fees are designed to encourage timely repayment and help cover our costs. Reminder

fees vary by geography and payment option.

**Gain on sale of consumer receivables**

Gain on sale of consumer receivables consists of gains recognized on the sale of Fair Financing

receivables to institutional investors which transfer the related credit risk and funding exposure. During

the year ended December 31, 2025, the Company entered into entered into sales agreements of Fair

Financing receivables comprising both an initial sale of existing portfolio and additional forward flow

agreements. The total Fair Financing receivables sold during the year was $1.6 billion. These sales of

receivables resulted in a gain on sale $73 million, of which $25 million was reclassified from other

comprehensive income during 2025. There was no comparable revenue for the year ended December 31,

2025. **Interest income** 

We define interest income as income we earn when consumers choose to spread the cost of

transactions over time with one of our interest-bearing financing products or delay the cost of transactions

with our payment flexibility features, such as "snooze."

Since 2021, we have only charged consumers interest on our Fair Financing products, with a duration

of three months or longer. Pay in Full or Pay Later products are non-interest bearing. Interest income

represented 27%, 24% and 22% of our total revenue in the year ended December 31, 2025 and in 2024, and

2023. Operating Expenses

Operating expenses include processing and servicing costs, provision for credit losses, funding costs,

technology and product development expenses, sales and marketing expenses, customer service and

operations expenses, and general and administrative expenses.

From 2023 to the year ended December 31, 2025, we saw a decrease across our operating expenses

as a percentage of our revenue, as revenue growth has outpaced operating expense growth. Technology

and product development expenses as a percentage of revenue decreased 3 percentage points, sales and

marketing expenses as a percentage of revenue decreased 5 percentage points, customer service and

operations expenses as a percentage of revenue decreased 5 percentage points, and general and

KLARNA GROUP PLC164

administrative expenses as a percentage of revenue decreased 3 percentage points. This led to our total

operating expenses as a percentage of revenue decreasing 8 percentage points from 2023 to the year

ended December 31, 2025, even as our GMV increased 38% in the same period. As a result, our operating

result improved by $93 million (or 29%) in the year ended December 31, 2025. In the same period, our

adjusted operating result improved by $114 million (or 233%), from an adjusted operating loss of $49 million

to an adjusted operating profit of $65 million. In fact, during the year ended December 31, 2025, the

difference between our revenue, on the one hand, and adjusted operating expenses has been increasing.

This increased leverage has been the result of a number of efficiencies we are implementing throughout

our business, including certain AI-focused initiatives which have reduced our costs.

The below chart illustrates our expanding operation margins from 2019 to the year ended

December 31, 2025.

**Expanding Operating Margin**

![1649267441702](klar-20251231_g22.gif)

________________

Note: Adjusted operating expenses are non-transaction related IFRS operating expenses excluding

processing and servicing costs, provision for credit losses and funding costs.

In particular, from 2023 to the year ended December 31, 2025, as a result of our declining operating

expenses as a percentage of our total revenue, our operating result improved by $93 million (or 29%). In

the same period, our adjusted operating result improved by $114 million, from an adjusted operating loss of

$49 million to an adjusted operating profit of $65 million.

Transaction Margin Dollars and Transaction Margin

We define transaction margin dollars as our total revenue less total transaction costs, which consist of

processing and servicing costs, provision for credit losses and funding costs. The most directly

comparable financial measure presented in accordance with IFRS to our transaction margin dollars is

operating income (loss). We calculate transaction margin dollars as operating income (loss) plus

technology and product development costs, sales and marketing costs, customer service and operations

costs, general and administrative costs and depreciation, amortization and impairments costs. Transaction

margin is calculated by dividing transaction margin dollars by our total revenue. See "—Non-IFRS Financial

Measures."

KLARNA GROUP PLC165

Processing and servicing costs

We define processing and servicing costs as costs we pay to settle transactions, including payment

fees, authentication fees and scoring costs. Processing and servicing costs typically vary as a result of the

relative mix of payment methods and the geographies in which we operate. For example, while in the

United States our take rates are higher, our payment fees are similarly higher as a result of a less regulated

payments ecosystem as compared to other jurisdictions, which leads to higher processing and servicing

costs.

Provision for credit losses

We define provision for losses as provisions for future losses and realized losses associated with all

consumer lending activities during the relevant period. Our provision for credit losses have consistently

remained below 1% of GMV (0.63% in the year ended December 31, 2025).

Funding costs

We define funding costs as net interest costs associated with funding our consumer financing

products. They include interest that we pay on our consumer deposits. From 2023 to the year ended

December 31, 2025, our funding costs increased from $297 million to $667 million, or from 0.32% to 0.52%

of our GMV and from 3.1% to 5.1% of our deposits over the same period. Our highly competitive deposit

savings platform and bank license provide us greater operational flexibility and a relatively lower funding

cost compared to wholesale funding models. For example, in the year ended December 31, 2025, 90% of

our lending activities were funded from our consumer deposits, 58% of which are fixed and longer-term

than the average duration of the consumer loans that we funded through such deposits.

The below table illustrates changes in our various transaction costs from 2023 to the year ended

December 31, 2025. As shown below, we increased our total transaction costs by 91% while growing our

revenue by 54% over the same period.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **2023 to 2025** <br>**% Change** |
|  | **2025** | **2024** | **2023** | **2023 to 2025** <br>**% Change** |
| Processing and servicing costs ........................................ | $(809) | $(596) | $(541) | 50% |
| Provision for credit losses ................................................. | (794) | (495) | (353) | 125% |
| Funding costs ....................................................................... | (667) | (503) | **(297)** | 125% |
| **Total** ....................................................................................... | **$(2270)** | **$(1594)** | **$(1191)** | **91%** |

---

Our priority is to drive transaction margin dollar growth, given that our margin can fluctuate with

changes in our product, merchant, vertical and geographical mix. Transaction margin is calculated by

dividing transaction margin dollars by our total revenue. We have consistently delivered increasing

transaction margin dollars in a new geography following our entry into that geography. As our markets

mature, the number of active Klarna consumers and their purchase frequency typically increase, leading

to a more frequent use of our network. Higher purchase frequency drives increased scale, which in turn

improves the data that we collect and use to underwrite, reducing credit losses from both new and existing

consumers. This approach allowed us to generate positive transaction margin dollars in all 10 markets that

we launched before 2020.

Our Ability to Grow Our Global Consumer Base

The growth and engagement of our global consumer base is a critical factor in our ability to grow our

total revenue and operating results.

KLARNA GROUP PLC166

**Consumer growth** 

We have a track record of growing the number of active Klarna consumers over time. As of

December 31, 2025, we had 118 million active Klarna consumers, an increase of 42% from 2023. This growth

was primarily driven by our success in attracting new consumers in our key markets, including the United

States and the U.K., as well as our ability to successfully convert our former Stocard users into active

Klarna consumers.

![1649267441732](klar-20251231_g23.gif)

**Number of Active Klarna Consumers (in millions)**

Our consumer base growth is supported by powerful secular trends such as the growth of digital

payments and increasing distrust of credit cards among younger generations. For example, as of June

2024, the average credit card balance of Gen Z Americans was 50% lower than that of all American

consumers, according to Experian. Additionally, in 2024, only 72% of U.S. consumers had trust in their bank

and their practices, according to Ipsos. In 2024, Americans collectively paid $254 billion in credit card

interest and fees, according to WalletHub. We expect to continue to grow the number of our active Klarna

consumers by capturing more consumers in existing markets, including gaining customers from merchants

at the checkout and converting consumers from other parts of the Klarna ecosystem.

**Increasing consumer penetration in existing markets**

Our active Klarna consumers are geographically diverse, even though our market penetration varies

materially around the world. For example, in Sweden, our most mature market, approximately 85% of the

adult population were active Klarna consumers as of December 31, 2025, while in the United States, the

market that we entered only five years ago, that number was approximately 11%. Although we have

reached significant scale, the penetration of the addressable consumer base in the markets we serve

today was only 14.8% as of December 31, 2025. We believe we have an opportunity to significantly increase

our market penetration over time, particularly in the United States. We have a track record of increasing

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consumer penetration as we mature and expand our offerings in individual geographies, as shown in the

chart below.

**Expanding Consumer Penetration**

![Country ecom and consumer penetration.jpg](klar-20251231_g24.jpg)

**Effective consumer acquisition strategy** 

We initially reach consumers in their commerce discovery journey at the point of purchase. We enable

consumers to sign up to Klarna at the point of checkout, with minimum friction. Since we partner with

some of the largest merchants globally, being able to sign up consumers at checkout is a very effective

consumer acquisition strategy.

We are very focused on acquiring consumers in a highly efficient manner. Our cohorts demonstrate

high degrees of repeatability and predictability, which, in combination with our transaction margin dollars,

enables us to continue investing in consumer acquisition outside of the merchant checkout. We expect to

continue to focus on acquiring new consumers and increasing our engagement with our existing

consumers, with the goal of becoming their everyday spending and saving partner.

Our Ability to Increase Engagement and Expand Revenue from Existing Consumers

**Purchase frequency growth drives increased spend on our network**

As consumers find value on our network, they are typically more engaged and use Klarna for more of

their purchasing needs, which is visible in our frequency trends. On average, our 2019, 2020 and 2021

consumer cohorts made three transactions during their first year on our network and at least ten

transactions by year three. Purchase frequency typically increases as we launch and scale key product

initiatives and as we expand into new verticals. These initiatives contribute to purchase frequency

expanding as we mature within our existing markets, as demonstrated in the graphic below. In Sweden, for

example, our average purchase frequency has reached 33 times per year in 2025. In the United States,

purchase frequency in that period was approximately 6 times per year and grew from 5 in 2023.

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---

| | |
|:---|:---|
| **Purchase Frequency by Cohort** | **Expanding Purchase Frequency** |
| ![Purchase frequency.jpg](klar-20251231_g20.jpg) | ![Purchase over time.jpg](klar-20251231_g25.jpg) |

---

________________

Note: The right-hand side chart above refers to the year ended December 31, 2025 for Klarna. The

"Years since launch" axis does not apply to the Klarna card or the typical U.S. credit card frequency data

point. U.S. credit card use frequency based on data by Capital One.

Our purchase frequency has consistently grown in the last three years as the proportion of consumers

in our more recently launched markets increased. Average annualized purchase frequency across our

network reached 10.5 times in the year ended of 2025.

**Purchase frequency increases with key product initiatives**

Purchase frequency typically increases as consumers build trust in our brand and progressively

discover the added value of our solutions, products and services. New product launches, such as the

Klarna card (which allows customers to use Klarna offline) or the shopping browser extension (which

makes Klarna available at merchants outside of our network), also increase the utility of our network. In the

United States for example, we expect that our average purchase frequency will increase as the product

range available through the Klarna card increases. The average U.S. credit card was used over 257 times

per year in 2024, according to Capital One, and as we build our product offerings in the United States, we

give our consumers more opportunities to use Klarna for more of their purchases.

As consumers engage with us more, their use cases of our network expand, which drives engagement

and purchase frequency. Consumers typically use more of our products the longer they are on our

network. Product cross-adoption, as well as the network effects of our business, where more consumers

on our network drive more merchants, accelerates purchase frequency. For example, in the last twelve

months ended December 31, 2025, in Germany and Sweden, Klarna card users made on average 96 more

purchases per year using Klarna than non-Klarna card users, and in the last twelve months ended

December 31, 2025, Klarna app users in the United States transacted 2.8 times as frequently as non-Klarna

app users. In short, greater product adoption over time leads to higher purchase frequency.

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**Proven Formula to Grow Engagement and Adoption**

![Graph for growth in usage.jpg](klar-20251231_g26.jpg)

________________

Note: The increase in the number of transactions by Klarna card users in Germany and Sweden is

based on the purchase frequency of German Klarna card users as compared to non-Klarna card users in

our 2024 consumer cohort and is calculated by comparing their purchase frequency before such Klarna

card users signed up for the Klarna card to their purchase frequency in the following 365 days. The

increase in the purchase frequency for Klarna app users in the United States was based on data from the

twelve months ended December 31, 2025. Consumer cohorts are defined by reference to the date of the

consumer's first purchase.

**Purchase frequency increases as we expand into new verticals**

We actively seek to diversify our merchant verticals as we grow within our geographies. For example,

purchase by vertical is most diversified in Sweden—our most mature market where the percentage of total

purchases is almost evenly distributed across Apparel & Accessories, Health & Beauty, Home &

Electronics, Food & Beverage, and Leisure—while, for example, in the United States, the majority of

purchases are still within the Apparel & Accessories vertical. Our newer verticals are often the more

frequent purchase categories for consumers. Accordingly, there is a strong correlation between market

maturity, vertical diversification and purchase frequency in the markets in which we operate.

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**Category Expansion**

![Screenshot 2026-02-21 151934.jpg](klar-20251231_g27.jpg)

**Average Order Value ("AOV") Expansion**

Our AOV was $103 in the year ended December 31, 2025 and increased 2% from 2023. AOV is primarily

a function of our geographic, product and vertical mix. The increase in our AOV from 2023 to the year

ended December 31, 2025 was primarily driven by the growth in our U.S. business, where AOV is generally

higher than in our other markets. Conversely, lower AOV may be driven by an increase in higher purchase

frequency transactions, such as in the Events and Services vertical, including Transportation, which

typically have a lower AOV.

**Compounding Cohort Growth** 

We generally have generated more GMV, and consequently revenue, from our consumer cohorts the

longer they have been using Klarna, demonstrating our network's increasing value to our consumers over

time. Every cohort since 2019 has increased GMV annually. On average, purchase frequency in year two

was approximately 2.6 times higher than in the first year and 4 times higher by the fourth year.

Our Ability to Attract Merchants and Enable Merchant Success

Our strategy of turning Klarna into the everyday spending and saving partner depends on our ability to

advance our merchants' success and adding new merchants to our network. We employ a highly efficient,

multi-strategy approach to acquire merchants. Our three main channels—Klarna Payments, Klarna In-store

and Klarna In-app—facilitate seamless and fast transactions, which help us attract and retain merchants.

As of December 31, 2025, we served approximately 966 thousand merchants. While our network has

had success with enterprise merchants, our value proposition is relevant to all merchant categories

regardless of their size, vertical or AOVs. We serve a diverse global merchant base across 26 markets and

more than 15 verticals, including Apparel & Accessories, Everyday Payments, Travel, Health & Beauty,

Home & Electronics, and much more, as illustrated by the chart below. In the last twelve months ended

July 31, 2025, 48% on average of the top 100 merchants in each of the major markets we serve, the United

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States, the U.K., the Nordics, Germany, Austria, Belgium, Spain, France, Italy, the Netherlands and

Switzerland (based on data from eCommDB and Digital Commerce 360) used Klarna to facilitate payments,

while an even greater percentage (66%) advertised on our network during the same period. This

represents a significant increase in our adoption rate among top merchants from 2019, as illustrated by the

chart below. Our broad adoption across merchants contributes to our GMV diversification, with no single

merchant representing more than 10% of our GMV in any of our major markets in 2024. In the year ended

December 31, 2025, we also added more than 285 thousand net new merchants to our network, a 42%

year-over-year growth.

![Graph 34.jpg](klar-20251231_g28.jpg)

We also leverage our growing partner network, primarily PSPs, to boost merchant adoption. We are

usually an opt-in payment method with our PSP distribution partners, with our GMV accounting for less

than 1% of our PSP partners' total GMV in the year ended December 31, 2025. Opt-in typically requires us

to proactively market our payment methods toward their merchants. Becoming a default payment option

with our PSP partners, where a merchant no longer needs to opt-in but rather has the option to opt out,

represents a significant opportunity for us to attract merchants. For example, based on publicly available

information provided by the largest PSPs in the markets in which we operate, we estimate that the total

addressable volume processed by them equaled approximately $8 trillion in the year ended December 31,

2025 of which $6.7 trillion was processed by our current PSP partners that are committed to or already live

with Klarna. We expect these steps, combined with our trusted global brand, our consumer reach and our

comprehensive and innovative products, will allow us to continuously expand our merchant network.

We are highly focused on, and benefit from, the growth of our merchants. As merchants begin to use

our solutions, they realize the value we deliver and often then expand their use of our network into

additional products, services and geographies, which in turn increases our share of their checkout and

drives further GMV gains. At that point, merchants often decide to use our additional solutions to acquire

new consumers, from which we generate additional advertising revenue.

The chart below illustrates our expanding partnership with On, one of many globally trusted brands

that joined our network in recent years. This chart and the case studies that follow provide several

examples of what successful integration with Klarna can mean for our merchants in different verticals.

Results achieved by individual merchants may vary for a number of reasons, including the number and the

type of our solutions, products and services deployed by the merchant, the geography and vertical in

which the merchant operates and the timeframe during which the results are measured, as well as

because of our growing global presence and introduction of new and improved merchant solutions. At the

same time, we believe that the examples that we have chosen are representative of the impact that our

network has on enabling our merchants' growth and the financial and performance results presented are

typical of the results that our merchants generally experience.

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**Accelerating Merchant Growth**

![Graphic On.jpg](klar-20251231_g29.jpg)

________________

Note: On's expansion to the United States impacted the share of checkout in 2023. Share of checkout

is calculated as Klarna's GMV share of the merchant's total GMV generated online (including on the On

app) in our markets. GMV represents the merchant's total GMV transacted on our network. Revenue

represents the merchant's total revenue generated on our network.

Source: Klarna's calculations based on information received from the merchant.

Our solutions have consistently proven to drive merchant growth across different markets and

verticals, resulting in more efficient customer acquisition, higher AOV and better order conversion and

customer retention rates for our merchants, as illustrated by the several case studies presented below.

![foodora.jpg](klar-20251231_g9.jpg)

________________

Note: In 2020, H&M integrated Klarna's In-app mobile checkout into its app in ten markets. Klarna

payment options were quickly adopted by H&M customers—in these markets, our share of checkout has

reached almost 50% and, in Sweden, 60% of orders from new customers are made through Klarna. In

partnership with us, Sephora has introduced flexible payment options across the United States and

Canada, which have increased customer loyalty and purchase frequency. In 2023, Klarna users shopped at

Sephora 6.8 times per year on average, compared to four times per year on average for all Sephora

KLARNA GROUP PLC173

consumers. In recent years, members of Sephora's Beauty Inside Loyalty program across tiers (Insider, VIB

and Rouge) were two times more likely to use Klarna. Within the program, more than 40% of Klarna users

enrolled in a Sephora loyalty program qualified in the top two tiers (VIB and Rouge), measured by annual

spend. Using our affiliate program, Expedia increased its exposure on the Klarna app through a variety of

channels and placements, including email campaigns and ads. For instance, in 2024, the percentage of

Expedia transactions made by new Klarna customers more than doubled in the United States year over

year. In the United States, through our affiliate program, Expedia and Hotels.com experienced an

approximately 5% increase in their basket size in 2024 year over year. Since 2019, Foodora's customers in

Sweden have been able to pay for their purchases with Klarna. In August 2024, Foodora decided to use our

advertising solutions to promote on our network. As a result, the purchase frequency of Klarna consumers

increased by 14% in August 2024, as compared to October 2023, and our share of checkout in Sweden

reached 35% on average between August 2024 and September 2024.

Source: Klarna's calculations based on information received from the merchant.

We have continued to add high-quality merchants to our network, as measured by the size of the

merchant cohort added, and its consistent GMV and revenue growth over time. We also benefit from the

global nature of our network. While we may add a merchant in one country, that same merchant can grow

their global reach by launching Klarna in more and more markets, driving further revenue expansion of our

merchant cohorts. As we deliver more value to our merchants, they become more engaged with us, which

results in a meaningful revenue expansion.

Impact of Evolving Global Geography, Product and Merchant Vertical Mix on Our Operating Results

and Transaction Margin

Our operating results, including take rates and transaction margin dollars, are impacted by

geographical, product, and merchant vertical mix. While these factors may impact various line items of our

operating results in different ways at any given point in time, they collectively drive our long-term growth.

**Geographical mix** 

Geographical mix impacts our operating results due to differences among our markets, including

consumer spending behaviors, take rates, consumer credit profiles, the maturity of our credit underwriting

and varying processing costs. Our U.S. market today, for example, has higher take rates, as well as higher

processing and servicing costs compared to other regions and as a result, has a lower transaction margin

than our more established geographies. As we have entered and scaled in new markets, our operating

losses have consistently decreased while our transaction margin dollars expanded. As a result, over the

longer term, we anticipate that our transaction margin will expand, especially on a country-by-country

basis. However, in the short term, while our transaction margin dollars may grow in absolute terms, our

transaction margin may decline in percentage terms, as our U.S. operations continue to grow faster than

our more mature markets, notwithstanding the impact of our existing and future forward flow sale

arrangements, which are expected to mitigate the transaction margin percentage impact of our continued

growth in the U.S. market. As we mature our operations in new markets, greater scale typically enables us

to lower our processing and servicing costs and better data and understanding of consumer credit enables

us to improve our provision for credit losses.

**Payment option mix**

Payment option mix impacts our operating results due to varying consumer and merchant economics,

take rates and our cost to provide various payment options, including differences in processing fees and

provision for credit losses. While we have a range of options, we are able to deliver strong transaction

margin dollars across all of them. For example, our Fair Financing payment option is longer in duration than

our other solutions and as such, has higher associated take rates but also higher associated provision for

credit losses. Our Pay in Full payment option on the other hand generally has lower take rates but has no

funding costs and minimal provision for credit losses.

KLARNA GROUP PLC174

**Merchant vertical mix**

Our merchants' verticals also impact our operating results. Different verticals have different purchase

frequencies and AOV as well as may transact to varying degrees with different Klarna payment methods.

For example, we are currently growing in Services and Experiences verticals, such as Events and Food &

Beverage. These verticals typically have a higher purchase frequency but lower AOVs than other verticals,

and are transacted with the Klarna card or Pay in Full. At the same time, our largest merchant vertical is

Apparel & Accessories, which in the year ended December 31, 2025 represented approximately 41% of our

GMV. In the year ended December 31, 2025, this vertical had a higher-than-average AOV and purchase

frequency. In addition, the share of GMV generated from transactions made with our Pay Later payment

product in 2025 in this merchant vertical was significantly higher than the average share of Pay Later

across all of the transactions conducted on our network.

Our Ability to Maintain Our Cost-Effective Stable Funding

Our funding base is stable, low-cost and flexible as we have the ability to access a variety of forms of

funding, including consumer deposits that our banking license, a core competitive advantage, allows us to

collect. Higher funding costs would negatively impact our transaction costs and transaction margin dollars.

We have a conservative, deposit-based approach to funding. In the year ended December 31, 2025, we

funded 90% of our lending activities by using funds raised by offering our fixed deposits to our consumers.

This contributes to our relatively low cost of funding, as deposit-based funding is generally cheaper than

nonbank sources, such as ABS-based funding. We have been operating this deposit-based approach for

over 14 years, and we believe we can continue to grow our deposit base if and when needed given the size

of our current deposits relative to the overall market demand for deposits. We also have the flexibility to

diversify our funding strategy across multiple sources if desired. Our investment grade rating with S&P

(BBB-/A-3) allows us to issue a variety of debt securities at a relatively low cost. We have also entered into

a number of synthetic securitizations and wholesale funding transactions to support our continued growth

and believe we can continue to access capital markets for our financing needs when advantageous to us in

various market conditions.

We have a centralized funding model whereby substantially all deposits and other funding (e.g.,

wholesale market funding) is raised by Klarna Bank. Klarna Bank then provides, by utilizing currency swaps

when needed, necessary funding to other entities within our consolidated group, including to enable our

geographical expansion and growth in new markets outside of the EEA. There are currently no regulatory

restrictions on the amount of such funding that can be provided to our entities that are within the

regulated banking group, which comprises Klarna Holding and its subsidiaries, including Klarna Inc., our

U.S. operating subsidiary, and KFSUK, our U.K. operating subsidiary. Any funding from Klarna Bank to group

entities outside the regulated banking group is subject to limits under large exposures rules, which restrict

the amount of such funding to 25% of the regulated banking group's Tier 1 capital.

The inherent duration gap between our deposits and consumer loans drives stability in our funding

costs. In the year ended December 31, 2025, the average term of our deposits was 268 days, compared to

the weighted average life (WAL) based contractual repayment schedules of approximately 39 days (27

days for Pay Later and 109 days for Fair Financing). This duration gap stabilizes the rate at which our

funding costs change in response to interest rate changes. We also have control over the average term of

our deposits, 58% of which were fixed term in the year ended December 31, 2025. We can adjust terms

based on our expectation of market interest rates to lengthen or shorten the duration gap and best

respond to different interest rate environments.

We expect the relative portion of Fair Financing products in our overall payment option mix to increase

as we continue to expand the availability of our full suite of payment products across our growing

merchant network, including at leading merchants in their respective categories, like Walmart. We

anticipate that the average term of our consumer deposits will continue to remain significantly above such

average loan duration. We also expect to be able to raise deposits and other forms of funding and utilize

KLARNA GROUP PLC175

forward-flow arrangements as needed to support the extension of consumer loans, including as a result of

our recently announced partnership with Walmart, in line with our regular business practice. Accordingly,

we do not believe that our deposit-based funding model or our short- or long-term financing needs will be

materially different in the near-future. Finally, although we expect our funding costs to continue to

fluctuate to reflect the broader market conditions, we believe that our funding model will remain

conservative in any market environment.

**Banking License Advantage: Stable Low-cost Funding**

![Screenshot 2026-02-21 150959.jpg](klar-20251231_g30.jpg)

_________________

• Reflects on-balance sheet cost of funding. Excludes off-balance sheet funding costs, which

are included within Funding costs in our consolidated statements of profit or loss.

Note: Figures refer to the year ended December 31, 2025 unless otherwise indicated.

Our Ability to Maintain Best-In-Class Underwriting Capabilities and Achieve Low Consumer Credit

Losses

Our consumer credit offering consists of installment payments and financing products. Pay Later

enables consumers to purchase goods or services at the time of the transaction and pay the full amount at

a later date. All of our Pay Later products are designed to be fee- and interest-free for the consumer. Fair

Financing allows consumers to pay for their purchase over a longer duration. Consumers typically pay

interest for this payment method and durations range from three to 48 months. We operate an ML-

enabled high-frequency, large scale, real-time underwriting process across a standardized set of products.

In the year ended December 31, 2025, our average balance per active Klarna consumer was $124 (Pay in

Full: $0; Pay Later: $120 Fair Financing: $393) (compared to an average balance per credit card of

approximately $6,961 in the United States in 2025, according to Experian), and based on contractual

repayment schedules, our weighted average life (WAL) was approximately 39 days (27 days for Pay Later

and 109 days for Fair Financing) (compared to a typical loan duration of more than five years at a typical

Nordic bank in 2024, according to publicly available information, and an average of 2.5 years of a typical

U.S. personal bank loan in Q1 2025, according to TransUnion). We only provide credit for specific

purchases, with clear repayment terms that are fixed and short-term. We do not allow borrowing in cash,

revolving balances or balance transfers, and we freeze an account if the consumer misses a payment, all

of which help us maintain low credit losses.

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**GMV Growth Coupled with Reducing Credit Losses**

![Screenshot 2026-02-24 212033.jpg](klar-20251231_g31.jpg)

_________________

Note: Figures refer to the year ended December 31, 2025 unless otherwise indicated. High-growth

markets refer to all of our markets excluding the United States, the U.K., the Nordics, Germany, Austria and

Switzerland. The number of transactions since inception refers to the period from January 2005 to

December 31, 2025.

We have designed our short-term credit products to serve a wide range of consumers, including those

with varying credit histories and borrowing needs. Rather than targeting a specific credit segment, our

underwriting processes aim to responsibly extend credit across a broad customer base. To that end, we

have built market-leading underwriting capabilities based on our access to proprietary data set, including

first- and third-party data, and a unique credit underwriting process that becomes more accurate as it

scales and our ML models analyze growing amounts of data. We provide a new, real-time underwriting

decision for each transaction, leveraging our own records, including the customer's history with Klarna,

and purchase behavior from an average of approximately 3.4 million transactions per day made by 118

million active Klarna consumers in the year ended December 31, 2025. We also leverage merchant data,

credit bureau reports and open banking data to understand the financial position of the consumer at that

point in time. Our underwriting process utilizes ML-based credit models and is fully automated, making

decisions in a matter of seconds. The underwriting process begins with the identification and

authentication of the consumer and the evaluation of our credit and fraud policies to prevent over-

indebtedness as well as potential abuse and fraud. We then assess the consumer's creditworthiness with

our ML-based risk scoring and compare approved consumer credit against our own internal risk appetite,

all before providing a final credit decision.

As we process more transactions, our credit models continuously improve to achieve increased

performance in credit modeling and scoring. The predictive accuracy of our models is demonstrated by a

notable improvement in our Gini score over time. In the credit scoring context, a Gini score is a scale of

predictive power from 0 to 1, with a higher Gini score indicating higher predictive power. For example, in

the United States, our Gini score improved from 0.36 in 2019 to 0.78 in the fourth quarter of 2025, while

also representing a significant advantage over the models used by credit bureaus such as VantageScore

4.0, which had a Gini score of 0.43 in the fourth quarter of 2025, according to our credit scoring model. As

a result, our Gini score in the United States, where we expanded in 2019, approached a similar level to our

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Gini score in Germany, one of our most mature markets, showing the increased predictive power of our

models as we mature our presence and operations in a new market.

Our high credit modeling and scoring performance allows us to responsibly extend credit to

consumers with different credit scores while maintaining the quality of our loan portfolio. For example, in

the United States and the United Kingdom, our financing products are used by a broad customer base that

includes consumers with both subprime and super prime credit scores (as defined by the VantageScore

4.0 and Experian methodology commonly used in those markets, respectively). At the same time, our loan-

weighted average consumer credit score in those markets in 2025 qualified as near-prime and prime,

respectively. We also expect that, as we continue to expand our consumer base and further mature our

operations in these markets, in particular the United States, the weighted average credit score of our

consumers will further increase, in line with our most mature markets, including Sweden and Germany. In

addition, our geographical diversification adds further resilience to our underwriting model as our loan

portfolio is not heavily concentrated in a single market. For example, in the year ended December 31, 2025,

Germany and the United States represented 32% and 21% of our GMV (which is closely tied to our loan

portfolio distribution), respectively, with Sweden and the United Kingdom accounting for 13% and 12%,

respectively.

**Increasing Accuracy of Our Credit Models\***

![Screenshot 2026-02-25 211432.jpg](klar-20251231_g11.jpg)

_________________

• Gini score indicates the model's discriminatory power, namely, the model's effectiveness in

differentiating between "bad" borrowers, who will default in the future, and "good" borrowers, who

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will not default in the future. Our Gini score above was calculated for our Pay in 4 payment option

(for the United States) and our Pay Later payment option (for Germany).

• \*U.S. Benchmark Gini is calculated using the VantageScore 4.0 model. German Benchmark Gini is

calculated using the Schufa Bank 3.0 model.

Our underwriting process allows us to increase repayment rates and reduce losses, while preventing

consumers from taking on unmanageable levels of debt, a stark contrast to credit cards that provide

revolving credit and allow cash withdrawals and balance transfers. Each consumer starts with a small

spending capacity, compared to large credit limits for new credit card holders, and we gradually increase

that limit based on the customer's repayment history, unlike credit cards, which automatically increase the

credit limits to promote usage. We provide consumers clear repayment terms and, by carefully setting the

spending capacity based on the customer's profile and repayment history, ensure that our loans are easy

to repay, with less friction than credit cards which permit minimum repayment. Our underwriting process is

optimized for sustainable lending that puts the consumer first.

In the second half of 2022, we implemented a strategic initiative to adjust our underwriting standards

in an effort to improve the overall credit quality of our portfolio. The initiative was driven by our strategic

recalibration to a more balanced growth and shift towards profitability. These changes included updates to

our credit underwriting decision framework, such as launching new risk models to manage risk return

trade-off in line with our profitability targets for 2023, including first-generation new-consumer-level risk

models, targeted risk-based down-payment policies, updating decline thresholds following the new model

implementation and adjusting our risk-based pricing policies for our consumer loans to drive a higher yield

on the portfolio. In particular, we increased the number of consumers that were required to make a down

payment in order to take advantage of our financing products. We also increased the average amount of

such down payment based on our updated credit risk models, historical delinquency behavior and

information from credit bureaus. As a result, in 2023, our credit portfolio comprised loans extended to

consumers with either a well-established repayment history with Klarna or a repayment behavior similar to

our existing well-performing customer base. Consequently, in the year ended December 31, 2025, our

provision for credit losses represented 0.63% of total GMV.

*Credit Risk Governance and Monitoring*

We evaluate the repayment ability of our consumers both at origination and post-origination through a

structured governance and monitoring framework. On an operational level, our underwriting teams

conduct daily and weekly cohort-level monitoring to flag delinquencies and payment deviations, which in

turn trigger automated alarms. At the portfolio level, we maintain a dedicated consumer credit committee,

comprising our chief financial officer, chief risk officer and chief product and design officer. The

committee holds monthly reviews to assess several delinquency indicators, including early- and late-stage

delinquencies, volume distributions and loan acceptance rates. Key findings from this review are

summarized and escalated to the chief executive officer and our board of directors. This multi-tiered

governance and monitoring framework provides early-warning signals and portfolio-level controls that

enable timely risk adjustments.

*Key Credit Metrics*

We monitor the credit performance of our two primary consumer credit products, Pay Later and

Financing, through delinquency rates (leading indicators), cumulative net charge-off curves (realized

losses by origination cohort), and allowances for expected credit losses (forward-looking provisioning).

Together, these metrics provide a comprehensive view of the credit health of our consumer receivables

portfolio. As described below, our credit metrics have remained within our risk appetite parameters

throughout the periods presented.

Delinquency Rates

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• We monitor credit-risk metrics with particular emphasis on 30-day and 60-day past due rates ("30+

DPD" and "60+ DPD"), which measure the share of quarterly originated volume that is over 30 or 60

days past due. These rates serve as leading indicators of credit quality.

• Delinquency rates are calculated by dividing the aggregate origination volume (principal) of

consumer loans of a given type (Pay Later or Financing) extended in a given quarter that

subsequently become 30/60 days past due, by the total origination volume of that cohort. The

calculation is volume-based, not count-based. Once a loan enters a cohort, it remains in the

denominator permanently—regardless of subsequent repayment, charge-off, transfer, or sale. The

metric therefore captures the proportion of originated volume that has experienced delinquency,

independent of whether loans remain on our balance sheet. By including all originated loans

irrespective of subsequent developments, we believe the metric provides a useful indicator of

underwriting quality.

• For Financing, 60+ DPD rates are measured six months post-issuance and 30+ DPD rates at four

months, irrespective of original maturity—allowing performance to stabilize for a more reliable read

on credit quality. For Pay Later, the observation period is three months, reflecting its short-term

nature.

• 30+ DPD delinquency rates are disclosed alongside our existing 60+ DPD rates. The 30+ DPD

metric provides earlier-stage visibility into emerging credit trends and, as described further below,

has been instrumental in giving us confidence that the delinquency increases observed in the US

during the first half of 2025 are transitory in nature.

Cumulative Net Charge-Off Rates

• Cumulative net charge-off rates are calculated by dividing net charge-offs (principal amounts

deemed uncollectible, net of recoveries) for a given cohort by the originated receivables for that

cohort that remain on our balance sheet. A loan is charged off when deemed unlikely to be

collected. Loans sold through forward-flow arrangements are included in the cohort at origination.

We believe this metric provides meaningful insight into our actual credit-risk exposure and its

financial impact on our results of operations.

Allowance for Expected Credit Losses

• We monitor our allowance for expected credit losses as a proportion of total consumer receivables

over time. This balance sheet metric reflects estimated expected losses across the portfolio,

determined in accordance with applicable accounting standards, and provides an indication of

how our provisioning levels respond to observed and anticipated changes in credit performance.

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***Pay Later Credit Performance***

Delinquency Rates

Pay Later delinquency rates in both the US and the Group (which includes the US) showed a modest

increase through the first half of 2025. This was consistent with a shift in portfolio mix toward Direct-to-

Consumer ("DTC") card-backed products (comprising the Klarna Card, Debit flex Card, and One-time-card).

Reflecting this broader strategic shift, full-year 2025 volume growth for these DTC products reached 59%

year-over-year, significantly outpacing overall merchant checkout volume growth of 18%.

US Pay Later 60+ DPD rates rose incrementally from approximately 1.2% in Q1 to 1.4% in Q2 2025

before moderating in Q3. This pattern is corroborated by our 30+ DPD data, which confirms that the Q2

uptick has since normalized. At the Group level, trends were consistent, with 60+ DPD rates remaining

within a narrow range of approximately 0.7–0.9% across 2025 cohorts. Group 30+ DPD rates similarly

showed limited movement, staying around 1.5–1.7%, further supporting the view that the Pay Later portfolio

has not experienced a structural shift in credit quality.

![1649267442145](klar-20251231_g32.gif)

![1649267442133](klar-20251231_g33.gif)

![1649267442331](klar-20251231_g34.gif)

![1649267442319](klar-20251231_g35.gif)

Group refers to all markets in which Klarna operates, including the U.S. "U.S." refers solely to the United States market.

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*Cumulative Net Charge-Off Rates*

The modest delinquency increase observed in Q2 2025 is reflected in our cumulative net charge-off

curves, with the Q2 2025 origination cohort tracking above prior cohorts at the same point in its life cycle.

As noted above, the 30+ DPD data confirms a normalization in Q3 2025 delinquency rates and we expect

cumulative charge-off curves for subsequent cohorts to converge toward historical levels.

![1649267442418](klar-20251231_g36.gif)

![1649267442482](klar-20251231_g37.gif)

Group refers to all markets in which Klarna operates, including the U.S. "U.S." refers solely to the United States market.

*Allowance for Expected Credit Losses*

The allowance for expected credit losses as a proportion of gross Pay Later receivables decreased

from 4.2% in Q3 2025 to 3.5% in Q4 2025. This movement reflects mechanical portfolio composition

effects rather than any deterioration or improvement in underlying credit quality.

The elevated coverage ratio in Q3 2025 was driven by the launch of our US forward flow programs,

under which newly originated Pay Later receivables were sold to third-party purchasers. As a result of this

offloading activity, the receivables remaining on our balance sheet in Q3 2025 were disproportionately

skewed toward later-stage exposures, which carry higher expected loss provisions by their nature. This

mix effect mechanically inflated the ECL coverage ratio relative to a steady-state portfolio composition.

As those later-stage exposures subsequently charged off through Q4 2025, the portfolio composition

normalized, and the ratio declined accordingly. The Q4 2025 ratio of 3.5% reflects a more balanced on-

balance-sheet portfolio and is broadly consistent with the 3.7% observed at year-end 2024.

---

| | | | |
|:---|:---|:---|:---|
| **Pay Later Receivables** | **24'Q4** | **25'Q3** | **25'Q4** |
| Gross Carrying Amount | 5388 | 5793 | 6347 |
| Allowance for ECL | 201 | 242 | 220 |
| ECL (% of Gross Carrying Amount) | 3.7% | 4.2% | 3.5% |

---

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***Fair Financing Credit Performance***

Delinquency Rates

Financing delinquency performance showed an increase at the 60+ DPD level in the US, from 2.7% in

Q1 2025 to 3.7% in Q2 2025. This increase, albeit one consistent with our risk appetite, reflects the

seasoning profile of a rapidly growing book. US Financing origination volumes increased 296% between Q1

2023 and Q1 2025. Group-level trends were broadly consistent, with 60+ DPD rates remaining close to prior

year-levels as we expanded the product across more jurisdictions and partners.

Our 30+ DPD data shows a stabilization in the most recent US cohort at around 3.4–3.5%, broadly in

line with prior-year levels. At the Group level, 30+ DPD rates remained stable at approximately 3.0% from

Q2 to Q3 2025. As observed in prior periods, 30 DPD serves as a leading indicator for 60 DPD. We expect

the observed improvement in 30 DPD in Q3 to be mirrored in a corresponding improvement in 60 DPD in

the following periods.

![81913616270168](klar-20251231_g38.gif)

![81913616270156](klar-20251231_g39.gif)

![81913616270192](klar-20251231_g40.gif)

![81913616270180](klar-20251231_g41.gif)

Group refers to all markets in which Klarna operates, including the U.S. "U.S." refers solely to the United States market.

*Cumulative Net Charge-Off Rates*

The cumulative charge-off curves for US Financing demonstrate the consistency of our underwriting

standards through a period of significant volume growth. Through Q1 2025, loss curves have remained

within a narrow band of approximately 3.0–3.5% at maturity, with no material change in shape or level

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across vintages. The Q2 2025 cohort is tracking moderately above this range at a comparable point in its

life cycle, consistent with the transitional dynamics described above in relation to delinquency rates. At

the Group level, cumulative charge-off curves remain tightly clustered around 2.0–2.5%, with more limited

divergence in the most recent cohort.

![81913616270232](klar-20251231_g42.gif)

![81913616270244](klar-20251231_g43.gif)

*Allowance for Expected Credit Losses*

The allowance for expected credit losses as a proportion of gross Financing receivables has increased

relative to the prior year, primarily reflecting a higher share of US receivables within the portfolio. US

receivables represented about 50% more of the Financing portfolio at year-end 2025, compared to year-

end 2024. Because the US book is younger and carries a different risk profile than our European markets,

it requires higher expected loss provisions, driving the Group-level ratio higher.

The quarter-on-quarter increase from Q3 to Q4 2025 (reaching 5.9%) is a mix effect rather than a

reflection of underlying credit deterioration. In Q4 2025, we conducted our first Financing backbook sale

and forward-flow transaction, which removed a portion of receivables from the balance sheet. The

remaining portfolio had a higher average lifetime ECL, mechanically increasing the coverage ratio.

To illustrate the scale of this effect: had all US Financing loans remained on the balance sheet, the

coverage ratio would have been 5.5% in Q4 2025 compared to 5.2% in Q3 2025. The remaining difference

between Q3 2025 and Q4 2025 was driven by the continued shift in portfolio composition toward US

originations, rather than a change in credit quality.

---

| | | | |
|:---|:---|:---|:---|
| **Financing Receivables** | **24'Q4** | **25'Q3** | **25'Q4** |
| Gross Carrying Amount | 3085 | 4793 | 4604 |
| Allowance for ECL | 131 | 249 | 272 |
| ECL (% of Gross Carrying Amount) | 4.2% | 5.2% | 5.9% |

---

Operating Leverage from Economies of Scale in Combination with Continued Deployment of AI

Our ability to deliver improvements in our operating results is a function of our increasing operating

leverage. From 2023 to the year ended December 31, 2025, we saw a decrease across our operating

expenses both in absolute terms and as a percentage of our revenue. Technology and product

development expenses as a percentage of revenue decreased 3 percentage points, sales and marketing

expenses as a percentage of revenue decreased 5 percentage points, customer service and operations

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expenses as a percentage of revenue decreased 5 percentage points, and general and administrative

expenses as a percentage of revenue decreased 3 percentage points. This led to our total operating

expenses as a percentage of revenue decreasing 8 percentage points from 2023 to the year ended

December 31, 2025, even as our GMV increased 38% in the same period. As a result, our operating result

improved by $93 million (or 29%) in the year ended December 31, 2025. In the same period, our adjusted

operating result improved by $114 million (or 233%), from an adjusted operating loss of $49 million to an

adjusted operating profit of $65 million.

These efficiencies have been driven by our increased scale. Additionally, we have prioritized a number

of initiatives that improve our operating leverage, including implementing AI throughout our business to

drive cost savings. We announced a partnership with OpenAI in 2023 and in February 2024 launched our AI

service chats in the year ended December 31, 2025, according to our service chat log data, doing the work

equivalent of over 850 full-time agents (estimated based on the average monthly reduction in chat and

telephone conversations handled by full-time agents in 2025 following the launch of our AI assistant), and

in 2025 delivered approximately $59 million in cost savings. Based on our service chat log data and

consumer satisfaction surveys, AI-handled consumer chats rank on par with human agents in consumer

satisfaction and demonstrate higher accuracy in errand resolution. Following the launch of our AI

assistant, repeat inquiries dropped by 25% between December 2023 and January 2024. Additionally, AI-

handled consumer chat resolutions averaged two minutes, compared to the 12-minute average for human

agents in 2024. Our AI assistant has been trained to handle complex errands and assist consumers with a

wide range of their queries. At the same time, appreciating that certain consumers may nevertheless

prefer to interact with human representatives, we continue to offer all of our customers that option. This

reflects our dual-track approach of combining broad and continuing implementation of scalable AI in our

customer service with high-quality human support.

We similarly continue to invest in AI in other aspects of our operations to drive innovation and

efficiencies across Klarna. Recognizing the critical importance of human capital, we continue to focus on

internal talent development and upskilling programs in AI, fostering a data-driven culture across our entire

organization. We are actively monitoring emerging AI technologies and best practices. While we continue

to utilize well-established ML techniques in our underwriting processes, we do not use generative AI for

credit underwriting. As exemplified by our approach to customer service, we also continue to refine our

processes throughout our business to maximize the benefits of AI while aiming to effectively manage

associated risks and ensure the quality and reliability of our network, products and overall consumer

experience.

We are embracing AI in our internal operations as well, which we expect to drive additional operating

leverage. The vast majority of our employees use various generative AI tools in their daily work. For

example, our engineers use an AI-assisted case log classification tool that organizes documents and

categorizes over one million monthly chat conversations. We also operate an internal knowledge chatbot

boosts productivity, compliance, discovery and collaboration.

General Economic Conditions and Industry Trends

Our results of operations are impacted by the relative strength of the overall economy and the related

levels of unemployment, interest rates, consumer confidence, economic recessions, downturns or

extended periods of uncertainty or volatility, all of which may influence consumer spending behavior and

consumer demand for financing-enabled commerce. Our merchants' underlying business activities are

also linked to the macroeconomic environment. Our top merchants, for example those in the retail space,

are impacted by fluctuations in general economic conditions and consumer spending behavior that affect

their sales of products and will generally result in lower credit sales and, therefore, lower loan volume and

associated interest income for us.

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Currency Fluctuations

We are exposed to currency risks in light of our global operations. The functional and presentation

currency of Klarna Group plc is the U.S. dollar. The functional currency of our subsidiaries is generally the

currency of the country in which they are located. As a result, change in currency rates may create

additional volatility in our operating and financial results, as more fully discussed below under "—

Qualitative and Quantitative Disclosures About Market Risk—Currency Risk."

Seasonality

We experience seasonal fluctuations in our revenues as a result of consumer spending patterns.

Historically, our revenue has been strongest during the fourth quarter of our fiscal year due to increases in

retail commerce during the holiday season. Similarly, many advertisers devote a disproportionate amount

of their advertising budgets to the fourth quarter of the calendar year to coincide with such increased

holiday purchasing, which may lead to seasonal increases in our advertising revenue. Accordingly, adverse

events that occur during these months could have a disproportionate effect on our financial results for the

fiscal year. In addition, other seasonal trends may develop or these existing seasonal trends may become

more extreme, and the existing seasonality and consumer and merchant behavior that we experience may

change or become more significant, which would contribute to fluctuations in our results of operations. As

a result, our results may fluctuate significantly and our results in any given fiscal period may not fully

reflect the underlying performance of our business or be indicative of the results we may achieve in any

other fiscal period.

**Key Components of Our Results of Operations**

Revenue

**Transaction and service revenue**

Transaction and service revenue includes merchant revenue, consumer service revenue and

advertising revenue. Merchant revenue refers to fees paid by our merchants, generated when consumers

transact on our network. It includes merchant fees, interchange revenue and fees for settling disputes.

Merchant revenue is derived from the volume of transactions we process multiplied by the fees we charge,

which vary among our geographies. Our pricing is a combination of value-based and fixed pricing, charged

either ad valorem (proportional to the estimated value of goods and services purchased on our network) or

fixed fees on each transaction, or a mix of both. Where consumers return merchandise or goods and

merchants process a refund, merchant fees charged for the original transaction are not returned to the

merchant. Advertising revenue is earned from merchants who place advertisements on our network,

including sponsored search, affiliate programs and brand ads. We enter into contracts for advertising

either directly with merchants or through other third parties. Consumer service revenue refers to revenue

we earn from consumer fees, primarily consisting of certain administrative fees, including reminder fees

and fees for issuing one-time cards. Consumers may be charged a fee, being a fixed amount that

constitutes the transaction price and recognized at the point in time that the consumer is charged. This

fee income is earned in relation to the Company's ordinary activities. Reminder fees are flat, capped and

clearly disclosed. They are applied only when a payment is several days late and are always preceded by

multiple friendly reminders (e.g., push notifications, emails and app reminders). These fees are designed to

encourage timely repayment and help cover our costs. They vary by geography and payment option.

**Gain on sale of consumer receivables**

Gain on sale of consumer receivables consists of gains recognized on the sale of Fair Financing

receivables to institutional investors which transfer the related credit risk and funding exposure.

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**Interest income** 

Interest income includes interest earned when consumers choose to spread the cost of transactions

over time through one of our interest-bearing financing products or to delay the cost of transactions with

our payment flexibility features, such as "snooze." We also recognize interest income related to

incremental fees earned from certain merchants for providing interest-free promotional loans to their

consumers. Since 2021, we have only charged consumers interest on our Fair Financing products, which

have a duration of more than three months. Pay in Full or Pay Later products are non-interest bearing and,

as such, we derive no interest income from them. Interest income also includes interest from debt

securities.

Operating Expenses

**Processing and servicing costs**

Processing and servicing costs are costs that we pay to settle transactions. They consist primarily of

authentication costs to verify user identities, scoring costs related to purchasing credit and fraud data

from various bureaus, distribution costs related to direct communication with consumers, commissions

paid to third parties for debt collection and payment fees to credit card companies and financial

institutions. Processing and servicing costs typically vary as a result of the relative mix of payment

methods and the geographies in which we operate. For example, while in the United States our take rates

are higher, our payment fees are similarly higher, which leads to higher processing and servicing costs.

**Provision for credit losses**

Provision for credit losses for the period consist of realized credit losses, provisions for credit losses

for granted credit, less reversal of provisions for credit losses made previously. Realized credit losses are

losses whose amount is, for example, determined via bankruptcy, a composition arrangement, a statement

by an enforcement authority or the sale of receivables. Our provision for credit losses represents our

estimate of the credit losses inherent in our loans held for investment and is based on a variety of factors,

including the composition and quality of the portfolio, loan-specific information gathered through our

collection efforts, current economic conditions and our historical net charge-off and loss experience.

**Funding costs**

Funding costs include interest that we pay on our consumer deposits, calculated using the effective

interest method, and securitization costs, including fair value adjustments on Pay Later receivables held at

fair value through profit and loss related to forward flow agreements, and premiums paid in connection

with our synthetic securitization transactions.

**Technology and product development**

Technology and product development expenses primarily consist of personnel-related costs for

technology functions as well as other expenses, including hosting, software licenses, external service

providers, hardware costs and amortization of internally developed and acquired technology assets.

**Sales and marketing**

Sales and marketing expenses primarily consist of personnel costs, general marketing and promotional

activities costs, referral commissions, costs related to sponsorships and partnerships, and costs related to

consumer promotional programs.

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**Customer service and operations**

Customer service and operations expenses primarily consist of personnel costs for customer support

functions and outsourced assistance to help with purchases, account management, returns and merchant

disputes.

**General and administrative**

General and administrative expenses consist of personnel costs for directors and executives, legal and

human resources, and finance functions, lease expenses related to short-term leases, low-value assets,

and variable lease expenses, professional services costs and merchant and other losses.

We recognized certain non-recurring costs in connection with the initial public offering and the related

preparations to become a publicly listed company in the United States, consisting of professional fees and

other expenses. We incurred $14 million in such fees in 2024 and $11 million in the year ended

December 31, 2025. These fees are not directly attributable to the issuance and sale of ordinary shares by

us in the initial public offering and have been expensed as incurred.

We expect to incur additional expenses as a result of operating as a public company, including costs

related to compliance and reporting obligations pursuant to the rules and regulations of the SEC, costs to

comply with the rules and regulations applicable to companies listed on the NYSE and increased expenses

for insurance, investor relations and professional services. We also expect that our general and

administrative expenses will increase in absolute dollars as our business grows.

**Depreciation, amortization and impairments**

Depreciation, amortization and impairments consists of non-cash charges relating to recognition of

depreciation, amortization and impairment of property, equipment, software, internally developed

intangibles and right-of-use assets.

Other Income (Expense)

Other income (expense) primarily consists of other income or expenses not classified in the foregoing

categories of our operating expenses.

Income Taxes

Income taxes consist of current tax and deferred tax.

**Critical Accounting Policies and Estimates**

Our discussion and analysis of our financial condition and results of operations are based upon our

consolidated financial statements, which have been prepared in conformity with IFRS. The preparation of

our consolidated financial statements and related disclosures requires us to make estimates, assumptions

and judgments that affect the reported amounts and related disclosures. We believe that the estimates,

assumptions and judgments involved in the accounting policies described below have the greatest

potential impact on our financial statements and, therefore, we consider these to be our critical

accounting policies. Accordingly, we evaluate our estimates and assumptions on an ongoing basis. Our

actual results may differ from these estimates under different assumptions and conditions.

We consider the following policies and estimates critical because they are both important to the

portrayal of our financial condition and operating results, and they require us to make judgments and

estimates about inherently uncertain matters. Please refer to Note 2 of our consolidated financial

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statements included elsewhere in this report for information about these critical accounting policies, as

well as a description of our other significant accounting policies.

**Transaction and service revenue**

We recognize revenue from merchants, advertising and consumers.

Merchant revenue primarily refers to fees paid by our merchants, generated when consumers transact

on our network and also includes interchange revenue and fees for settling disputes. Merchant revenue is

derived from the volume of transactions we process multiplied by the fees we charge, which vary among

our geographies. Where consumers return merchandise or goods and merchants process a refund,

merchant fees charged for the original transaction are not returned to the merchant. We generally

recognize merchant revenue at the point in time when the merchant successfully confirms the

transaction, which is when the terms of the contract are fulfilled. We provide a reduction of merchant fees

to certain merchants based on performance measures, including volume of processed transactions. Such

fee rebates are recorded as a reduction of merchant revenue.

Advertising revenue is earned from merchants who place advertisements on our network, including

sponsored search, affiliate programs and brand ads. We enter into contracts for advertising either directly

with merchants or through other third parties. The transaction price is determined based on the

advertising model, with fees that may be fixed or variable, typically based on the number of impressions

delivered or actions taken by users, such as clicks or purchases. Revenue from impression-based ads is

recognized in the period when an ad is displayed to users. For action-based ads, revenue is generally

recognized at a point in time, when a specified action, such as a click or purchase, occurs.

Consumer service revenue refers to revenue we earn from consumer fees, primarily consisting of

certain administrative fees, including reminder fees and fees for issuing one-time cards. Consumers may

be charged a fee, being a fixed amount that constitutes the transaction price and recognized at the point

in time that the consumer is charged. This fee income is earned in relation to the Company's ordinary

activities. Reminder fees are flat, capped and clearly disclosed. They are applied only when a payment is

several days late and are always preceded by multiple friendly reminders (e.g., push notifications, emails

and app reminders). These fees are designed to encourage timely repayment and help cover our costs.

They vary by geography and payment option.

Consumer service revenue also includes subscription revenue. Subscription revenue represents

monthly subscription fees related to a single performance obligation for a bundle of services and are

recognized over the subscription period as those services are provided.

We enter into contracts with certain merchants and other partners to expand our user base and

market presence, and for brand promotion through co-marketing activities, in which Klarna provides cash,

share warrants, or both as consideration. We evaluate if the consideration payable is in exchange for a

distinct good or service. Where the payment is for a distinct good or service, it is recognized as sales and

marketing expenses. If a payment is not for a distinct good or service, it is recognized as a reduction of the

transaction price.

**Allowance for expected credit losses**

We recognize an allowance for expected credit losses upon origination of our consumer receivables

and settlement and trade receivables. Adjustments to the allowance each period for changes in our

estimate of expected credit losses are recognized in our provision for credit losses or general and

administrative, depending on the nature of the receivable, in our consolidated statements of profit or loss.

In estimating the allowance for expected credit losses, we estimate the likelihood that a receivable will

progress through various stages of delinquency. This analysis focuses on the pertinent factors underlying

the quality of the receivables portfolio, including historical performance and the age of the receivable

balance. We also take into consideration certain qualitative factors for which we adjust our quantitative

KLARNA GROUP PLC189

baseline using our best judgment to consider the inherent uncertainty regarding future economic

conditions and consumer loan performance. For example, we consider the impact of current economic

and environmental factors at the reporting date that did not exist over the period from which historical

experience was used.

The underlying assumptions, estimates and assessments that we use to provision for expected credit

losses are updated periodically to reflect our view of current conditions, which can result in changes to our

assumptions. Changes in such estimates can significantly affect the allowance and provision for expected

credit losses. It is possible that we will experience credit losses that are different from our current

estimates.

**Income taxes**

We are subject to income taxes in U.K., Sweden, the United States and numerous other foreign

jurisdictions. Deferred tax assets are recognized for unused tax losses, unused tax credits and deductible

temporary differences to the extent that it is probable that future taxable profits will be available, against

which they can be used. Unused tax loss carry-forwards are reviewed at each reporting date and have not

been recorded when we believe we will not generate future taxable income to utilize the loss carry-

forwards.

In determining the amount of current and deferred income tax, we take into account the impact of

uncertain tax positions and whether additional taxes, interest, or penalties may be due. Although we

believe that we have adequately reserved for our uncertain tax positions, we can provide no assurance

that the final tax outcome of these matters will not be materially different. We make adjustments to these

reserves when facts and circumstances change, such as the closing of a tax audit or the refinement of an

estimate. To the extent that the final tax outcome of these matters is different than the amounts recorded,

such differences will affect the provision for income taxes in the period in which such determination is

made and could have a material impact on our financial condition and operating results.

**Partner share warrants**

We have granted share warrants to certain partners, including merchants and other service providers,

in return for services. Share-based payments to partners are generally measured at the fair value of the

goods or services received, and measured at the time when such goods and services are received. If the

fair value of goods and services cannot be reliably measured, the fair value of the equity instruments is

used. We recognize commercial agreement assets where the consideration paid represents a future

economic benefit, and these assets are amortized over the relevant performance period within the

commercial agreement, and recognized within sales and marketing expenses where the payment is in

exchange for a distinct service, or as a reduction to transaction prices if in exchange for no distinct

service.

**Structured entities and forward flow securitization arrangements**

We have entered into transactions with unconsolidated securitization vehicles ("SPVs") managed by

third-party institutional investors, including forward flow arrangements whereby specified pools of

consumer receivables are transferred. These SPVs are structured entities because voting rights are not

the dominant factor in determining control and the relevant activities are directed by contractual

arrangements, and we typically continue to service certain sold receivables in exchange for a market-

based servicing fee. We consolidate such SPVs when we determine that we control the entity in

accordance with IFRS 10. This judgment requires assessing the purpose and design of the SPV, whether we

have power over the relevant activities, exposure or rights to variable returns, and the ability to use that

power to affect those returns, including whether we act as principal or agent.

We classify the specified pools of consumer receivables into either fair value through OCI ("FVOCI"), or

fair value through profit or loss ("FVTPL") on the basis of both Klarna's business model for managing the

KLARNA GROUP PLC190

assets, and the contractual cash flow characteristics of the financial assets. See Note 16 to our

consolidated financial statements included elsewhere in this report.

Fair value is determined using a discounted cash flow methodology that projects contractual cash

flows over the remaining life of the instruments. Cash flows are adjusted for unobservable inputs, including

a weighted-average lifetime probability of default, conditional loss given default, and prepayment rates

reflecting an average modeled probability, based on portfolio-level assumptions applied at the reporting

date are classified within Level 3 of the fair value hierarchy. This consistent with the overall policy outlined

in Note 2. The cash flows are discounted using observable zero-coupon rates, plus a portfolio-specific

credit spread applied as a margin over the risk-free curve.

We derecognize receivables upon transferring the contractual rights to the cash flows and

substantially all associated risks and rewards. The transfers are deemed to occur on the sale date, at

which point, the derecognition criteria are satisfied. Upon disposal gains related to Fair Financing

receivables are recognized within Gain on sale of consumer receivables, and losses related to Pay Later

receivables are recognized within Funding costs, reflecting the nature and underlying characteristics of

the sold receivables.

Recent Accounting Pronouncements

New accounting guidance that we have recently adopted, as well as accounting guidance that has

been recently issued but not yet adopted by us, is included in Note 2 to our consolidated financial

statements included elsewhere in this report.

Internal Control over Financial Reporting

As previously disclosed in our registration statement on Form F-1, in connection with the preparation

of our consolidated financial statements, we previously identified a material weakness in our internal

control over financial reporting related to our IT general controls for information systems that are relevant

to the preparation of our consolidated financial statements, related to (i) user access controls, including

management of privileged access, (ii) change management with respect to monitoring segregation of

duties, and (iii) IT operations controls with respect to certain third-party service providers. We

implemented certain measures to address the material weakness which we have concluded is remediated

as of December 31, 2025.

We remain committed to maintaining and improving our internal control over financial reporting, but we

can give no assurance that the measures we have taken and plan to take in the future will remediate the

material weakness in our internal control over financial reporting or that they will prevent or avoid

potential future material weaknesses in our internal control over financial reporting. In addition, our

current internal control over financial reporting and disclosure controls and procedures, and any new

internal control over financial reporting and disclosure controls and procedures that we develop, may

become inadequate because of changes in our business, operations and other factors, some of which may

be beyond our control.

We are not required, pursuant to Section 404, to furnish a report by management on, among other

things, the effectiveness of our internal control over financial reporting until our first annual report

required to be filed with the SEC. This assessment will need to include disclosure of any material

weaknesses identified by our management in our internal control over financial reporting. At that time, our

management may conclude that our internal control over financial reporting remains not effective. In

addition, our independent registered public accounting firm will be required to attest to the effectiveness

of our internal control over financial reporting. Even if our management concludes that our internal control

over financial reporting is effective, our independent registered public accounting firm, after conducting its

own independent testing, may disagree with our assessment and may issue a report that contains an

adverse opinion if, in their evaluation, there are deficiencies that, individually or in combination, result in

one or more material weaknesses.

KLARNA GROUP PLC191

See "Risk Factors—Risks Related to Our Business and Industry"— We may identify additional material

weaknesses in the future or otherwise fail to maintain an effective system of internal controls."

KLARNA GROUP PLC192

**SELECTED STATISTICAL INFORMATION**

*The tables below set forth selected statistical information regarding our banking operations as* 

*required by subpart 1400 of Regulation S-K under the Securities Act ("Regulation S-K"). The statistical* 

*information presented below is derived from our audited consolidated financial statements, our unaudited* 

*interim condensed financial statements as well as our financial reporting and management information* 

*systems. The statistical information included below has been prepared by our management and has not* 

*been externally audited, reviewed or verified.* 

**Overview**

We are a leading global commerce network that provides our customers a broad range of payment

options:

• **Pay in Full**. Pay in Full instantly settles purchases at the time of the transaction. Payment methods

vary by market and may include direct debit from bank accounts, credit and debit card or digital wallets.

• **Pay Later**. Pay Later enables consumers to purchase goods or services at the time of the

transaction and pay the full amount at a later date. The most common version of Pay Later is Pay in 30,

where the consumer pays 30 days after purchase. We also offer Pay Later as Pay in "N," which allows the

consumer to split their purchase into multiple installments which begin with a first payment when a

purchase is initially made. The most common installment plans are Pay in 3, when installments are paid

every 30 days, or Pay in 4, when installments are paid every 14 days. All of our Pay Later products are

designed to be fee- and interest-free for the consumer. As a result, Klarna pays the merchant on behalf of

the consumer when the order is placed and, generally, our consumers do not pay a fee or interest, with our

fees being generated from merchants who offer the payment method.

• **Fair Financing**. Fair Financing allows consumers to pay for their purchase over a longer duration.

Consumers typically pay interest for this payment method and durations range from three to 48 months.

The table below shows the relative breakdown of our GMV among our payment options for the periods

presented:

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| | | | |
|:---|:---|:---|:---|
|  | **For the Year Ended December 31,** | **For the Year Ended December 31,** | **For the Year Ended December 31,** |
|  | **2025** | **2024** | **2023** |
| **Pay in Full** .................................................................................................... | 11% | 16% | 21% |
| **Pay Later** .................................................................................................... | 80% | 79% | 75% |
| **Fair Financing** ............................................................................................. | 9% | 5% | 4% |

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____________

Note: Data in the table above excludes GMV generated through KCO unbranded channels.

We have operated as a fully licensed bank since 2017, when the SFSA approved our application for a

bank license. We conduct our operations through Klarna Bank, its branches and subsidiaries, and are

currently active in 26 countries. In all of our active markets, we extend short-term consumer credit by

offering Pay Later and/or Fair Financing payment options to our consumers. In addition, we currently offer

savings accounts directly to residents of Sweden, Germany, Austria, the Netherlands, Finland, France,

Belgium, Spain, Ireland, Italy and Portugal. We also raise deposits in Germany, the Netherlands, France,

Spain and Ireland pursuant to a partnership with a third-party platform operated by Raisin. In addition, we

also offer the Klarna card in Sweden, Germany, the U.K. and the United States.

In most of our active markets we maintain one or more corporate offices. See "Business—Facilities."

We do not have any retail locations or branches and all of products and offerings are available online.

KLARNA GROUP PLC193

Although we take deposits from, and extend credit to, our consumers, unlike traditional banks, we

generate our revenue mostly from our merchants and the fees they pay when consumers use our network

for making purchases. At the same time, the loans that we extend to our consumers are mostly non-

interest bearing and, as such, interest income (which we define as income we earn when consumers

choose to spread the cost of transactions over time with one of our interest-bearing financing products,

such as Fair Financing or delay the cost of transactions with our payment flexibility features) does not

constitute the main portion of our overall revenue. For example, in 2024, interest income accounted for

27% of our total revenue. As a result, our net interest income, net interest margin (calculated as net

interest income as a percent of average interest-earning assets) and other similar measures of

performance commonly used in the banking industry and presented elsewhere in this section as required

by subpart 1400 of Regulation S-K may not be indicative of the overall performance of our business and, as

such, may be of limited value in evaluating our financial performance as compared to our peers and

competitors.

Domestic assets and liabilities refer to those of Klarna Inc., our U.S. operating subsidiary, while

international assets and liabilities represent those of our various non-U.S. operating subsidiaries.

**Average Balance Sheet and Interest Information**

The table below sets forth the average balances of our interest-earning assets and interest-bearing

liabilities, other assets and liabilities, the interest generated from such assets and liabilities and average

return rate for the periods indicated. Average balances are calculated using month-end figures, including

the prior year-end figures. The presentation of historical averages in this section on a daily basis would

involve unreasonable effort and expense. We do not believe that monthly averages present trends

materially different from those that would be presented by daily averages.

Average balance sheet

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** | **2023** | **2023** | **2023** |
| **(in $ millions, except for** <br>**percentages)**<br>| **Average**<br>**balance**<br>| **Interest** | **Average**<br>**yield/**<br>**rate**<br>**(in %)**<br>| **Average**<br>**balance**<br>| **Interest** | **Average**<br>**yield/**<br>**rate**<br>**(in %)**<br>| **Average**<br>**balance**<br>| **Interest** | **Average**<br>**yield/**<br>**rate**<br>**(in %)**<br>|
| **Assets** |  |  |  |  |  |  |  |  |  |
| Interest-earning deposits <br>with banks<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | $175 | $3 | 1.45% | $132 | $1 | 0.76% | $128 | $1 | 1.10% |
| International .............................. | 325 | 7 | 2.23% | 328 | 5 | 1.53% | 243 | 1 | 0.49% |
| Central bank funds sold |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 4526 | 75 | 1.66% | 3284 | 108 | 3.30% | 2036 | 45 | 2.21% |
| Securities purchased with <br>agreements to resell<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 15 | 0 | 1.97% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| Loans |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 3749 | 803 | 21.30% | 2667 | 531 | 19.90% | 2424 | 434 | 17.91% |
| Taxable investment <br>securities<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 1228 | 49 | 3.98% | 805 | 27 | 3.36% | 983 | 22 | 2.21% |
| Nontaxable investment <br>securities<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |

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KLARNA GROUP PLC194

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** | **Year ended December 31,** |
|  | **2025** | **2025** | **2025** | **2024** | **2024** | **2024** | **2023** | **2023** | **2023** |
| **(in $ millions, except for** <br>**percentages)**<br>| **Average**<br>**balance**<br>| **Interest** | **Average**<br>**yield/**<br>**rate**<br>**(in %)**<br>| **Average**<br>**balance**<br>| **Interest** | **Average**<br>**yield/**<br>**rate**<br>**(in %)**<br>| **Average**<br>**balance**<br>| **Interest** | **Average**<br>**yield/**<br>**rate**<br>**(in %)**<br>|
| Other short-term <br>investments<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 6 | 0 | 2.55% | 4 | 0 | 1.58% | 1 | 0 | 1.38% |
| **Total interest-earning assets** .. | **$10023** | **$937** | **9.35%** | **$7220** | **$672** | **9.31%** | **$5815** | **$503** | **8.66%** |
| Domestic .................................... | 175 | 2 | 1.35% | 132 | 1 | 0.76% | 128 | 1 | 1.10% |
| International .............................. | 9847 | 935 | 9.49% | 7088 | 671 | 9.47% | 5687 | 502 | 8.83% |
| All other assets | 7620 | 0 | 0.00% | 7200 | 0 | 0.00% | 6512 | 0 | 0.00% |
| Domestic .................................... | 1008 | 0 | 0.00% | 496 | 0 | 0.00% | 341 | 0 | 0.00% |
| International .............................. | 6613 | 0 | 0.00% | 6704 | 0 | 0.00% | 6171 | 0 | 0.00% |
| **Total domestic assets** .............. | **$1183** | **$2** | **0.20%** | **$628** | **$1** | **0.16%** | **$469** | **$1** | **0.30%** |
| **Total international assets** ........ | **16460** | **935** | **5.68%** | **13792** | **671** | **4.87%** | **11858** | **502** | **4.23%** |
| **Total assets** ............................... | **$17643** | **$937** | **5.31%** | **$14420** | **$672** | **4.66%** | **$12327** | **$503** | **4.08%** |
| **Liabilities** |  |  |  |  |  |  |  |  |  |
| Savings deposits |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | $2 | $0 | 0.00% | $0 | $0 | 0.00% | $0 | $0 | 0.00% |
| International .............................. | 12392 | (347) | (2.80)% | 9766 | (359) | (3.68)% | 7910 | (203) | 2.57% |
| Other time deposits |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| Central bank funds <br>purchased<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| Securities sold with <br>agreements to repurchase<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. |  | 0 | 0.00% | 1 | 0 | (3.73)% | 21 | 0 | 0.72% |
| Commercial paper |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 46 | (1) | (2.68)% | 37 | (1) | (3.91)% | 20 | (1) | 5.01% |
| Other short-term debt |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 76 | (1) | (1.49)% | 87 | (1) | (1.33)% | 32 | (1) | 4.60% |
| International .............................. | 630 | (34) | (5.35)% | 442 | (20) | (4.55)% | 396 | (16) | 4.15% |
| Long-term debt |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0.00% | 0 | 0 | 0.00% | 0 | 0 | 0.00% |
| International .............................. | 407 | (29) | (7.10)% | 226 | (22) | (9.92)% | 168 | (9) | 5.56% |
| **Total interest-bearing** <br>**liabilities** .....................................<br>| **$13554** | **$(412)** | **3.04%** | **$10559** | **$(405)** | **3.83%** | **$8547** | **$(230)** | **2.71%** |
| Domestic .................................... | 78 | (1) | 1.45% | 87 | (1) | 1.33% | 32 | (1) | 4.60% |
| International .............................. | 13476 | (411) | 3.05% | 10472 | (403) | 3.85% | 8515 | (229) | 2.70% |
| All other liabilities | 1605 | 0 | 0.00% | 1556 | 0 | 0.00% | 1499 | 0 | 0.00% |
| Domestic .................................... | 237 | 0 | 0.00% | 173 | 0 | 0.00% | 241 | 0 | 0.00% |
| International .............................. | 1368 | 0 | 0.00% | 1384 | 0 | 0.00% | 1258 | 0 | 0.00% |
| **Total domestic liabilities** .......... | **$315** | **$(1)** | **0.36%** | **$260** | **$(1)** | **0.45%** | **$273** | **$(1)** | **0.53%** |
| **Total international liabilities** .... | **14844** | **(411)** | **2.77%** | **11855** | **(403)** | **3.40%** | **9773** | **(229)** | **2.35%** |
| **Total liabilities** ........................... | **$15159** | **$(412)** | **2.72%** | **$12116** | **$(405)** | **3.34%** | **$10046** | **$(230)** | **2.30%** |

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KLARNA GROUP PLC195

Analysis of changes in interest and similar income and interest expense

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **2025** | **For the year ended December**<br>**31, 2025 compared to the year**<br>**ended December 31, 2024** | **For the year ended December**<br>**31, 2025 compared to the year**<br>**ended December 31, 2024** | **For the year ended December**<br>**31, 2025 compared to the year**<br>**ended December 31, 2024** | **2024** | **For the year ended December**<br>**31, 2024 compared to the year**<br>**ended December 31, 2023**  | **For the year ended December**<br>**31, 2024 compared to the year**<br>**ended December 31, 2023**  | **For the year ended December**<br>**31, 2024 compared to the year**<br>**ended December 31, 2023**  | **2023** |
| **(in $ millions, except for** <br>**percentages)**<br>| **Amount** | **Net**<br>**change**<br>| **Change**<br>**due to**<br>**volume**<br>| **Change**<br>**due to**<br>**rate**<br>| **Amount** | **Net**<br>**change**<br>| **Change**<br>**due to**<br>**volume** <br>| **Change**<br>**due to**<br>**rate**<br>| **Amount** |
| **Interest and similar income:** |  |  |  |  |  |  |  |  |  |
| Interest-earning deposits <br>with banks<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | $2 | $1 | $0 | $0 | $1 | $0 | $0 | $0 | $1 |
| International .............................. | 7 | 2 | 0 | 2 | 5 | 4 | 0 | 3 | 1 |
| Central bank funds sold |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | 75 | (33) | 29 | (62) | 108 | 63 | 28 | 36 | 45 |
| Securities sold with <br>agreements to repurchase<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Loans |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | 798 | 267 | 114 | 152 | 532 | 98 | 44 | 54 | 434 |
| Taxable investment <br>securities<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | 49 | 19 | 6 | 14 | 29 | 3 | (5) | 8 | 27 |
| Nontaxable investment <br>securities<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Other short-term <br>investments<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. |  |  |  |  |  |  |  |  |  |
| **Total domestic interest and** <br>**similar income** ...........................<br>| **$2** | **$0** | **$0** | **$0** | **$1** | **$0** | **$0** | **$0** | **$1** |
| **Total international interest** <br>**and similar income** ....................<br>| **$929** | **$255** | **$149** | **$106** | **$674** | **$168** | **$67** | **$101** | **$507** |
| **Total interest and similar** <br>**income** .......................................<br>| **$931** | **$256** | **$149** | **$106** | **$675** | **$167** | **$67** | **$100** | **$508** |
| **Interest expense:** |  |  |  |  |  |  |  |  |  |
| Savings deposits |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 |
| International .............................. | (348) | 12 | (37) | 49 | (360) | (155) | (69) | (86) | (205) |
| Other time deposits |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Central bank funds <br>purchased<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Securities purchased with <br>agreements to resell<br>|  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Commercial paper |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |

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KLARNA GROUP PLC196

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| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | **2025** | **For the year ended December**<br>**31, 2025 compared to the year**<br>**ended December 31, 2024** | **For the year ended December**<br>**31, 2025 compared to the year**<br>**ended December 31, 2024** | **For the year ended December**<br>**31, 2025 compared to the year**<br>**ended December 31, 2024** | **2024** | **For the year ended December**<br>**31, 2024 compared to the year**<br>**ended December 31, 2023**  | **For the year ended December**<br>**31, 2024 compared to the year**<br>**ended December 31, 2023**  | **For the year ended December**<br>**31, 2024 compared to the year**<br>**ended December 31, 2023**  | **2023** |
| **(in $ millions, except for** <br>**percentages)**<br>| **Amount** | **Net**<br>**change**<br>| **Change**<br>**due to**<br>**volume**<br>| **Change**<br>**due to**<br>**rate**<br>| **Amount** | **Net**<br>**change**<br>| **Change**<br>**due to**<br>**volume** <br>| **Change**<br>**due to**<br>**rate**<br>| **Amount** |
| International .............................. | (1) | 0 | (1) | 2 | (1) | 0 | (1) | 1 | (1) |
| Other short-term debt |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 1 | (1) | 2 | (1) | 0 | (1) | 2 | (1) |
| International .............................. | (34) | (11) | (23) | 11 | (23) | (1) | (21) | 20 | (21) |
| Long-term debt |  |  |  |  |  |  |  |  |  |
| Domestic .................................... | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| International .............................. | (29) | (6) | (22) | 16 | (22) | (13) | (9) | (4) | (9) |
| **Total domestic interest** <br>**expense** .....................................<br>| **$0** | **$1** | **$(1)** | **$2** | **$(1)** | **$0** | **$(1)** | **$2** | **$(1)** |
| **Total international interest** <br>**expense** .....................................<br>| **$(412)** | **$(5)** | **$(83)** | **$78** | **$(406)** | **$(170)** | **$(100)** | **$(69)** | **$(236)** |
| **Total interest expense** ............. | **$(412)** | **$(4)** | **$(84)** | **$80** | **$(407)** | **$(169)** | **$(101)** | **$(67)** | **$(237)** |
| **Net change in net interest** <br>**income** .......................................<br>| **$520** | **$251** | **$65** | **$186** | **$268** | **$(2)** | **$(36)** | **$33** | **$271** |
| **Net interest income**<sup>(1)</sup> ................ | **$520** | **$0** | **$0** | **$0** | **$268** | **$0** | **$0** | **$0** | **$271** |
| Domestic .................................... | **1** |  |  |  | **0** |  |  |  | **0** |
| International .............................. | **519** |  |  |  | **268** |  |  |  | **271** |
| **Net interest margin**<sup>(2)</sup> ................. | **5.2%** |  |  |  | **3.71%** |  |  |  | **4.68%** |
| Domestic .................................... | **0.7%** |  |  |  | **(0.12)%** |  |  |  | **(0.04)%** |
| International .............................. | **5.3%** |  |  |  | **3.78%** |  |  |  | **4.8%** |

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<sup>1</sup> Net interest income is the difference between interest earned on interest-earning assets and interest paid on interest-bearing

liabilities.

<sup>2</sup> Net interest margin is calculated as net interest income as a percent of average interest-earning assets.

**Debt Securities**

Our total holdings in debt securities as of December 31, 2025 and December 31, 2024 was $1,518 million

and $454 million, respectively (at amortized cost).

The following tables present the approximate weighted average yields (based on amortized cost) by

maturity distribution of our investments in debt securities as of December 31, 2025 and December 31,

2024:

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **< 1 year** | **< 1 year** | **1-5 years** | **1-5 years** | **5-10 years** | **5-10 years** | **> 10 years** | **> 10 years** | **Total** | **Total** |
| **(in $ millions, except for** <br>**percentages)**<br>**December 31, 2025**<br>**Debt Security Category** | **Amount** | **Yield** | **Amount** | **Yield** | **Amount** | **Yield** | **Amount** | **Yield** | **Amount** | **Yield** |
| Central Banks ................ | $88 | 3.5% | $— | —% | $— | —% | $— | —% | $88 | 3.5% |
| Governments ................. | 109 | 1.9% | 50 | 2.3% |  |  |  |  | 159 | 2.0 |
| Municipalities ................ | 137 | 1.8% | 176 | 2.4% |  |  |  |  | 313 | 2.1 |
| Supranationals .............. | 272 | 2.1% | 159 | 2.3% |  |  |  |  | 431 | 2.2 |
| Covered Bonds ............. |  | —% | 58 | 2.5% |  |  |  |  | 58 | 2.5 |
| Corporates ..................... | 134 | 2.0% | 335 | 2.5% |  |  |  |  | 469 | 2.4 |
| **Total** ................................ | $740 | 2.0% | $778 | 2.4% | $— | —% | $— | —% | $1518 | 2.2% |

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KLARNA GROUP PLC197

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **< 1 year** | **< 1 year** | **1-5 years** | **1-5 years** | **5-10 years** | **5-10 years** | **> 10 years** | **> 10 years** | **Total** | **Total** |
| **(in $ millions, except for** <br>**percentages)**<br>**December 31, 2024**<br>**Debt Security Category** | **Amount** | **Yield** | **Amount** | **Yield** | **Amount** | **Yield** | **Amount** | **Yield** | **Amount** | **Yield** |
| Central Banks ................ | $42 | 0.00% | $— | 0.00% | $— | —% | $— | —% | $42 | 0.00% |
| Governments ................. | 12 | 0.17 |  | 0.00 |  |  |  |  | 12 | 0.17 |
| Municipalities ................ | 144 | 0.21 | 40 | 1.09 |  |  |  |  | 185 | 0.40 |
| Supranationals .............. | 140 | 1.65 | 66 | 0.53 |  |  |  |  | 206 | 1.29 |
| Covered Bonds ............. | 9 | 0.36 |  | 0.00 |  |  |  |  | 9 | 0.36 |
| Corporates ..................... |  | 0.00 |  | 0.00 |  |  |  |  |  | 0.00 |
| **Total** ................................ | $347 | 0.77% | $106 | 0.74% | $— | —% | $— | —% | $454 | 0.76% |

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**Loan Portfolio**

The tables below set forth our loan portfolio by maturity, together with the split between fixed and

floating interest rates for the loans, as of December 31, 2025 and December 31, 2024. We have included

our receivables related to non-interest bearing Pay Later loans under "Fixed rate loans" under the < 1 year

column.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **(in $ millions)**<br>**December 31, 2025**<br>**Consumer Loan Category** | <br>**< 1 year** | <br>**1-5 years** | <br>**5-15 years** | <br>**> 15 years** | <br>**Total** |
| Fair Financing ....................................... | $1893 | $2439 | $— | $— | $4332 |
| Pay Later ................................................ | $6127 | $— |  |  | 6127 |
| **Total** ....................................................... | **$8020** | **$2439** | **$—** | **$—** | **$10459** |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **(in $ millions)**<br>**December 31, 2025**<br>**Loan Category** | <br>**< 1 year** | <br>**1-5 years** | <br>**5-15 years** | <br>**> 15 years** | <br>**Total** |
| Fixed rate loans ..................................... | $8020 | $2439 | $— | $— | $10459 |
| Floating or adjustable rate loans ....... |  |  |  |  |  |
| **Total** ......................................................... | **$8020** | **$2439** | **$—** | **$—** | **$10459** |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **(in $ millions)**<br>**December 31, 2024**<br>**Loan Category** | <br>**< 1 year** | <br>**1-5 years** | <br>**5-15 years** | <br>**> 15 years** | <br>**Total** |
| Consumer loans .................................... | $6485 | $1656 | $— | $— | $8141 |
| **Total** ....................................................... | **$6485** | **$1656** | **$—** | **$—** | **$8141** |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **(in $ millions)**<br>**December 31, 2024**<br>**Loan Category** | <br>**< 1 year** | <br>**1-5 years** | <br>**5-15 years** | <br>**> 15 years** | <br>**Total** |
| Fixed rate loans .................................... | $6485 | $1656 | $— | $— | $8141 |
| Floating or adjustable rate loans ...... |  |  |  |  |  |
| **Total** ....................................................... | **$6485** | **$1656** | **$—** | **$—** | **$8141** |

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As of December 31, 2025 and December 31, 2024, we had $125 million and $274 million, respectively, in

consumer receivables from a legacy revolving credit portfolio. These legacy loans do not have fixed

maturities but we expect these to continue to be paid down over 1-5 years as borrowers make ongoing

minimum monthly payments.

KLARNA GROUP PLC198

**Allowance for Credit Losses**

The tables below set forth our total loans at period end, the average amount of loans during the period,

the amount of allowances for credit losses at period end, the ratio of our allowances for credit losses to

total loans outstanding at period end and the ratio of net charge-offs during the period to average loans

outstanding at period end, in each case, as of December 31, 2025, 2024, and 2023.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** |
| **(in $ millions, except for percentages)** | **Outstanding**<br>**amount at end** <br>**of**<br>**period**<br>| **Average**<br>**outstanding**<br>**amount during**<br>**period**<br>| **Allowance for**<br>**credit losses** <br>**at**<br>**end of period**<br>| **Ratio of**<br>**allowance for**<br>**credit losses** <br>**to**<br>**total loans**<br>**outstanding**<br>| **Ratio of net**<br>**charge-offs to**<br>**average loans**<br>**outstanding**<br>**during the**<br>**period**<sup>(1)</sup><br>|
| Fair Financing ......................................... | $4604 | $3845 | $(272) | (5.9)% | (6.5)% |
| Pay Later ................................................. | 6347 | 5868 | (220) | (3.5)% | (6.4)% |
| **Total** ......................................................... | **$10951** | **$9712** | **$(492)** | **(4.5)%** | **(6.4)%** |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** |
| <br>**(in $ millions, except for percentages)** | **Outstanding**<br>**amount at end** <br>**of**<br>**period**<br>| **Average**<br>**outstanding**<br>**amount during**<br>**period**<br>| **Allowance for**<br>**credit losses** <br>**at**<br>**end of period**<br>| **Ratio of**<br>**allowance for**<br>**credit losses** <br>**to**<br>**total loans**<br>**outstanding**<br>| **Ratio of net**<br>**charge-offs to**<br>**average loans**<br>**outstanding**<br>**during the**<br>**period**<sup>(1)</sup><br>|
| Consumer loans ..................................... | $8473 | $8434 | $(332) | (3.9)% | (5.5)% |
| **Total** ......................................................... | **$8473** | **$8434** | **$(332)** | **(3.9)%** | **(5.5)%** |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** |
| <br>**(in $ millions, except for percentages)** | **Outstanding**<br>**amount at end** <br>**of**<br>**period**<br>| **Average**<br>**outstanding**<br>**amount during**<br>**period**<br>| **Allowance for**<br>**credit losses** <br>**at**<br>**end of period**<br>| **Ratio of**<br>**allowance for**<br>**credit losses** <br>**to**<br>**total loans**<br>**outstanding**<br>| **Ratio of net**<br>**charge-offs to**<br>**average loans**<br>**outstanding**<br>**during the**<br>**period**<sup>(1)</sup><br>|
| Consumer loans ..................................... | $8394 | $7763 | $(311) | (3.7)% | (5.9)% |
| **Total** ......................................................... | **$8394** | **$7763** | **$(311)** | **(3.7)%** | **(5.9)%** |

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<sup>1</sup> Ratio of net charge-offs to average loans outstanding during the period is calculated by dividing the net charge-offs during a

period by the average loans outstanding during that period.

The increase in our consumer loans as of December 31, 2025 as compared to December 31, 2024 and

December 31, 2023, resulted from the growth in our GMV. At the same, our allowance for credit losses has

decreased year over year as a result of the increased maturity of our underwriting models from further

scaling up our operations, including in the United States and U.K.

**Deposits**

We currently offer savings accounts directly to residents of Sweden, Germany, Austria, the

Netherlands, Finland, France, Belgium, Spain, Ireland, Italy and Portugal. We also raise deposits in Germany,

the Netherlands, France, Spain and Ireland pursuant to a partnership with a third-party platform operated

by Raisin. We do not take deposits in the United States, including interest-bearing deposits. We currently

do not maintain the necessary banking licenses to take U.S. deposits. To the extent that our customers,

including our customers in the United States, utilize our Klarna balance solution or maintain deposits with

KLARNA GROUP PLC199

any of our bank partners in connection with their use of our solutions, products and services, such funds

do not constitute our deposits and, as a result, are not reflected in the tables below.

The tables below set forth deposit balances as of December 31, 2025, 2024, and 2023.

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** | **As of December 31, 2025** |
| **(in $ millions)** | **Balance** | **Foreign** | **Rate** | **Uninsured** |
| Consumer deposits ............................................................. | $13003 | $13003 | 2.4% | $681 |
| **Total** ....................................................................................... | **$13003** | **$13003** | **2.4%** | **$681** |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** | **As of December 31, 2024** |
| **(in $ millions)** | **Balance** | **Foreign** | **Rate** | **Uninsured** |
| Consumer deposits ............................................................. | $9510 | $9510 | 3.8% | $437 |
| **Total** ....................................................................................... | **$9510** | **$9510** | **3.8%** | **$437** |

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| | | | | |
|:---|:---|:---|:---|:---|
|  | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** | **As of December 31, 2023** |
| **(in $ millions)** | **Balance** | **Foreign** | **Rate** | **Uninsured** |
| Consumer deposits ............................................................. | $9478 | $9478 | 2.4% | $320 |
| **Total** ....................................................................................... | **$9478** | **$9478** | **2.4%** | **$320** |

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Our consumer deposits in the year ended December 31, 2025 increased by 3,493, or 36.7% , compared

to 2024, in order to support our GMV growth. While interest rates on our consumer deposits increased

from 2022 to 2024, primarily driven by the rising central bank interest rate environment in Europe, they

decreased by 1.4 percentage points during in the year ended December 31, 2025.

Our consumer deposits are subject to the Swedish Deposit Guarantee Scheme (the "Guarantee

Scheme"), as administered by the Swedish National Debt Office (Sw. *Riksgälden*). As of December 31, 2025

and December 31, 2024, approximately 95% and 96% of our deposits, respectively, were covered by the

Guarantee Scheme. The remainder of our deposits were not eligible for coverage under the Guarantee

Scheme because they were in excess of the applicable statutory coverage limit. We are required to pay an

annual fee to the Swedish National Debt Office, which is calculated based on the volume of guaranteed

deposits and the Swedish National Debt Office's assessment of our risk profile. We do not collect any time

deposits in the United States and as such, our deposits are not subject to the FDIC insurance limits.

The table below sets forth consumer deposit balances by geographic location as of December 31,

2025, and December 31, 2024, 2023 and 2022.

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| | | | |
|:---|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** | **As of December 31,** |
| **(in $ millions)** | **2025** | **2024** | **2023** |
| Germany ............................................................................................................... | $10209 | $7271 | $7169 |
| Sweden ................................................................................................................. | 643 | 752 | 1114 |
| Netherlands ......................................................................................................... | 1774 | 1306 | 1054 |
| Other countries .................................................................................................. | 377 | 181 | 141 |
| **Total** ..................................................................................................................... | **$13003** | **$9510** | **$9478** |

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KLARNA GROUP PLC200

The table below sets forth consumer deposit balances by source as of December 31, 2025, 2024, and

2023. ---

| | | | |
|:---|:---|:---|:---|
|  | **As of December 31,** | **As of December 31,** | **As of December 31,** |
| **(in $ millions)** | **2025** | **2024** | **2023** |
| Klarna Bank AB ................................................................................................. | $7679 | $5746 | $6475 |
| Third-party platforms ...................................................................................... | 5324 | 3764 | 3003 |
| **Total** ................................................................................................................... | **$13003** | **$9510** | **$9478** |

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KLARNA GROUP PLC201

**Item 6. Directors, Senior Management and Employees**

**Directors & Senior Management**

The following table sets forth the name, age and position of our executive officers and directors as of

December 31, 2025.

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| | | |
|:---|:---|:---|
| **Name** | **Age** | **Position(s)** |
| **Executive Officers** |  |  |
| Sebastian Siemiatkowski ............................................. | 43 | Chief Executive Officer and Director |
| David Fock ....................................................................... | 47 | Chief Product and Design Officer |
| Camilla Giesecke ........................................................... | 44 | Chief Operating Officer |
| Niclas Neglén .................................................................. | 47 | Chief Financial Officer and Director |
| David Sandström ............................................................ | 42 | Chief Marketing Officer |
| Yaron Shaer .................................................................... | 49 | Chief Technology Officer |
| David Sykes ..................................................................... | 41 | Chief Commercial Officer |
| **Non-Executive Directors** |  |  |
| Michael J. Moritz ............................................................ | 70 | Chairperson of the Board of Directors |
| Roger W. Ferguson, Jr. .................................................. | 73 | Director |
| Lise Kaae ......................................................................... | 55 | Director |
| Omid R. Kordestani ........................................................ | 61 | Director |
| Andrew Reed .................................................................. | 35 | Director |
| Sarah Smith ..................................................................... | 66 | Director |
| Mateusz Staniszewski ................................................... | 30 | Director |
| Markus Villig .................................................................... | 31 | Director |

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The following is a brief summary of the business experience of our executive officers and directors.

Unless otherwise indicated, their current business address is 10 York Road, London SE1 7ND, United

Kingdom.

**Executive Officers**

***Sebastian Siemiatkowski*** is one of our co-founders. He has served as a member of our board of

directors since February 2005 and as our Chief Executive Officer since February 2005. Mr. Siemiatkowski

served as an advisory board member of SSE Business Lab, the startup incubator of the Stockholm School

of Economics, from May 2015 to June 2019. Mr. Siemiatkowski holds an M.Sc. in Economics and Business

from the Stockholm School of Economics.

***David Fock*** has served as our Chief Product and Design Officer since February 2015. He joined Klarna in

August 2010 and prior to his current role held various positions in design and sales, most recently as our

Vice President of Product, Commerce. Prior to that, from January 2008 to May 2010, Mr. Fock founded and

operated HML Systems AB, an online retailer, and served as the chief executive officer of Clarion Bilstereo

AB, a distributor of electronic products, from January 2006 to December 2007.

***Camilla Giesecke*** has served as our Chief Operating Officer since August 2022. She joined Klarna in

February 2017 and held various leadership positions prior to her current role, most recently as our Chief

Expansion Officer. From August 2006 through January 2017, Ms. Giesecke served as an investment

professional at Investor AB, a Swedish investment firm, and in various leadership roles at its portfolio

companies, such as Permobil AB, a medical equipment manufacturer, and Saab AB, a Swedish aerospace

and defense company. Prior to that, Ms. Giesecke worked as an M&A analyst at J.P. Morgan Chase & Co. in

London, United Kingdom. She holds an M.Sc. in Economics and Business Administration from the

Stockholm School of Economics.

KLARNA GROUP PLC202

***Niclas Neglén*** has served as our Chief Financial Officer since March 2021 and as a member of our board

of directors since February 2025. From April 2016 to March 2021, he held various leadership positions at

HSBC Private Bank, the private banking business of the HSBC Group, including as the chief operating

officer for the EMEA region. Prior to that, from January 2003 to April 2016, Mr. Neglén served in various

roles at GE Capital, a financial services company, including as the chief financial officer of its U.K. business.

He holds an M.Sc. in Economics and Business Administration from the Stockholm School of Economics.

***David Sandström*** has served as our Chief Marketing Officer since June 2017. Since May 2017, he has

been a partner and a member of the board of directors at Add Health Media AB, a media and

communications company, and since July 2017, a partner at Bellbird AB, a communication agency. Prior to

that, from April 2012 to October 2016, Mr. Sandström served as the chief executive officer and a partner at

DDB Stockholm AB, a digital marketing agency. He holds an M.B.A. in Communication from the Stockholm

School of Economics.

***Yaron Shaer*** has served as our Chief Technology Officer since March 2022. He previously served as our

interim Chief Information Security Officer from February to September 2024 and as our Co-Chief

Technology Officer from January to March 2022, when he assumed his current role. Mr. Shaer joined

Klarna in June 2014 and prior to his current role held various engineering positions, most recently as our

Vice President of Engineering. Prior to that, he served in various software and technical managerial roles at

Camelot Strategic Solutions Limited, a consumer services company, from December 2011 to June 2014,

Nokia Corporation, a multinational telecommunications and technology company, from May 2007 to

December 2011, and Barclays Capital (now Barclays Corporate and Investment Bank), the investment

banking business of Barclays plc, a multinational universal bank, from July 2006 to April 2007. Mr. Shaer is

ISEB certified in Software Testing and holds a B.Tech. in Software Engineering and Management from Tel

Aviv Academic college of Engineering (in cooperation with Tel-Aviv University).

***David Sykes*** has served as our Chief Commercial Officer since June 2022. He has been with Klarna

since October 2019, having also served as Head of Klarna U.S. Prior to that, from September 2017 to

September 2019, Mr. Sykes served as the chief operating officer of QuadPay (now ZIP Co US Inc.), a

financial services company. He holds a B.A. in International Relations and an L.L.B. in Public International

Law, both from the Australian National University.

**Non-Executive Directors**

***Sir Michael J. Moritz KBE*** has served as a member of our board of directors since July 2010 and as the

Chairperson of our board of directors since December 2020. He is a member of the Remuneration and

Nomination Committee. He currently serves as Senior Advisor to Sequoia Heritage, a private investment

partnership, and from 1986 to July 2023, he served as a partner at Sequoia Capital, a venture capital firm.

In addition to our board of directors, Mr. Moritz currently serves on the boards of directors of Maplebear

Inc. (doing business as Instacart), a delivery company, and several private companies, including Formation

Bio, Inc., a pharmaceutical company. He previously served on the boards of directors of, among others,

LinkedIn Corporation, a professional networking company, Green Dot Corporation, a financial technology

company, PayPal Holdings, Inc., a digital payments company, Alphabet Inc., a multinational technology

conglomerate, and Yahoo!, Inc., a web services provider. Mr. Moritz also serves as chairman of Crankstart.

He holds a bachelor's degree in History from Christ Church, University of Oxford, and an MBA from the

Wharton School at the University of Pennsylvania.

***Roger W. Ferguson, Jr.*** has served as a member of our board of directors since May 2021. He is a

member of the Audit Committee. He has been a partner and the chief investment officer and chairman of

the Investment Committee of Red Cell Partners, an incubation and venture capital enterprise focused on

the healthcare and defense sectors, since August 2022. Mr. Ferguson served as the president and chief

executive officer of TIAA, a financial services company, from April 2008 to April 2021. From 2006 to 2008,

he served as the chairman of Swiss Re America Holding Corporation, head of financial services and a

member of the executive committee of Swiss Re, a global reinsurance company. Prior to that, Mr. Ferguson

was a member of the Board of Governors of the U.S. Federal Reserve System from 1997 to 2006 and

KLARNA GROUP PLC203

served as its vice chairman from 1999 to 2006. He also worked as an associate and partner at McKinsey &

Company, a global management consulting firm, from 1984 to 1997. Mr. Ferguson began his career as an

attorney at the New York City office of Davis Polk & Wardwell LLP. In addition to our board of directors, Mr.

Ferguson has served as a member of the boards of directors of Alphabet Inc., a multinational technology

conglomerate, since June 2016, where he serves as chair of the audit committee, International Flavors &

Fragrances, Inc., a creator of flavors and fragrances, from April 2010 through April 2025, where he served

as chair of the board of directors, and Corning Incorporated, a manufacturing company, since April 2021.

Mr. Ferguson currently serves on the boards of the Norton Museum and the Memorial Sloan Kettering

Cancer Center. He is a fellow of the American Philosophical Society and the American Academy of Arts &

Sciences and is a member of the Smithsonian Institution's Board of Regents, the Economic Club of New

York, the Council on Foreign Relations and the Group of Thirty. Mr. Ferguson holds a B.A. in Economics, a

J.D., and a Ph.D. in Economics, all from Harvard University.

***Lise Kaae*** has served as a member of our board of directors since December 2020. She does not

currently serve on any committee of the Board. She has served as the chief executive officer of

HEARTLAND A/S, a holding and investment company, since August 2017. Ms. Kaae previously served as the

chief financial officer of BESTSELLER A/S, a fashion company, from May 2008 to July 2017. Prior to that,

she worked in various roles at entities affiliated with PricewaterhouseCoopers International Limited, an

accounting firm, from August 1992 to April 2008, most recently as a partner. In addition to our board of

directors, Ms. Kaae has served as a member of the boards of directors of Novonesis A/S, an international

biotechnology company, since March 2024, of BESTSELLER A/S, since November 2017, of Normal A/S, a

Danish retail chain, since October 2014, and of VKR HOLDING A/S, a holding company, since March 2020,

and currently serves as a managing director and/or member of the board of directors of several

subsidiaries within, and affiliates of, the Heartland group. She holds an MSc in Business Economics and

Auditing from the Aarhus School of Business.

***Omid R. Kordestani*** has served as a member of our board of directors since December 2020. He serves

as Chair of the Remuneration and Nomination Committee and is a member of the Audit Committee. He

previously served as the executive chairman of Twitter, Inc. (now X Corp.), a social networking company,

from October 2015 to June 2020, and as a member of its board of directors until October 2022. Prior to

that, he worked in various leadership roles at Alphabet Inc., a multinational technology conglomerate, from

May 1999 to April 2009 and then again from August 2014 to October 2015, most recently as Chief Business

Officer. In addition to our board of directors, Mr. Kordestani has served as a member of the board of

directors of Pearson, plc, a learning company, since April 2022, and as its chairman since May 2022. He

holds a B.S. from San Jose State University and an M.B.A. with a focus on Organizational Leadership from

Stanford University.

***Andrew Reed*** has served as a member of our board of directors since March 2024. He is a member of

the Remuneration and Nomination Committee. Mr. Reed is a Partner at Sequoia Capital, a venture capital

firm, which he joined in February 2014. In addition to our board of directors, Mr. Reed serves as a member

of the board of directors of Figma, Inc., a design platform, since February 2024, and of several private

companies, including Vanta Inc., a security and compliance automation company, since April 2021, Bolt

Technology OÜ, a mobility and delivery company, since January 2022, and Strava, Inc., a social networking

company for athletes, since November 2023. He holds a B.A. in Economics and Classics from Amherst

College.

***Sarah Smith*** has served as a member of our board of directors since December 2020. She serves as

Chair of the Audit Committee and is a member of the Remuneration and Nomination Committee. She

previously worked at The Goldman Sachs Group, Inc. ("Goldman Sachs"), a global financial firm. Ms. Smith

joined Goldman Sachs in 1996 and was named a managing director in 1998 and a partner in 2002. During

her tenure, Ms. Smith served as the controller and chief accounting officer of the firm until 2017 and

subsequently as the chief compliance officer from 2017 to 2020. She then served as a senior advisor to

Goldman Sachs from 2020 until her retirement in 2021. In addition to our board of directors, Ms. Smith has

served as a member of the board of directors of Aon plc, a global insurance company, since April 2023, Via

Transportation, Inc., a re-engineering public transit company, since June 2021 which has gone public in

KLARNA GROUP PLC204

September 2025, and 98point6 Inc., a healthcare software company, from February 2021 to March 2024.

She has also served as a member of the board of trustees of the Financial Accounting Foundation, the

parent organization of the Financial Accounting Standards Board and the Governmental Accounting

Standards Board, since January 2021 and until December 2025, and has served as a trustee of the Nuveen

Churchill Private Capital Income Fund since April 2022. Ms. Smith holds a Dip. in Accounting from the City

of London University and is a fellow of the Institute of Chartered Accountants in England and Wales.

***Mateusz Staniszewski*** has served as a member of our board of directors since May 2025. He does not

currently serve on any committee of the Board. He is the chief executive officer of Eleven Labs Inc.

("ElevenLabs"), a software company specialized in advanced voice synthesis technology, which he co-

founded in January 2022. Prior to founding ElevenLabs, Mr. Staniszewski worked at Palantir Technologies

Inc., a data analytics company that develops software platforms, from October 2018 to May 2022, at

BlackRock, Inc., an investment company, from July 2017 to August 2018, and at Opera Norway AS, an

internet company, from June 2014 to June 2016. Mr. Staniszewski holds a BSc in Mathematics from

Imperial College London.

***Markus Villig*** has served as a member of our board of directors since February 2025. He does not

currently serve on any committee of the Board. Mr. Villig is the chief executive officer of Bolt Technology

OÜ ("Bolt"), a mobility and delivery company, which he founded in 2013. Prior to starting Bolt, he studied

computer science at University of Tartu.

**Family Relationships**

There are no family relationships among any of our executive officers or directors.

KLARNA GROUP PLC205

**EXECUTIVE AND DIRECTOR REMUNERATION**

**Remuneration of Directors and Officers**

English Law does not require us to disclose compensation paid to members of senior management

who are not directors on an individual basis. We disclose the remuneration of our Chief Executive Officer

and other directors in accordance with applicable UK requirements. Our executive officers and certain of

our directors receive a combination of fixed and variable compensation. Accordingly, we have elected to

follow English Law disclosure practices with respect to executive compensation.

The information below sets out the remuneration of our executive directors and certain executive

officers, including aggregate compensation expenses and details of our equity incentive plans.

**Summary Remuneration Table**

The following table sets forth information concerning the components of remuneration of the current

members of our board of directors for the year ended December 31, 2025.

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| **(in $ millions)** | **Salary** | **Bonus** | **Fixed Equity** | **Variable** <br>**equity**<br>| **Other** <br>**benefits**<br>| **Pension** <br>**expenses**<br>| **Total** |
| **Directors** |  |  |  |  |  |  |  |
| Michael J. Moritz | $0.1 | $— | $— | $1.5 | $— | $— | $1.6 |
| Roger W. Ferguson, Jr. | $0.2 | $— | $0.1 | $0.2 | $— | $— | $0.4 |
| Lise Kaae | $— | $— | $— | $1.5 | $— | $— | $1.5 |
| Omid R. Kordestani | $0.2 | $— | $— | $0.2 | $— | $— | $0.4 |
| Andrew Reed | $— | $— | $— | $1.5 | $— | $— | $1.5 |
| Sarah Smith | $0.2 | $— | $— | $0.2 | $— | $— | $0.4 |
| Markus Villig | $0.1 | $— | $— | $1.0 | $— | $— | $1.1 |
| Mati Staniszewski | $0.1 | $— | $— | $1.0 | $— | $— | $1.1 |
| Sebastian Siemiatkowski | $3.3 | $0.3 | $19.0 | $22.3 | $0.1 | $0.2 | $45.1 |
| Niclas Neglén | $1.5 | $— | $2.4 | $4.2 | $— | $— | $8.1 |
| **Total** .................................... | **5.7** | **$0.3** | **$21.4** | **33.5** | **$0.1** | **$0.2** | **$61.1** |

---

**Equity Compensation paid to Mr. Siemiatkowski**

Equity compensation awarded to Mr. Siemiatkowski in 2025, as approved by the Remuneration and

Nomination Committee, includes 17,505,672 Class C share options, vesting in equal annual installments

over a four-year period. Two Class C share options entitle the recipient to either one ordinary share or two

Class C shares, at Mr. Siemiatkowski's election. The weighted average exercise price, expressed as the

equivalent of one ordinary share, is $91.8 , representing a significant premium to the initial public offering

price of $40.00 per ordinary share. Accordingly, as of the date of this report, these options are

substantially out of the money and no value is realizable by Mr. Siemiatkowski unless and until the ordinary

share price exceeds the exercise price, at which point the interests of Mr. Siemiatkowski would be directly

aligned with those of shareholders who have similarly benefited from such share price appreciation. The

equity compensation amounts reported in the Summary Remuneration Table above reflect the grant-date

fair value of these awards as calculated in accordance with IFRS 2 and do not represent cash

compensation paid to, or value currently received by, Mr. Siemiatkowski. Mr. Siemiatkowski's acquisition of

Class C shares upon exercise of these options is subject to an annual limit of 1.5% of the number of issued

and outstanding ordinary shares on the last day of the preceding fiscal year, and total voting rights

attributable to all outstanding Class C shares may not at any time exceed 15% of total voting rights

outstanding immediately prior to the Company's initial public offering.

KLARNA GROUP PLC206

**Remuneration of Directors and Executive Officers**

For the year ended December 31, 2025, the aggregate remuneration paid to the current members of

our board of directors and our executive officers for services in all capacities, including retirement and

similar benefits, and equity awards, was $103.7 million.

**Remuneration Program**

The aim of our remuneration program is to both support our ability to attract and retain global talent in

every position at Klarna and promote equal and fair treatment, as well as to ensure that remuneration is

aligned with efficient risk management and compliant with applicable laws and regulations.

Our remuneration framework acknowledges the necessity of globally aligned, well-balanced, yet

differentiated executive compensation structures tailored to support Klarna's global footprint. It

emphasizes the importance of consistency with sound and efficient risk management practices, avoiding

excessive risk-taking and short-term profit pursuits that could impede our long-term objectives.

Additionally, where applicable, our remuneration program reflects the requirements of the Swedish

banking regulations applicable to Klarna.

**Remuneration and Nomination Committee**

We have established a Remuneration and Nomination Committee, which supports our board of

directors in establishing and reviewing the compensation and benefits strategy and guidelines as well as in

preparing the proposals to the annual general meeting of shareholders regarding the compensation of the

members of our board of directors and our executive officers. The committee may submit proposals to the

board of directors on other compensation-related matters. Our Remuneration and Nomination Committee

consists of Omid R. Kordestani, Andrew Reed, Michael J. Moritz and Sarah Smith, with Omid R. Kordestani

serving as chairperson.

**Remuneration Policy**

Our board of directors has adopted a Remuneration Policy that is designed to be compatible with, and

support, sound and effective risk management, avoid excessive risk-taking and promote our long-term

interests.

The Remuneration Policy and wider remuneration system are assessed annually. The assessment

includes an analysis of all key risks we are or might be exposed to, including the risks associated with our

Remuneration Policy and remuneration structure. The risk cycle in our credit business is assessed to be

short, which means that any risks typically materialize within a few months.

**Remuneration Structure**

We apply the following general principles on remuneration:

• remuneration shall be set on an individual basis, based on experience, competence and

performance;

• remuneration shall not be discriminating; and

• remuneration shall be competitive, but not counterproductive to our long-term goals and ability to

operate successfully throughout a full economic cycle.

Our remuneration structure comprises fixed remuneration and variable remuneration. We strive to

remain globally competitive with regard to the fixed and variable components while ensuring compliance

with the banking regulations in Sweden, where applicable.

KLARNA GROUP PLC207

Variable remuneration takes into consideration not only the employee's and their team's results but

also our financial results and performance, as well as qualitative criteria such as the employee's

compliance with our policies, rules and processes as well as applicable laws and regulations. It should be

based on results that are reflective of current and future risks. We aim to ensure that we can unilaterally

decrease or withdraw all or parts of the variable remuneration if the aforementioned criteria are not met or

if our results of operations, financial condition or future prospects have been materially adversely

affected.

**Executive Officer Agreements**

We have entered into written employment agreements with each of our executive officers. These

agreements generally provide for notice periods of 12 months (although some include a shorter notice

period or no notice period) for termination of the agreement by us or by the relevant executive officer,

generally during which time the executive officer will continue to receive base salary and benefits. These

agreements also contain customary provisions regarding non-competition, non-solicitation, non-

disparagement, confidentiality of information and/or assignment of inventions. However, the non-

competition and non-solicitation provisions may be unenforceable or otherwise limited under applicable

law.

**Directors' and Officers' Insurance**

We maintain directors' and officers' liability insurance covering our directors and executive officers for

acts performed in the course of their duties.

**Indemnification Agreements**

We have entered into indemnification agreements with each of our directors and executive officers.

These indemnification agreements provide our directors and executive officers with contractual rights to

indemnification and expense reimbursement to the fullest extent permitted by applicable law. We also

provided indemnification to such persons to the fullest extent permitted by law, for their service at our

request as directors or officers of any of our subsidiaries. A form of the indemnification agreement is filed

as an exhibit to this report on Form 20-F.

**Equity-Related Programs**

The following section provides an overview of the equity-based programs available to our employees

and certain third-party contributors. Certain of the equity-based instruments described below were issued

by our subsidiaries and/or convert into ordinary shares of our subsidiaries.

Employee Restricted Share Unit Program

Our Restricted Share Unit Program (the "RSU Program") was implemented in 2020. It is open to all

employees as well as certain third-party contributors and currently entails grants of RSUs under the

Omnibus Incentive Plan. Each participant is granted a set number of RSUs on the grant date, which

generally vest over a four-year staggered vesting schedule, with 25% of the shares vesting each year. If the

participant leaves Klarna, unvested RSUs are forfeited. Participants in the RSU Program who were granted

RSUs under the Omnibus Incentive Plan receive ordinary shares in Klarna Group plc upon vesting of those

RSUs. All other RSUs vest into shares of subsidiaries of Klarna Group plc, and, as a result, we plan to

periodically facilitate the exchange of these subsidiary shares issued upon vesting of those RSUs into

ordinary shares of Klarna Group plc. The number of shares distributed to our employees under the RSU

Program is approved by our board of directors.

Upon vesting, in accordance with certain countries' tax laws, we are required to withhold an amount to

settle the employee's tax associated with a share-based payment and transfer that amount in cash to

taxing authorities on the employee's behalf. Such amounts are withheld from our employees in

KLARNA GROUP PLC208

accordance with applicable laws, either through deduction of salary or withholding a number of vested

shares.

Share Warrants and Options

In certain jurisdictions, we offer share-based payments to certain individual contributors, including

employees as well as executive officers and directors, in the form of share warrants and options to

purchase ordinary shares. These awards are subject to staggered vesting over a term of typically four to

five years. Such awards were historically issued by Klarna Holding and certain of our other indirect

subsidiaries. One share warrant issued by a subsidiary of Klarna Group plc entitles the recipient to

purchase one ordinary share of Klarna Holding or of certain other of our indirect subsidiaries (such shares,

"subsidiary shares") at the agreed exercise price. One share option or warrant issued by Klarna Group plc

entitles the recipient to purchase one ordinary share in Klarna Group plc at the agreed adjusted exercise

price. Certain warrants and options have been acquired by individual contributors in exchange for a cash

payment of the fair market value measured at the grant date.

We have also granted warrants to acquire our ordinary shares or ordinary shares of certain of our

subsidiaries to select partners, including merchants and other service providers, in return for services. We

granted 15.7 million, 1.3 million and 1.2 million of such warrants to certain partners in the twelve months

ended months ended December 31, 2025 and in the years 2024 and 2023, respectively, of which

15,239,419 were outstanding as of the date of this report. Additionally, in the twelve months ended months

ended December 31, 2025, we granted 108,960 ordinary shares and 8,834,736 share options to acquire

ordinary shares to certain members of our management team.

The table below includes additional details regarding RSUs, share warrants and options, issued by

Klarna Group plc as of, and for the year ended, December 31, 2025. The Class C share options column

relates exclusively to options granted to Mr. Siemiatkowski under the C Share Awards Plan. Weighted

average exercise prices for Class C share options are expressed as the equivalent of one Class C share; as

described above, two Class C share options correspond to either one ordinary share or two Class C shares,

and the exercise price expressed as the equivalent of one ordinary share is double the per-Class-C-share

figures shown.

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| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Klarna Group plc RSU** <br>**program** | **Klarna Group plc RSU** <br>**program** | **Share warrants and options** <br>**issued by Klarna Group plc** | **Share warrants and options** <br>**issued by Klarna Group plc** | **Share options to acquire C** <br>**Class shares**<sup>2</sup> **issued by** <br>**Klarna Group plc** | **Share options to acquire C** <br>**Class shares**<sup>2</sup> **issued by** <br>**Klarna Group plc** |
| | **Number** | **Weighted** <br>**average fair** <br>**value at grant**<br>| **Number** | **Weighted** <br>**average** <br>**exercise** <br>**price**<sup>1</sup><br>| **Number** | **Weighted** <br>**average** <br>**exercise** <br>**price**<br>|
| **December 31, 2024 .................** | **—** | **$—** | **6100140** | **$46.0** | **—** | **$—** |
| Granted during the year ...... | 1026951 | 34.2 | 24909751 | 57.0 | 17505672 | 45.9 |
| Exercised during the year ... |  |  | (2400000) |  |  |  |
| Amended during the year <sup>3</sup> . |  |  | (1477164) | 38.2 | 2941236 | 19.1 |
| Forfeited during the year .... | (28044) | 34.0 |  |  |  |  |
| **December 31, 2025 .................** | **998907** | **$34.2** | **27132727** | **$60.6** | **20446908** | **$42.0** |

---

____________

<sup>1</sup> Where share options were granted in SEK, the input has been converted to USD using the average exchange rate for the period

for presentation purposes.

<sup>2</sup> Two Class C share options entitle the recipient to acquire, at the recipient's election, either one ordinary share or two Class C

shares. Class C shares carry enhanced voting rights. The acquisition of Class C shares upon exercise is subject to the limits described

under "Equity Compensation paid to Mr. Siemiatkowski" above. All Class C share options outstanding as of December 31, 2025 were

granted exclusively to Mr. Siemiatkowski.

<sup>3</sup> In 2025, the board of directors amended the terms of 1,477,164 share options originally granted to Mr. Siemiatkowski in the

fourth quarter of 2024 to allow such options to be exercised into 2,941,236 Class C shares (or 1,470,618 ordinary shares). The

amendment did not alter the original exercise price of the underlying options; the weighted average exercise price of $19.1, expressed

KLARNA GROUP PLC209

as the equivalent of one Class C share, reflects the conversion ratio under which two Class C share options correspond to one

ordinary share. There was no incremental fair value as a result of this amendment.

KLARNA GROUP PLC210

The table below includes additional details regarding RSUs and share warrants, issued by a subsidiary

of Klarna Group plc as of, and for the year ended, December 31, 2025:

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Legacy RSU program** | **Legacy RSU program** | **Share warrants issued by a** <br>**subsidiary of Klarna Group plc** | **Share warrants issued by a** <br>**subsidiary of Klarna Group plc** |
| | **Number** | **Weighted** <br>**average fair** <br>**value at grant**<br>| **Number** | **Weighted** <br>**average** <br>**exercise price**<br>|
| **December 31, 2024 ...........................................................** | **26411646** | **$4.5** | **2507534** | **$543.0** |
| Granted during the year ................................................. | 123335 | 10.1 |  |  |
| Released during the year ............................................... | (8225629) | 5.3 |  |  |
| Exercised during the year .............................................. |  |  | (90000) | 231.0 |
| Repurchased during the year ....................................... |  |  | (105646) | 441.0 |
| Amended during the year .............................................. |  |  |  |  |
| Forfeited during the year ............................................... | (3712137) | 5.0 | (84367) | 631.0 |
| **December 31, 2025 ...........................................................** | **14597215** | **$5.1** | **2227521** | **$605.0** |
| **Equivalent of Klarna Group plc Shares** | **3649304** | **$20.4** | **26730252** | **$50.4** |

---

____________

<sup>1</sup> Legacy RSUs granted in SEK have been converted to USD using the average exchange rate for each period for presentation

purposes.

<sup>2</sup> Where share warrants were granted in SEK, the input has been converted to USD using the average exchange rate for the

period for presentation purposes.

**2025 Omnibus Incentive Plan**

We adopted the Klarna Group plc 2025 Omnibus Incentive Plan (the "Omnibus Incentive Plan") on June

27, 2025. The Omnibus Incentive Plan has been used to grant awards of RSUs and vested shares prior to

this Company's initial public offering and will be used as our main share incentive plan for employees and

third-party contributors after initial public offering. The following summary describes the material terms of

the Omnibus Incentive Plan.

*Types of Awards*. Awards under the Omnibus Incentive Plan include share options, share appreciation

rights ("SARs"), restricted shares, RSUs, performance awards, other cash-based awards and other share-

based awards (collectively, the "Awards").

*Plan Administration*. The Omnibus Incentive Plan is administered by the Remuneration and Nomination

Committee of our board of directors, unless another committee is designated by our board of directors

(the "Remuneration Committee").

*Eligibility*. Our employees are eligible to be selected to participate in the Omnibus Incentive Plan. Our

non-employee directors, consultants, advisers, employees of record and other non-employee service

providers are eligible to be selected to participate in the non-employee plan of the Omnibus Incentive Plan

(the "Non-Employee Plan"). Except as otherwise specified, references below to the Omnibus Incentive Plan

include the Non-Employee Plan.

*Authorized Shares*. The total number of our ordinary shares authorized for issuance under the

Omnibus Incentive Plan prior to and after initial public offering will equal 10% of the number of ordinary

shares immediately outstanding following the completion of initial public offering on a fully diluted basis;

provided that the total number of ordinary shares available for issuance under the Omnibus Incentive Plan

shall be increased on the first day of each fiscal year following the effective date of the Omnibus Incentive

Plan in an amount equal to the least of (i) 5% of outstanding ordinary shares on the last day of the

immediately preceding fiscal year and (ii) such number of ordinary shares as determined by the board of

directors in its sole discretion.

KLARNA GROUP PLC211

*Share Options*. The Remuneration Committee is permitted to grant share options under the Omnibus

Incentive Plan. With respect to share options granted to a participant subject to U.S. federal income tax

law, the exercise price of a share option may not be less than 100% of the fair market value of a share on

the grant date (other than in the case of substitute Awards). Each share option will expire no later than the

tenth anniversary of the date the share option is granted.

*Share Appreciation Rights*. The Remuneration Committee is permitted to grant SARs under the

Omnibus Incentive Plan. With respect to SARs granted to a participant subject to U.S. federal income tax,

the exercise or hurdle price of a SAR may not be less than 100% of the fair market value of a share on the

grant date (other than in the case of substitute Awards). Each SAR will expire no later than the tenth

anniversary of the date the SAR is granted.

*Restricted Shares and Restricted Share Units*. The Remuneration Committee is permitted to grant

restricted shares and RSUs under the Omnibus Incentive Plan. A restricted share Award is an award of

ordinary shares that is subject to restrictions on transfer and a substantial risk of forfeiture. An RSU is an

Award that is granted with respect to one ordinary share or has a value equal to the fair market value of

one such share. RSUs shall be settled in ordinary shares except that where the Remuneration Committee

determines otherwise, in which case, RSUs may be paid in cash equal to the fair market value of the shares

in respect of which the RSUs are settled.

*Performance Awards*. The Omnibus Incentive Plan permits the grant of performance-based share

Awards. The Remuneration Committee may structure Awards so that ordinary shares will be issued only

following the achievement of certain pre-established performance goals during a designated performance

period determined by the Remuneration Committee. Performance Awards shall be settled in ordinary

shares except that where the Remuneration Committee determines otherwise, in which case, performance

Awards may be paid in cash equal to the fair market value of the shares in respect of which the

performance Awards are settled.

*Other Cash-Based and Other Share-Based Awards*. The Remuneration Committee is permitted to

grant other equity or equity-based Awards and cash-based Awards on such terms and conditions as the

Committee determines and such Awards may or may not require vesting or any other terms or conditions

and can take the form of fully-vested shares, if so determined by the Remuneration Committee. For

Awards in the nature of a purchase right, the purchase price shall not be less than the fair market value of

such ordinary shares on the date of grant of such right in respect of any such Award granted to a

participant subject to U.S. federal income tax law.

*Changes in Capitalization*. In the event the Remuneration Committee determines that, as a result of a

change affecting the Company or its securities, an adjustment is necessary in order to prevent undue

enrichment or harm, the Remuneration Committee will equitably adjust any or all of (i) the number and

type of ordinary shares that thereafter may be made the subject of Awards under the Omnibus Incentive

Plan (including the share limit) and (ii) the terms of any outstanding Award, including the exercise price and

the number or type of ordinary shares or other securities of the Company or other property subject to

outstanding Awards.

*Effect of Termination of Service or a Change in Control.* The Remuneration Committee may provide, by

rule or regulation or in any applicable Award agreement, or may determine in any individual case, an Award

may be exercised, settled, vested, paid or forfeited in the event of a participant's termination of service

prior to the vesting, exercise or settlement of such Award.

In the event of a change in control of the Company, the Remuneration Committee may take any one or

more of the following actions with respect to any outstanding Award: (i) continuation, (ii) substitution or

replacement, (iii) acceleration of the vesting and the lapse of any restrictions either immediately prior to or

after the change in control or upon termination of service under certain circumstances following the

change in control and, in the case of a performance Award, the determination of the level of attainment of

KLARNA GROUP PLC212

the applicable performance condition(s), and (iv) cancellation of such Award in consideration of a payment

or, in certain circumstances, for no consideration.

Awards granted under the Omnibus Incentive Plan may be subject to acceleration of vesting and

exercisability upon or after a change in control as may be provided in the applicable Award agreement or

in any other written agreement between the Company or any of its subsidiaries and the participant.

*Clawback*. Under the Omnibus Incentive Plan, Awards (including any amounts or benefits arising from

such Awards) will be subject to any clawback or recoupment arrangements or policies we may have in

place from time to time, and the Remuneration Committee may, to the extent permitted by applicable law

and stock exchange rules or by any applicable company policy or arrangement, and will, to the extent

required, cancel or require reimbursement of any Awards or any shares issued or cash received upon

vesting, exercise or settlement of any such Awards or sale of shares underlying such Awards, including any

policies necessary to comply with Section 10D of the Exchange Act and any rules promulgated thereunder

and any other regulatory regimes.

*Amendment*. Except to the extent prohibited by applicable law and unless otherwise expressly

provided in an Award agreement or in the Plan, our board of directors may amend, alter, suspend,

discontinue or terminate the Omnibus Incentive Plan or any portion thereof at any time; provided that no

such amendment, alternation, suspension, discontinuation or termination shall be made without

(i) shareholder approval if such approval is required by applicable law or the rules of the stock market or

exchange on which the shares are principally quoted or trade, or (ii) subject to limitations, the consent of

the affected participant of the Omnibus Incentive Plan if such action would materially adversely affect the

rights of such participant under any outstanding Award.

*Repricing*. Our board of directors may, without shareholder approval, seek to effect any re-pricing of

any previously granted "underwater" share options, SARs or similar Award, including (i) amending or

modifying the terms of the share options, SARs or similar Awards to lower the exercise price, (ii) cancelling

the underwater share options, SARs or similar Awards and granting (A) replacement share options, SARs or

similar Awards having a lower exercise price or (B) restricted shares, RSUs, performance Awards or other

share-based Awards in exchange, or (iii) cancelling or repurchasing the underwater share options, SARs or

similar Awards for cash or other securities.

*Term*. No Award may be granted under the Omnibus Incentive Plan after the tenth anniversary of its

adoption. Previously granted Awards are permitted to extend beyond the termination date of the Omnibus

Incentive Plan.

*Jurisdictional Modifications*. The Remuneration Committee may modify awards or establish sub-plans

or procedures to address differences in laws, rules, regulations or customs of such international

jurisdictions with respect to tax, securities, currency, employee benefit or other matters or to enable

awards to be granted in compliance with a tax favorable regime that may be available in any jurisdiction.

*Non-Employee Plan*. The Non-Employee Plan governs equity awards granted to our non-employee

directors, consultants, advisers, employees of record and other non-employee service providers and

generally provides for awards to be made on identical terms to awards made under the Omnibus Incentive

Plan.

*C Share Awards Plan. The C Share Awards Plan is part of the Omnibus Incentive Plan and is designed* 

*to align Mr. Siemiatkowski's long-term incentives with the interests of shareholders over a multi-year* 

*horizon, while maintaining governance safeguards that limit the extent of enhanced voting rights that may* 

*be acquired. Under this Plan, the Remuneration and Nomination Committee may grant to Mr.* 

*Siemiatkowski awards in the form of Class C shares or securities, such as options, convertible into Class C* 

*shares. In 2025, the Remuneration and Nomination Committee granted Mr. Siemiatkowski options over* 

*17,505,672 Class C shares under this Plan, as described under "Equity Compensation paid to Mr.* 

*Siemiatkowski" above. Upon exercise of Class C options, Mr. Siemiatkowski may elect to acquire, in his* 

*discretion, either ordinary shares or Class C shares. Class C shares carry enhanced voting rights;* 

KLARNA GROUP PLC213

*however, Mr. Siemiatkowski's acquisition of Class C shares upon exercise of Class C options in any year is* 

*subject to a limit of 1.5% of the number of issued and outstanding ordinary shares on the last day of the* 

*fiscal year preceding such acquisition. In addition, pursuant to our articles of association, we will not issue* 

*any Class C shares in the number that would make the voting rights corresponding to all such Class C* 

*shares outstanding at any time exceed 15% of the voting rights corresponding to all of our shares* 

*outstanding immediately prior to the Company's initial public offering. As of the date of this report, no* 

*Class C shares have been issued.*

![](klar-20251231_g44.gif)

<sup>1</sup> Consists of ordinary shares held by: (i) Sequoia Capital GFIV Sweden, L.P.; (ii) Sequoia Capital Global Growth Fund L.P.; (iii)

Sequoia Capital US/E Expansion Fund I, L.P.; (iv) Sequoia Capital Global Growth Fund III - Endurance Partners, L.P.; (v) Sequoia Capital

U.S. Growth Fund IV, L.P.; (vi) Sequoia Capital Global Growth Fund II, L.P.; (vii) Sequoia Capital Global Growth Principals Fund, L.P.; (viii)

Sequoia Capital Global Growth II Principals Fund, L.P.; (ix) Sequoia Grove II, LLC; (x) Sequoia Grove UK, L.P.; and (xi) SCGE Fund, L.P.

KLARNA GROUP PLC214

**Item 7. Major Shareholders and Related Party Transactions**

**Major Shareholders / Share Ownership**

As at the date of this report, the following shareholders beneficially owned 5% or more of the

Company's issued share capital:

---

| | | |
|:---|:---|:---|
| **Shareholder** | **Number ordinary** <br>**shares**<br>| **Approximate % of Total Voting Rights** |
| Entities affiliated with Sequoia Capital<sup>1</sup> | 76671503 | 23% |
| Heartland A/S | 29652586 | 9% |
| Victor Jacobsson | 24959959 | 6% |
| Sebastian Siemiatkowski | 24651816 | 7% |
| Commonwealth Bank of Australia | 17407235 | 5% |

---

As of December 31, 2025, according to data from our shareholder register, of the ordinary shares that

are subject to lock-up restrictions (excluding shares publically traded and held within The Depository Trust

Company (DTC)), 158,262,133 ordinary shares were held by 279 record holders in the United States, and

177,259,079 ordinary shares were held by record holders outside the United States.

As at December 31, 2025, our issued and outstanding share capital consists of 377,507,910 ordinary

shares and 328,136,589 Class B shares as per below table:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| <br>**Nominal value** | **Ordinary** <br>**shares**<br>**$0.00010** | **Class B shares**<br>**$0.00010** | **Class C shares**<br>**$0.00010** | **Deferred** <br>**shares**<br>**$0.00073** | **Deferred** <br>**shares**<br>**$11.35013** | **Deferred** <br>**shares**<br>**$0.28000** | **Deferred** <br>**shares**<br>**$0.00010** |
| **As of January 01,** <br>**2024**<br>| **364018908** | **—** | **—** | **364018908** | **—** | **—** | **—** |
| Shares issued | 1277664 |  |  | 1277664 |  | 1 |  |
| **As of December** <br>**31, 2024**<br>| **365296572** | **—** | **—** | **365296572** | **—** | **1** | **—** |
| Shares issued | 12211338 | 369911294 |  | 257772 | 369911294 |  |  |
| Redesignation |  | (41774705) |  |  |  |  | 41774705 |
| Capital <br>reduction<br>|  |  |  | (365554344) | (369911294) | (1) | (41774705) |
| **As of December** <br>**31, 2025**<br>| **377507910** | **328136589** | **—** | **—** | **—** | **—** | **—** |

---

**CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS**

The following is a description of certain related party transactions we have entered into since

January 1, 2025 with any of our executive officers, directors or their affiliates and holders 5% or more of

any class of our voting securities in the aggregate, which we refer to as "related parties," other than

compensation arrangements which are described in the section titled "Executive and Director

Remuneration."

**Partnership with Milkywire**

On April 21, 2021, following a competitive selection process, we entered into a partnership agreement

with Milkywire AB ("Milkywire"), an environmental impact platform, for the sourcing, vetting and monitoring

of planet health initiatives to which we make donations or from which we purchase carbon removal

KLARNA GROUP PLC215

services in furtherance of our sustainability efforts. In addition, Milkywire provides us with services and

tools related to our sustainability program, including facilitation of carbon credit purchases, development

of donation solutions and related digital integrations, and sustainability-focused content and campaign

support. Milkywire was founded in 2018 by Nina Siemiatkowski, who is the spouse of Sebastian

Siemiatkowski, our Co-Founder and Chief Executive Officer. Mrs. Siemiatkowski remains the chief

executive officer and majority owner of Milkywire.

Klarna paid Milkywire AB $0.9 million in 2025, $0.7 million in 2024 and $0.9 million in 2023 for the

sustainability related services described above. Separately, in 2025 Klarna transferred to Milkywire an

additional $0.5 million for the purchase of carbon credits on Klarna's behalf; these amounts were paid in

full by Milkywire to the third-party providers of the carbon credits and Milkywire did not retain any margin

on these transactions. In 2024, the corresponding amount transferred for carbon credit purchases was

$1.0 million.

In addition, Klarna makes charitable contributions to organizations sourced and vetted by Milkywire

through the WRLD Foundation, a registered nonprofit organization in the United States and Sweden. The

WRLD Foundation serves as an administrative vehicle through which contributions are distributed in full to

the underlying recipient organizations; the identity of all recipient organizations has been reported to

Klarna. Nina Siemiatkowski is the founder and a board member of the WRLD Foundation. The Company

contributed $2.3 million in 2025, $3.8 million in 2024 and $5.5 million in 2023 through the WRLD

Foundation. We also provide consumers with the ability to voluntarily make donations to the WRLD

Foundation while using our network through several donation features, both online and in the Klarna app,

as part of our planet health initiative. Such donations are made directly by our consumers in their sole

discretion.

Milkywire was engaged following a comprehensive selection process and the board believes the fees

paid to Milkywire reflect competitive rates for the services provided. The partnership agreement, including

all fees paid to Milkywire and all contributions made through the WRLD Foundation, has been approved by

the board of directors with Mr. Siemiatkowski recusing himself from the related deliberations and approval,

in accordance with the Company's related party transactions policy and conflicts of interest procedures.

**Use of Klarna Network by Directors and Officers**

Our directors and officers and their immediate family members have in the past used, and may in the

future use, our payment options offered on the Klarna network, including Pay Later and Fair Financing,

which involve provision of consumer loans by us. Any such loans outstanding as of the date of this report

(i) were similar to all of the consumer loans originated on our network, i.e., were extended primarily for

personal, family or household purposes, (ii) were extended in the ordinary course of our consumer credit

business, under the same conditions applicable to such loans in the jurisdictions in which they were

originated and on substantially the same terms, including interest rates, as those prevailing at the time for

comparable transactions with other consumers in such jurisdictions, and (iii) did not involve more than the

normal risk of collectability or present other unfavorable features. The average outstanding balance for

these related parties did not materially exceed, if at all, our overall average outstanding balance per

consumer in the fiscal year.

**Registration Rights Agreement** 

On September 11, 2025, we entered into a registration rights agreement (the "Registration Rights

Agreement") with certain of our principal shareholders. The Registration Rights Agreement grants certain

demand registration rights, short-form registration rights and piggyback registration rights in respect of our

ordinary shares and related indemnification rights from us, subject to customary restrictions and

exceptions.

KLARNA GROUP PLC216

**Related Party Transactions Policy**

In connection with our initial public offering, we have adopted a new related party transaction policy

setting forth the policies and procedures for the identification, review and approval or ratification of

related party transactions, as defined in Item 404 of Regulation S-K under the Securities Act and in

applicable EU, Swedish and English rules, regulations and guidelines, including the Swedish Banking Act.

The policy defines "related parties" to include our directors, executive officers, key function holders,

significant shareholders (3% or more), their close family members and entities in which such persons hold

a material interest. Our Company Secretary, supported by relevant functions, such as People Advisory,

Procurement, Partner Risk Policy and Reporting, and Group Consolidation and Reporting, maintains a list of

related parties and coordinates annual and *ad hoc* screenings of agreements with them. Pursuant to the

policy, all related party transactions must be entered into on arm's-length terms, meaning commercially

justifiable and no more favorable than those offered to unrelated parties.

Within our Swedish regulated bank subsidiary and its prudentially consolidated group, additional

requirements apply under the Swedish Banking Act. The board of directors of Klarna Bank must approve

all agreements with related parties, either in advance on an *ad hoc* basis (for individually negotiated

contracts) or annually on a retroactive basis (for standardized, non-negotiated agreements). The Klarna

Bank board of directors also maintains a detailed record of all related party agreements, including both

credit arrangements and non-credit agreements, in line with applicable prudential and governance

standards.

In certain cases, including specified contracts with directors or significant property transfers,

shareholder approval may also be required under applicable English corporate law.

The policy is intended to ensure that all related party transactions are appropriately identified,

reviewed, approved and disclosed in accordance with applicable laws and regulations.

**Interests of Experts and Counsel**

Not applicable.

KLARNA GROUP PLC217

**Item 8. Financial Information**

A.Consolidated statements and other financial information.

Refer to "Item 18. Financial Statements" for our consolidated financial statements and report of our

independent registered public accounting firm included elsewhere in this document.

Legal or arbitration proceedings

From time to time, we may be subject to legal proceedings and claims in the ordinary course of

business. We are not presently a party to any legal proceedings that, if determined adversely to us, would

individually or taken together have a material adverse effect on our business, results of operations,

financial condition and future prospects. The results of any current or future litigation cannot be predicted

with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of

defense and settlement costs, diversion of management resources and other factors.

Dividend policy

Not applicable.

B.Significant Changes

KLARNA GROUP PLC218

**Item 9. The Offer and Listing**

A.Offer and listing details

Our ordinary shares are listed on the NYSE under the symbol "KLAR."

B.Plan of distribution

Not applicable.

C.Markets

Our ordinary shares are listed and traded on the NYSE.

D.Selling shareholders

Not applicable.

E.Dilution

Not applicable.

F.Expenses of the Issue

Not applicable.

KLARNA GROUP PLC219

**Item 10. Additional Information**

A.Share capital

Not applicable.

B.Memorandum and articles of association

The following description is a summary of material terms of our articles of association in effect from

September 9, 2025 in connection with the completion of our IPO. The following description may not

contain all of the information that is important to you and we therefore refer you to our articles of

association filed as Exhibit 3.1 hereto.

**Corporate Reorganization**

We are a public company with limited liability incorporated pursuant to the laws of England and Wales

on November 7, 2022 as Klarna UK II PLC and renamed as Klarna Group plc on December 13, 2023. We are

registered with the Registrar of Companies in England and Wales under number 14467769, and our

registered office is at 10 York Road, London SE1 7ND, United Kingdom.

We were incorporated for the purposes of becoming the ultimate holding company of Klarna Holding

AB (publ) and its subsidiaries and consummating the corporate reorganization described herein. Klarna

Holding AB (publ) was formed in January 2005 as a private limited liability company and subsequently

converted into a public limited liability company, in each case under the laws of Sweden. Klarna Group

Midco Ltd (our wholly owned subsidiary) and Klarna Group Holdco Ltd (a wholly owned subsidiary of Klarna

Group Midco Ltd) were incorporated in November 2022 as Jersey limited companies (originally under the

names Runway I Limited and Runway II Limited, respectively). They were formed to become the indirect

and direct holding companies, respectively, of Klarna Holding AB (publ). Prior to our IPO, neither entity

conducted any operations other than activities related to their formation, the corporate reorganization

and the IPO.

Pursuant to the terms of our corporate reorganization, and in each case with the exception of certain

de minimis amounts, (i) all of the issued share capital in Klarna Holding AB (publ) was exchanged for the

same number of ordinary shares in Klarna Group Holdco Ltd, (ii) all of the issued share capital in Klarna

Group Holdco Ltd was exchanged for the same number of ordinary shares in Klarna Group Midco Ltd and

(iii) all of the issued share capital in Klarna Group Midco Ltd was exchanged for the same number of

ordinary shares in Klarna Group plc, and, as a result, Klarna Group plc became the ultimate indirect parent

company of Klarna Holding AB (publ).

**Capital Structure**

***Issued share capital***

We have two classes of voting shares issued and outstanding: ordinary shares and Class B shares.

Each ordinary share has one vote per share and each Class B share has ten votes per share. The ordinary

shares and Class B shares vote together as a single class on all matters submitted to a vote of

shareholders, except as otherwise required by applicable law. As of the date of this annual report, we have

no deferred shares in issue. Where we do have deferred shares in issue, they shall not entitle the holder to

voting rights, do not have any rights to participate in our profits or to receive dividends or other

distributions and only participate in any liquidation, dissolution or our winding up only after we have paid (i)

to holders of our ordinary shares and Class C shares: (a) the nominal capital paid up on all such shares,

plus (b) $10,000,000 on each ordinary share and $5,000,000 on each Class C share; and (ii) to holders of

our Class B shares: the nominal capital paid up on all such Class B shares, which we do not expect to

occur. In addition, during a period of five years from the completion of our IPO, we may from time to time

issue Class C shares.

KLARNA GROUP PLC220

As 31 December, 31 2025, our issued and outstanding share capital was $70,624.71, divided into

377,507,910 ordinary shares of $0.0001 nominal value each and 328,136,589 Class B shares of $0.0001

nominal value each:.

In addition to the authority previously granted from our shareholders, our board of directors was, on

June 30, 2025, granted the authority from our shareholders to allot new ordinary shares and other shares,

and to grant rights to subscribe for, or to convert any security into, new ordinary shares or other shares, up

to a maximum aggregate nominal amount (i.e., par value) of $367,502.51, for a period expiring (unless

previously renewed, varied or revoked by the Company in general meeting) at the conclusion of the

Company's annual general meeting to be held in 2026 (or, if earlier, on June 30, 2026).

***Ordinary shares***

*Voting rights*. The holders of our ordinary shares are entitled to one vote per ordinary share on all

matters to be voted upon by the shareholders other than with respect to matters that require a separate

class vote in accordance with applicable law.

*Dividend rights*. The holders of our ordinary shares are entitled to receive ratably such dividends or

other distributions, if any, as may be approved from time to time by the board of directors out of funds

legally available for such dividends and otherwise to participate in our profits; provided that each ordinary

share shall participate to the extent of twice the amount of each Class C share (on a per share basis).

Rights upon liquidation. In the event of liquidation, dissolution or winding up of Klarna Group plc, the

holders of ordinary shares are entitled to share ratably in all assets remaining after payment of liabilities;

provided that each ordinary share shall participate to the extent of twice the amount of each Class C

share (on a per share basis).

***Class B shares***

*Voting rights*. The holders of our Class B shares are entitled to ten votes per share on all matters to be

voted other than with respect to matters that require a separate class vote in accordance with applicable

law. The voting rights attached to each Class B share may only be exercised by their original holder, as

reflected in our register of members.

*Dividend rights*. The holders of our Class B shares do not have any rights to participate in our profits

and do not have any right to receive dividends or other distributions.

*Rights upon liquidation*. The holders of our Class B shares only have limited rights to receive a

distribution equal to the nominal value paid-up or credited as paid-up on such Class B shares upon our

liquidation, dissolution or winding up (excluding any reorganization of our assets and liabilities on an intra-

group and solvent basis), following the prior payment of the nominal capital paid up or credited as paid up

on each ordinary share and Class C share, as well as an amount of $10.0 million on each ordinary share

and $5.0 million on each Class C share upon such liquidation, dissolution or winding up.

*Redesignation*. The Class B shares will be redesignated (i.e., converted) by us into deferred shares in

connection with certain events, in accordance with our articles of association, including certain disposals

of interests in ordinary shares by holders of our Class B shares or their affiliates.

*Issue and transfer*. The Class B shares were issued prior to our IPO and cannot be transferred to any

person.

***Class C shares***

*Voting rights*. The holders of our Class C shares are entitled to ten votes per share on all matters to be

voted upon by the shareholders other than with respect to matters that require a separate class vote in

accordance with applicable law.

KLARNA GROUP PLC221

*Dividend rights*. The holders of our Class C shares are entitled to receive ratably such dividends or

other distributions, if any, as may be approved from time to time by our board of directors out of funds

legally available for such dividends, and otherwise to participate in our profits; provided that each Class C

share shall participate to the extent of half the amount of each ordinary share (on a per share basis).

*Rights upon liquidation*. In the event of our liquidation, dissolution or winding up, the holders of Class C

shares are entitled to share ratably in all assets remaining after payment of liabilities; provided that each

Class C share shall participate to the extent of half the amount of each ordinary share (on a per share

basis).

*Redesignation*. The Class C shares will be redesignated by us into ordinary shares and deferred shares:

(i) at the election of the holder; (ii) if they are transferred (other than in permitted circumstances); (iii) if

Sebastian Siemiatkowski and his related or affiliated persons cease to beneficially own the relevant Class

C shares; (iv) if Mr. Siemiatkowski ceases to provide services to us; and (v) in other specified

circumstances. For every two Class C shares to be redesignated, one Class C share will be redesignated

into one ordinary share and one Class C share will be redesignated into one deferred share; provided that,

if at any time the number of Class C shares to be redesignated is an odd number, the one remaining Class

C share will be redesignated into one deferred share.

*Issue and transfer*. The Class C shares can only be issued to Mr. Siemiatkowski and certain of his

related and affiliated persons, their respective nominees and a depositary service prior to the fifth

anniversary of our IPO; provided that the maximum number of Class C shares that may be issued is that

number which would result in the aggregate number of votes that are eligible to be cast by the Class C

shares at our general meeting being equal to 15% of the aggregate number of votes that would have been

eligible to be cast by the shares at our general meeting immediately prior to our IPO. We have granted to

Mr. Siemiatkowski Class C options pursuant to which he can elect to acquire, in his discretion, either

ordinary shares or Class C shares upon the exercise of such Class C options. Mr. Siemiatkowski's

acquisition of Class C shares pursuant to Class C options in any year is subject to a limit of 1.5% of the

number of issued and outstanding ordinary shares on the last day of the fiscal year preceding such

acquisition. The Class C shares cannot be transferred, other than to certain related and affiliated persons

of Mr. Siemiatkowski, their respective nominees and a depositary service.

***Deferred shares***

*Voting rights*. The holders of our deferred shares are not entitled in their capacity as holders of

deferred shares to receive notice of any general meeting or to attend, speak or vote at any such meeting.

*Dividend rights*. The holders of our deferred shares do not have any rights to participate in our profits

and do not have any right to receive dividends or other distributions.

*Rights upon liquidation*. The holders of deferred shares only have limited rights to receive a

distribution equal to the nominal value paid-up or credited as paid-up on such deferred shares upon our

liquidation, dissolution or winding up (excluding any reorganization of our assets and liabilities on an intra-

group and solvent basis), and only after we have first paid: (i) to holders of our ordinary shares and Class C

shares: (a) the nominal capital paid up on all such shares, plus (b) $10,000,000 on each ordinary share and

$5,000,000 on each Class C share; and (ii) to holders of our Class B shares: the nominal capital paid up on

all such Class B shares.

Deferred shares typically arise as a result of amendments to share capital (for example, upon

redesignation of our Class B shares) or as an alternative to cancelling shares pursuant to a court approved

reduction of capital procedure.

**Dividends**

Under English law, we may only pay dividends out of profits available for that purpose. Profits available

for distribution are our accumulated, realized profits, to the extent that they have not been previously

KLARNA GROUP PLC222

utilized by distribution or capitalization, less our accumulated, realized losses, to the extent that they have

not been previously written off in a reduction or reorganization of capital duly made. The amount of our

distributable reserves is a cumulative calculation. We may be profitable in a single financial year but

unable to pay a dividend if the profits of that year do not offset all previous years' accumulated, realized

losses.

Additionally, we may only make a distribution if the amount of our net assets is not less than the

aggregate of our called-up share capital and undistributable reserves, and if, and to the extent that, the

distribution does not reduce the amount of those assets to less than that aggregate.

Our articles of association authorize our board of directors to approve interim dividends without

shareholder approval to the extent that the approval of such dividends appears justified by profits. Our

board of directors may also recommend a final dividend to be approved and declared by the shareholders

at an annual general meeting and may direct that the payment be made by distribution of assets, shares or

cash. No dividend may exceed the amount recommended by the board of directors.

Our articles of association also permit a scrip dividend scheme under which our board of directors

may offer any holders of shares entitled to receive dividends the right to elect to receive ordinary shares,

credited as fully paid, instead of cash in respect of the whole (or some part determined by our board of

directors) of a dividend subject to certain terms and conditions set out in our articles of association.

The right to receive a dividend lapses if unclaimed for 12 years.

**Quorum for General Meetings**

Our articles of association provide that no business shall be transacted at any general meeting unless

a quorum is present.

The necessary quorum for a general meeting is two qualifying persons, unless each is a representative

of a corporation or each is appointed as proxy of a member and they are representatives of the same

corporation or are proxies of the same member, except where we only have one member, that shareholder

present at the meeting and entitled to vote is a quorum.

**Voting Rights**

Under our articles of association, each holder of ordinary shares is entitled to one vote for each

ordinary share that they hold as of the record date for the meeting and each holder of Class B shares or

Class C shares, as applicable, is entitled to ten votes for each Class B share or Class C share that they hold

as of the record date for the meeting. Neither English law nor any of our constituent documents place

limitations on the right of nonresident or foreign owners to vote or hold ordinary shares.

The voting at a general meeting must be taken by poll. Subject to any relevant special rights or

restrictions attached to any shares, on a poll taken at a general meeting, each qualifying shareholder

present in person or by proxy (or, in the case of a corporation, a corporate representative) and entitled to

vote on the resolution has one vote for every ordinary share held by such shareholder and ten votes for

every Class B share or Class C share held by such shareholder.

An ordinary resolution must be approved by a simple majority, and a special resolution approved by at

least 75%, of shareholders attending and voting, whether in person or by proxy.

**Amendment to Our Articles of Association**

Under English law, shareholders may amend the articles of association of a company by special

resolution. However, for so long as any of our shares are held in a settlement system operated by DTC or

any affiliate or nominee therefor, including Cede & Co. and any successors thereto, the article in our

articles of association which requires voting at a general meeting to be taken on a poll may only be

removed, amended or varied by resolution of the shareholders passed unanimously.

KLARNA GROUP PLC223

**General Meetings and Notices**

An annual general meeting must be called by not less than 21 clear days' notice (i.e., excluding the date

of receipt or deemed receipt of the notice and the date of the meeting itself).

The notice of a general meeting must be given to the shareholders (other than any who, under the

provisions of our articles of association or the terms of allotment or issue of shares, are not entitled to

receive notice), to the board of directors and to the auditors. Under English law, we are required to hold an

annual general meeting of our shareholders within six months from the day following the end of our

financial year. Subject to the foregoing, a general meeting may be held at a time and place determined by

the board of directors.

The rules governing notice of adjourned meetings depend on the reason for adjournment. Where the

chair adjourns a meeting in exercise of its general power of adjournment, no notice of the adjourned

meeting is required unless the adjournment is for 30 days or more, or is to no fixed date, in which case at

least 14 clear days' notice must be given in the same manner as for the original meeting. Where a meeting

is adjourned specifically due to the absence of a quorum, the adjourned meeting must be held not less

than 14 days and not more than 28 days after the original meeting, and at least seven clear days' notice of

the adjourned meeting must be given.

Under English law, our board of directors must convene such a meeting once it has received requests

to do so from shareholders representing at least 5% of our paid-up share capital carrying voting rights at

general meetings (excluding any paid-up capital held as treasury shares).

**Winding Up**

In the event of a voluntary winding up of the Company, the liquidator may, with the sanction of a

special resolution of the Company and any other sanction required by law, subject to the U.K. Insolvency

Act of 1986, after effectively applying the Company's property to satisfy the Company's liabilities, divide

among our members the whole or any part of the assets of the Company, whether they consist of property

of the same kind or not, and vest the whole or any part of the assets in trustees upon such trusts for the

benefit of the holders of ordinary shares of the Company as the liquidator, with such sanction, may

determine. No shareholder of the Company shall be compelled to accept any assets upon which there is a

liability.

On a return of capital on a liquidation, reduction of capital or otherwise, the surplus assets of the

Company available for distribution among the holders of ordinary shares shall be applied pro rata

(rounded to the nearest whole number).

**Rights of Preemption on New Issues of Shares**

Under the Companies Act, the allotment of "equity securities" (except pursuant to an employees'

share scheme and as bonus shares) that are to be paid for wholly in cash must be offered first to the

existing holders of equity securities in proportion to the respective nominal amounts (i.e., par values) of

their holdings on the same or more favorable terms, unless a special resolution to the contrary has been

passed or the articles of association otherwise provide disapplication from this requirement (which

disapplication can be for a maximum of five years after which shareholders' approval would be required to

renew the disapplication). "Equity securities" means ordinary shares or rights to subscribe for, or convert

securities into, ordinary shares where ordinary shares means shares other than shares that, with respect

to dividends and capital, carry a right to participate only up to a specified amount in a distribution. In

relation to the Company, "equity securities" will therefore include the ordinary shares, and all rights to

subscribe for or convert securities into such shares.

In addition to the authority previously granted from our shareholders, our board of directors was, on

June 30, 2025, granted the authority from our shareholders to allot new ordinary shares and other shares,

and to grant rights to subscribe for, or to convert any security into, new ordinary shares or other shares, up

KLARNA GROUP PLC224

to a maximum aggregate nominal amount (i.e., par value) of $367,502.51, for a period expiring (unless

previously renewed, varied or revoked by the Company in general meeting) at the conclusion of the

Company's annual general meeting to be held in 2026 (or, if earlier, on June 30, 2026).

**Disclosure of Ownership Interests in Shares**

Section 793 of the Companies Act gives us the power to require persons whom we know have, or

whom we have reasonable cause to believe have, or within the previous three years have had, an interest

in any shares of the Company to disclose specified information regarding those shares. Failure to provide

the information requested within the prescribed period (or knowingly or recklessly providing false

information after the date the notice is sent) can result in criminal or civil sanctions being imposed against

the person in default.

Under our articles of association, if any of our shareholders, or any other person appearing to be

interested in the shares of the Company held by such shareholder, has been duly served with a notice

under section 793 and fails to give us the information required by such notice or has made a statement

which is false or inadequate in a material particular, then our board of directors may, in its absolute

discretion at any time by notice, withdraw voting rights and place restrictions on the rights to receive

dividends and refuse to register a transfer of such shares.

**Alteration of Share Capital; Share Repurchases**

Subject to the provisions of the Companies Act, and without prejudice to any relevant special rights

attached to any class of shares, we may, from time to time, among other things:

• increase our share capital by allotting and issuing new shares in accordance with our articles of

association and any relevant shareholder resolution;

• consolidate all or any of our share capital into shares of a larger nominal amount (i.e., par value)

than the existing shares;

• subdivide any of our shares into shares of a smaller nominal amount (i.e., par value) than the

existing shares; or

• redenominate our share capital or any class of share capital.

We may not redenominate, consolidate, divide or subdivide any class of voting shares without

redenominating, consolidating, dividing or subdividing (as the case may be) the other classes of our voting

shares.

English law prohibits us from purchasing our own shares unless such purchase has been approved by

our shareholders. Shareholders may approve two different types of such share purchases: "on-market"

share purchases or "off-market" share purchases. "On-market" purchases may only be made on a

"recognized investment exchange," which does not include the NYSE, which is the only exchange on which

the Company's shares are be traded. In order to purchase our own shares, as a company listed on the

NYSE, we must therefore obtain the approval of our shareholders for an "off-market purchase" (on the

basis of a specific purchase agreement with a financial intermediary) to acquire shares that are traded on

the NYSE. This requires our shareholders to pass an ordinary resolution approving an "off-market

purchase," where such approval may be for a maximum period of five years. In relation to an "off-market

purchase," we may not acquire our own shares until the terms of the contract pursuant to which the

purchase(s) are to be made have been authorized by our shareholders. Our shareholders have passed a

resolution to approve certain contracts pursuant to which we will be able to make "off-market" purchases

from selected investment banks. This resolution may be renewed prior to its expiration (i.e., within five

years), and renewal of such authorization may be sought at least once every five years, and possibly more

frequently.

**Transfer and Registration of Shares**

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Our articles of association allow shareholders to transfer all or any of their shares by instrument of

transfer in writing in any usual form or in any other form which our board of directors may approve.

The instrument of transfer must be executed by or on behalf of the transferor and (in the case of a

transfer of a share that is not fully paid) by or on behalf of the transferee. Our articles of association also

permit transfer of shares in uncertificated form by means of a relevant electronic system.

We may not charge a fee for registering the transfer of a share.

Our board of directors may, in its absolute discretion, refuse to register a transfer of shares in

certificated form if, among other things, it is not fully paid (provided that the refusal does not prevent

dealings in the shares from taking place on an open and proper basis), is with respect to a share on which

we have a lien and sums in respect of which the lien exists are payable and are not paid within 14 clear

days after due notice has been sent or if such transfer may violate any law or regulation applicable to us,

the shares, the holder, the member or proposed transferee or breach of any contractual obligation

whether or not we are a party to, or a beneficiary of, such contract. If our board of directors refuses to

register a transfer of a share, it shall notify the transferor of the refusal and the reasons for it as soon as

practicable and in any event within two months after the date on which the instrument of transfer was

lodged with us (in the case of a transfer of a share in certificated form) or the instructions to the relevant

system were received. Any instrument of transfer which our board of directors refuses to register shall

(except in the case of fraud) be returned to the person lodging it when notice of the refusal is sent.

Computershare Trust Company, N.A. will act as our transfer agent and registrar. The share register

reflects only registered owners of our ordinary shares, Class B shares, Class C shares and deferred shares.

Registration in the Company's share register will be determinative of ownership of shares of the Company.

A shareholder who holds shares beneficially will not be the holder of record of such shares. Instead, the

clearance service or depositary (for example, Cede & Co., as nominee for DTC, or GTU Ops, Inc., as

nominee for Computershare Trust Company, N.A.) or other nominee will be the holder of record of those

shares. Accordingly, a transfer of shares from a person who holds such shares beneficially to a person

who holds such shares beneficially through a clearance service or depositary or other nominee will not be

registered in the Company's official share register, as the depositary or other nominee will remain the

record holder of any such shares.

In the event that the Company notifies one or both of the parties to a share transfer that it believes

stamp duty or SDRT is required to be paid in connection with a transfer of shares of the Company, if the

parties to the transfer have an instrument of transfer duly stamped to the extent required and then

provide such instrument of transfer to the Company's share registrar, the buyer will be registered as the

legal owner of the relevant shares on the official share register, subject to our rights with respect to the

disclosure of interests in our shares.

**Annual Accounts and Independent Auditor**

Under English law, a "quoted company," which includes a company whose equity share capital is

admitted to dealing on the NYSE, must deliver to the Registrar of Companies a copy of:

• the company's annual accounts;

• the directors' remuneration report;

• the directors' report;

• a strategic report; and

• the auditor's report on those accounts, on the auditable part of the directors' remuneration report,

on the directors' report and on the strategic report.

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The annual accounts and reports must be presented to the shareholders at a general meeting

(although a vote is not mandatory in respect of such documents). Our individual accounts must be

prepared in accordance with U.K. GAAP or IFRS as adopted by the United Kingdom. Our consolidated

group accounts must be prepared in accordance with U.K. GAAP, IFRS as adopted by the United Kingdom,

or U.S. GAAP for a period expiring at the end of the fourth financial year from our incorporation. In addition,

for public reporting purposes we will prepare consolidated financial statements in accordance with IFRS.

Under our articles of association, copies of the annual accounts and reports for that financial year must be

sent to every shareholder, every debenture holder and every person entitled to receive notice of general

meetings at least 21 clear days before the date of the meeting at which copies of the documents are to be

presented. Our articles of association provide that any documents to our shareholders may be distributed

in electronic form or by making them available on a website, as long as shareholders have agreed that

such documents may be sent or supplied in that form.

As an English company with no applicable exemptions from the audit requirements under the

Companies Act and applicable law, we must appoint an independent auditor to audit the annual accounts

of the Company. The auditor of a public company may be appointed by ordinary resolution at the general

meeting of the company at which the company's annual accounts are laid. Directors can also appoint

auditors at any time before the company's first accounts meeting, after a period of exemption or to fill a

casual vacancy.

The remuneration of an auditor is fixed by our shareholders by ordinary resolution or in a manner that

our shareholders by ordinary resolution determine.

**Board of Directors**

The number of directors shall not be less than two (unless otherwise determined by ordinary

resolution) and not more than eleven.

Subject to our articles of association and the Companies Act, we may by ordinary resolution elect a

person who is willing to act to be a director and the board of directors shall have power to appoint any

person who is willing to act to be a director, either to fill a vacancy or as an additional director. In

accordance with the Companies Act and our articles of association, our directors may be removed from

office before the expiration of his or her term by an ordinary resolution of shareholders.

Except as otherwise determined by a majority of directors, our board of directors shall be divided into

three classes (Class A, Class B and Class C) that consist, as nearly as possible, of a number of directors

equal to one-third of the total number of directors. Each class of directors is elected for a three-year term

of office, but the terms are staggered so that the term of only one class of directors expires at each annual

general meeting. At each succeeding annual general meeting, directors shall be appointed to succeed

and/or be re-appointed to continue, as the directors of the class whose term expires at such annual

general meeting, for a term ending upon the conclusion of the third annual general meeting following their

appointment or re-appointment.

Our directors are divided among the three classes as follows:

• the Class A directors are Andrew Reed, Niclas Neglén, Markus Villig and Mateusz Staniszewski, and

their terms will expire at the first annual meeting of our shareholders following our IPO;

• the Class B directors are Lise Kaae, Omid R. Kordestani and Roger W. Ferguson, Jr., and their terms

will expire at the second annual meeting of our shareholders following our IPO; and

• the Class C directors will be Sebastian Siemiatkowski, Michael J. Moritz and Sarah Smith, and their

terms will expire at the third annual meeting of our shareholders following our IPO.

Subject to the provisions of our articles of association, the board of directors may meet for the

despatch of business, adjourn and otherwise regulate its meetings as it thinks fit.

KLARNA GROUP PLC227

The quorum for a meeting of the board of directors may be fixed by the board, but it must never be

less than half of the total number of directors, from time to time, and, unless so fixed at any other number,

shall be such number as is nearest to but not less than half of the total number of directors, from time to

time.

Questions arising at any board meeting shall be determined by a majority of votes of the directors

present and entitled to vote at such meeting. Subject to our articles of association, each director

participating in a board meeting has one vote and, in the case of an equality of votes, the chair shall have a

second or casting vote, unless he or she is not entitled to vote on the resolution in question.

Directors shall be entitled to such remuneration as we may determine by ordinary resolution for their

services to us as directors and for any other service which they undertake for us. Subject to and in default

of such determination, each such director shall be paid a fee for their services at such rate as may from

time to time be determined by our board of directors; provided that the agreement or payment of any such

fee would not result in non-compliance with any relevant exchange listing or other requirements. Any

director who is not an executive officer and who performs special services which, in the opinion of the

board of directors, are outside the scope of the ordinary duties of a director, may be paid such extra

remuneration as the board may determine; provided that the payment of any such extra remuneration

would not result in non-compliance with any relevant exchange listing or other requirements. We may pay

our directors for all traveling, hotel and other expenses properly incurred by them in and about the

discharge of their duties, including their expenses of traveling to and from board meetings, committee

meetings, general meetings or separate meetings of the holders of any class of shares or our other

securities, or otherwise. Subject to any guidelines and procedures established from time to time by our

board of directors, we may also pay a director for all expenses incurred by them in obtaining professional

advice in connection with our affairs or the discharge of their duties as a director.

Our board of directors may also, in accordance with the requirements set out in our articles of

association, authorize any matter or situation proposed to them by any director, which would, if not

authorized, involve a director breaching his or her duty to avoid conflicts of interests. A director seeking

authorization in respect of such conflict shall declare to the other directors the nature and extent of their

interest in a conflict as soon as is reasonably practicable. Any such authorization by the board of directors

will be effective only if:

i.the proposal to be authorized is made by a director in writing and delivered to the other directors

or made orally at a meeting of the board, in each case setting out particulars of the conflict;

ii.any requirements as to the quorum for consideration of the relevant matter is met without

counting the conflicted director and any other conflicted director; and

iii.the matter was agreed to without the conflicted director voting or would have been agreed to if the

conflicted director's vote had not been counted.

**Liability of Directors and Officers**

Subject to the provisions of English law and our articles of association, our relevant officers are

entitled to be indemnified against all costs, charges, losses, expenses and liabilities incurred by them as a

relevant officer in the actual or purported execution and/or discharge of their duties. Under English law,

any provision that purports to exempt a director of a company (to any extent) from any liability that would

otherwise attach to him or her in connection with any negligence, default, breach of duty or breach of trust

in relation to the company is void.

Insofar as indemnification of liabilities arising under the Securities Act may be permitted to our

directors or officers, we have been informed that, in the opinion of the SEC, such indemnification is against

public policy as expressed in the Securities Act and is therefore unenforceable.

**Anti-Takeover Provisions**

KLARNA GROUP PLC228

***Share issues in the context of an acquisition***

Our articles of association provide our board of directors with the power to establish a rights plan and

to grant rights to subscribe for our shares pursuant to a rights plan, including, without limitation, where, in

the opinion of our directors, acting in good faith and on such grounds as our board of directors shall

consider reasonable, in the context of an acquisition or potential acquisition of 15% or more of our issued

voting shares, to do so would improve the likelihood that:

• an acquisition process is conducted in an orderly manner;

• all our shareholders are treated equally and fairly and in a similar manner;

• an optimum price is achieved for our ordinary shares;

• our success would be promoted for the benefit of our shareholders as a whole;

• our long-term interests and those of our employees, our shareholders and business would be

safeguarded;

• we would not suffer serious economic harm; and/or

• the board of directors would have time to gather relevant information and pursue appropriate

strategies.

Our articles of association further provide that our board of directors may, in accordance with the

terms of a rights plan, determine to (i) allot shares pursuant to the exercise of rights or (ii) exchange rights

for our shares, including (without limitation) where, in the opinion of our board of directors acting in good

faith and on such grounds as it shall consider reasonable, in the context of an acquisition or potential

acquisition of 15% or more of our issued voting shares, to do so would approve the likelihood that:

• the use of abusive tactics by any person in connection with such acquisition would be prevented;

• unequal treatment of shareholders would be prevented;

• an acquisition which would undervalue us would be prevented;

• harm to the prospects of our success for the benefit of our shareholders as a whole would be

prevented;

• our long-term interests and those of our employees, our shareholders and our business would be

safeguarded; and/or

• we would not suffer serious economic harm.

Under the Takeover Code, the board of directors of a public company incorporated under the laws of

England and Wales is constrained from implementing such defensive measures. However, as discussed

above, these measures are included in our articles of association, the Takeover Code is not expected to

apply to us and these measures are included commonly in the constitutive documents of U.S. companies.

These provisions will apply for so long as we are not subject to the Takeover Code.

***Multi-class share capital structure***

Since each holder of Class B shares and Class C shares is entitled to ten votes per share and each

holder of ordinary shares is entitled to one vote per share, holders of our Class B shares and Class C

shares may be able to significantly influence the outcome of matters requiring shareholder approval. In

addition, our Class B shares will be redesignated into deferred shares in connection with certain events in

accordance with our articles of association, including in connection with certain transfers of interests in

KLARNA GROUP PLC229

our ordinary shares. Redesignation of these Class B shares could result in the remaining holders of our

Class B shares and holders of our Class C shares being able to significantly influence the outcome of

matters requiring shareholder approval. Our Class C shares can only be issued to Sebastian Siemiatkowski

and certain of his affiliated and related parties, their respective nominees and a depositary service.

***Classified board of directors***

In accordance with the terms of our articles of association, our board of directors is divided into three

classes (Class A, Class B and Class C), with members of each class serving staggered three-year terms.

Each class shall consist, as nearly as possible, of a number of directors equal to one-third of the total

number of directors. Our classified board of directors could have the effect of delaying or discouraging an

acquisition of us or a change in our management.

**Other Relevant English Law Considerations**

***Takeover Code***

Until 11.59 p.m. on February 2, 2027 (the "Transition Period"), the Takeover Code applies, among other

things, to an offer for a public company during the Transition Period with a registered office in the U.K. (or

the Channel Islands or the Isle of Man) which securities are not admitted to trading on a regulated market

in the U.K. (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on

Takeovers and Mergers (the "Takeover Panel") to have its place of central management and control in the

United Kingdom (or the Channel Islands or the Isle of Man). This is known as the "residency test." The test

for central management and control under the Takeover Code is different from that used by the U.K. tax

authorities. Under the Takeover Code, the Takeover Panel will determine whether we have our place of

central management and control in the U.K. by looking at various factors, including the structure of our

board of directors, the functions of the directors and where they are resident.

During the Transition Period, if at the time of a takeover offer the Takeover Panel determines that we

have our place of central management and control in the U.K., we would be subject to a number of rules

and restrictions, including, but not limited to, the following: (i) our ability to enter into deal protection

arrangements with a bidder would be extremely limited; (ii) we might not, without the approval of our

shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as

issuing shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality of

information to all bona fide competing bidders.

Given that our current intention is not to have central management and control situated within the U.K.

(or the Channel Islands or the Isle of Man), we do not currently expect that the Takeover Code will apply to

an offer for Klarna. At the same time, under English law, and whether or not a company is subject to the

Takeover Code, an offeror for the company that has acquired (i) 90% in value of that company, and (ii) 90%

of the voting rights carried by the shares to which the offer relates may exercise statutory squeeze-out

rights to compulsorily acquire the shares of the non-assenting minority, as further discussed below.

However, if an offer for the company is conducted by way of a scheme of arrangement, the threshold for

the offeror obtaining 100% of its shares has two components: (i) the approval by a majority in number of

each class of the company's shareholders present and voting at the shareholder meeting; and (ii) the

approval of the company's shareholders representing 75% or more in value of each class of its

shareholders present and voting at that meeting.

***Mandatory Bid***

Under the Takeover Code, where:

• any person acquires, whether by a series of transactions over a period of time or not, an interest in

shares which (taken together with shares in which they are already interested, and in which

persons acting in concert with them are interested) carry 30% or more of the voting rights of a

company; or

KLARNA GROUP PLC230

• any person who, together with persons acting in concert with them, is interested in shares which in

the aggregate carry not less than 30% of the voting rights of a company but does not hold shares

carrying more than 50% of such voting rights and such person, or any person acting in concert with

them, acquires an interest in any other shares which increases the percentage of shares carrying

voting rights in which he is interested, such person shall, except in limited circumstances, be

obliged to extend offers, on the basis set out in Rules 9.3, 9.4 and 9.5 of the Takeover Code, to the

holders of any class of equity share capital, whether voting or non-voting, and also to the holders

of any other class of transferable securities carrying voting rights. Offers for different classes of

equity share capital must be comparable. The Takeover Panel should be consulted in advance in

such cases.

An offer under Rule 9 of the Takeover Code must be in cash and at the highest price paid for any

interest in the shares by the person required to make an offer or any person acting in concert with them

during the twelve months prior to the announcement of the offer.

Under the Takeover Code, a "concert party" arises where persons acting together pursuant to an

agreement or understanding (whether formal or informal and whether or not in writing) cooperate to obtain

or consolidate control of a company. "Control" means holding, or aggregate holdings, of an interest in

shares carrying 30% or more of the voting rights of the company, irrespective of whether the holding or

holdings give de facto control.

***Squeeze-out***

Under sections 979 to 982 of the Companies Act, if an offeror were to acquire, or unconditionally

contract to acquire, not less than 90% in value of the ordinary shares of the company and 90% of the

voting rights carried by the ordinary shares of the company, it could then compulsorily acquire the

remaining 10%. It would do so by sending a notice to outstanding shareholders telling them that it will

compulsorily acquire their shares, provided that no such notice may be served after the end of: (i) the

period of three months beginning with the day after the last day on which the offer can be accepted; or (ii)

if earlier, and the offer is not one to which section 943(1) of the Companies Act applies, the period of six

months beginning with the date of the offer.

Six weeks following service of the notice, the offeror must send a copy of it to the company together

with the consideration for the ordinary shares to which the notice relates, and an instrument of transfer

executed on behalf of the outstanding shareholder(s) by a person appointed by the offeror.

The company will hold the consideration on trust for the outstanding shareholders. The consideration

offered to the ordinary shareholders whose shares are compulsorily acquired under the Companies Act

must, in general, be the same as the consideration that was available under the takeover offer.

A dissenting shareholder may object to the transfer on the basis that the offeror is not entitled and

bound to acquire shares or to specify terms of acquisition different from those in the offer by applying to

court within six weeks of the date on which notice of the transfer was given.

***Sell-out***

Sections 983 to 985 of the Companies Act also give minority shareholders in the company a right to be

bought out in certain circumstances by an offeror who has made a takeover offer. If at any time before the

end of the period within which the offer could be accepted the offeror held or had agreed to acquire not

less than 90% of the ordinary shares, any holder of shares to which the offer related who had not

accepted the offer could by a written communication to the offeror require it to acquire those shares. The

offeror is required to give any shareholder notice of their right to be bought out within one month of that

right arising. The offeror may impose a time limit on the rights of minority shareholders to be bought out,

but that period cannot end less than three months after the end of the acceptance period, or, if longer, a

period of three months from the date of the notice.

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If a shareholder exercises their rights, the offeror is bound to acquire those shares on the terms of the

offer or on such other terms as may be agreed.

**Corporate Governance**

Our articles of association allocate authority over the day-to-day management of us to our board of

directors. Our board of directors may then delegate any of its powers, authorities and discretions (with

power to subdelegate) to any committee, consisting of such person or persons (whether directors or not)

as it thinks fit, but regardless, our board of directors will remain responsible, as a matter of English law, for

the proper management of our affairs. Committees may meet and adjourn as they determine proper.

Unless otherwise determined by the board of directors, the quorum necessary for the transaction of

business at any committee meeting shall be a majority of the members of such committee then in office

unless the committee shall consist of one or two members, in which case one member shall constitute a

quorum.

**Choice of Forum; Governing Law**

The rights of holders of our shares will be governed by the laws of England and Wales.

Our articles of association provide that the courts of England and Wales will be the exclusive forum for

resolving all shareholder complaints other than shareholder complaints asserting a cause of action arising

under the Securities Act and the Exchange Act, for which the U.S. federal district courts will be the

exclusive forum. As a company incorporated in England and Wales, the choice of the courts of England

and Wales as our exclusive forum for resolving all shareholder complaints, other than complaints arising

under the Securities Act and the Exchange Act, allows us to more efficiently and affordably respond to

such actions, and provides consistency in the application of the laws of England and Wales to such

actions. Similarly, we have selected the U.S. federal district courts as our exclusive forum for resolving

shareholder complaints arising under the Securities Act and the Exchange Act in order to more efficiently

and affordably respond to such claims. This choice of forum also provides both us and our shareholders

with a forum that is familiar with and regularly reviews cases involving U.S. securities law. Although we

believe this choice of forum benefits us by providing increased consistency in the application of U.S.

securities law for the specified types of action, it may have the effect of discouraging lawsuits against our

directors and officers. Any person or entity purchasing or otherwise acquiring any interest in our ordinary

shares will be deemed to have notice of and consented to the provisions of our Articles of Association,

including the exclusive forum provision. However, it is possible that a court could find our forum selection

provision to be inapplicable or unenforceable.

**Differences in Corporate Law**

The applicable provisions of the Companies Act differ from laws applicable to U.S. corporations and

their shareholders. Set forth below is a summary of certain differences between the provisions of the

Companies Act applicable to us and the General Corporation Law of the State of Delaware relating to

shareholders' rights and protections. This summary is not intended to be a complete discussion of the

respective rights and it is qualified in its entirety by reference to Delaware law and the laws of England and

Wales.

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|  | England and Wales | Delaware |
| Number of <br>Directors<br>| Under the Companies Act, a public limited <br>company must have at least two directors and <br>the number of directors may be fixed by or in the <br>manner provided in a company's articles of <br>association.<br>| Under Delaware law, a corporation must have at <br>least one director and the number of directors <br>shall be fixed by or in the manner provided in the <br>bylaws, unless the certificate of incorporation <br>fixes the number of directors, in which case a <br>change in the number of directors may be made <br>only by amendment of the certificate of <br>incorporation.<br>|

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|:---|:---|:---|
| Removal of <br>Directors<br>| Under the Companies Act, shareholders may <br>remove a director without cause by an ordinary <br>resolution (which is passed by a simple majority <br>of those voting in person or by proxy at a general <br>meeting) irrespective of any provisions of any <br>service contract the director has with the <br>company, provided 28 clear days' notice of the <br>resolution has been given to the company and its <br>shareholders. On receipt of notice of an intended <br>resolution to remove a director, the company <br>must forthwith send a copy of the notice to the <br>director concerned. Certain other procedural <br>requirements under the Companies Act must <br>also be followed, such as allowing the director to <br>make representations against his or her removal <br>either at the meeting or in writing.<br>| Under Delaware law, any director or the entire <br>board of directors may be removed, with or <br>without cause, by the holders of a majority of the <br>shares then entitled to vote at an election of <br>directors, except (i) unless the certificate of <br>incorporation provides otherwise, in the case of a <br>corporation whose board of directors is <br>classified, stockholders may effect such removal <br>only for cause or (ii) in the case of a corporation <br>having cumulative voting, if less than the entire <br>board of directors is to be removed, no director <br>may be removed without cause if the votes cast <br>against his or her removal would be sufficient to <br>elect him or her if then cumulatively voted at an <br>election of the entire board of directors, or, if <br>there are classes of directors, at an election of <br>the class of directors of which he or she is a part.<br>|
| Vacancies on <br>the Board of <br>Directors<br>| Under English law, the procedure by which <br>directors, other than a company's initial <br>directors, are appointed is generally set out in a <br>company's articles of association, provided that <br>where two or more persons are appointed as <br>directors of a public limited company by <br>resolution of the shareholders, resolutions <br>appointing each director must be voted on <br>individually.<br>| Under Delaware law, vacancies and newly <br>created directorships may be filled by a majority <br>of the directors then in office (even though less <br>than a quorum) or by a sole remaining director <br>unless (i) otherwise provided in the certificate of <br>incorporation or bylaws of the corporation or (ii) <br>the certificate of incorporation directs that a <br>particular class of stock is to elect such director, <br>in which case a majority of the other directors <br>elected by such class, or a sole remaining <br>director elected by such class, will fill such <br>vacancy.<br>|
| Annual <br>General <br>Meeting <br>| Under the Companies Act, a public limited <br>company must hold an annual general meeting in <br>each six-month period following the company's <br>annual accounting reference date.<br>| Under Delaware law, the annual meeting of <br>stockholders shall be held at such place, on such <br>date and at such time as may be designated from <br>time to time by the board of directors or as <br>provided in the certificate of incorporation or by <br>the bylaws.<br>|
| General <br>Meeting <br>| Under the Companies Act, a general meeting of <br>the shareholders of a public limited company <br>may be called by the directors. <br>Shareholders holding at least 5% of the paid-up <br>capital of the company carrying voting rights at <br>general meetings (excluding any paid-up capital <br>held as treasury shares) can require the <br>directors to call a general meeting and, if the <br>directors fail to do so within a certain period, may <br>themselves convene a general meeting.<br>| Under Delaware law, special meetings of the <br>stockholders may be called by the board of <br>directors or by such person or persons as may <br>be authorized by the certificate of incorporation <br>or by the bylaws.<br>|

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| Notice of <br>General <br>Meetings <br>| Subject to a company's articles of association <br>providing for a longer period, under the <br>Companies Act, (i) at least 21 days' notice must <br>be given for an annual general meeting and any <br>resolutions to be proposed at the meeting and (ii) <br>at least 14 days' notice is required for any other <br>general meeting of a public limited company. In <br>addition, certain matters, such as the removal of <br>directors or auditors, require special notice, <br>which is 28 days' notice. The shareholders of a <br>company may in all cases consent to a shorter <br>notice period, the proportion of shareholders' <br>consent required being 100% of those entitled to <br>attend and vote in the case of an annual general <br>meeting and, in the case of any other general <br>meeting, a majority in number of the members <br>having a right to attend and vote at the meeting, <br>being a majority who together hold not less than <br>95% in nominal value of the shares giving a right <br>to attend and vote at the meeting.<br>| Under Delaware law, unless otherwise provided <br>in the certificate of incorporation or bylaws, <br>written notice of any meeting of the stockholders <br>must be given to each stockholder entitled to <br>vote at the meeting not less than 10 nor more <br>than 60 days before the date of the meeting and <br>shall specify the place, date and hour, the means <br>of remote communications by which <br>stockholders and proxy holders may be deemed <br>present and may vote at the meeting, the record <br>date for determining stockholders entitled to <br>vote at the meeting (if different than the record <br>date for determining stockholders entitled to <br>notice) and, if the meeting is a special meeting, <br>the purpose or purposes of the meeting.<br>|
| Quorum  | Subject to the provisions of a company's articles <br>of association, the Companies Act provides that <br>two shareholders present at a meeting (in <br>person, by proxy or by authorized representative <br>under the Companies Act) shall constitute a <br>quorum for companies with more than one <br>member.<br>| The certificate of incorporation or bylaws may <br>specify the number of shares, the holders of <br>which shall be present or represented by proxy <br>at any meeting in order to constitute a quorum, <br>but in no event shall a quorum consist of less <br>than one-third of the shares entitled to vote at <br>the meeting. In the absence of such specification <br>in the certificate of incorporation or bylaws, a <br>majority of the shares entitled to vote, present in <br>person or represented by proxy, shall constitute <br>a quorum at a meeting of stockholders.<br>|
| Proxy  | Under the Companies Act, at any meeting of <br>shareholders, a shareholder may designate <br>another person to attend, speak and vote at the <br>meeting on their behalf by proxy.<br>| Under Delaware law, at any meeting of <br>stockholders, a stockholder may designate <br>another person to act for such stockholder by <br>proxy, but no such proxy shall be voted or acted <br>upon after three years from its date, unless the <br>proxy provides for a longer period. A director of a <br>Delaware corporation may not issue a proxy <br>representing the director's voting rights as a <br>director.<br>|
| Preemptive <br>Rights <br>| Under the Companies Act, "equity securities," <br>being (i) shares in the company other than shares <br>that, with respect to dividends and capital, carry <br>a right to participate only up to a specified <br>amount in a distribution, referred to as "ordinary <br>shares," or (ii) rights to subscribe for, or to <br>convert securities into, ordinary shares, <br>proposed to be allotted for cash must be offered <br>first to the existing holders of equity shares in <br>the company in proportion to the respective <br>nominal value of their holdings of ordinary <br>shares, unless an exception applies or a special <br>resolution to the contrary has been passed by <br>shareholders in a general meeting or the articles <br>of association provide otherwise in each case in <br>accordance with the provisions of the <br>Companies Act.<br>| Under Delaware law, stockholders have no <br>preemptive rights to subscribe to additional <br>issues of stock or to any security convertible into <br>such stock unless, and except to the extent that, <br>such rights are expressly provided for in the <br>certificate of incorporation.<br>|

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| Liability of <br>Directors and <br>Officers <br>| Under the Companies Act, any provision, whether <br>contained in a company's articles of association <br>or any contract or otherwise, that purports to <br>exempt a director of a company, to any extent, <br>from any liability that would otherwise attach to <br>him or her in connection with any negligence, <br>default, breach of duty or breach of trust in <br>relation to the company, is void. Any provision by <br>which a company directly or indirectly provides <br>an indemnity, to any extent, for a director of the <br>company or of an associated company against <br>any liability attaching to him or her in connection <br>with any negligence, default, breach of duty or <br>breach of trust in relation to the company of <br>which he or she is a director is also void except <br>as permitted by the Companies Act, which <br>provides exceptions for the company to: (i) <br>purchase and maintain insurance against such <br>liability; (ii) provide a "qualifying third-party <br>indemnity," or an indemnity against liability <br>incurred by the director to a person other than <br>the company or an associated company or <br>criminal proceedings in which he is convicted; <br>and (iii) provide a "qualifying pension scheme <br>indemnity," or an indemnity against liability <br>incurred in connection with the company's <br>activities as trustee of an occupational pension <br>plan.<br>| Under Delaware law, a corporation's certificate of <br>incorporation may include a provision eliminating <br>or limiting the personal liability of a director to <br>the corporation and its stockholders for damages <br>arising from a breach of fiduciary duty as a <br>director. However, no provision can limit the <br>liability of a director for:<br>•any breach of the director's duty of loyalty to <br>the corporation or its stockholders;<br>•acts or omissions not in good faith or that <br>involve intentional misconduct or a knowing <br>violation of law;<br>• intentional or negligent payment of unlawful <br>dividends or stock purchases or redemptions; or<br>•any transaction from which the director derives <br>an improper personal benefit.<br>|
| Voting Rights  | Under English law, unless a poll is demanded by <br>the shareholders of a company or is required by <br>the chairman of the meeting or the company's <br>articles of association, shareholders shall vote on <br>all resolutions on a show of hands. Under the <br>Companies Act, a poll may be demanded by: (i) <br>not fewer than five shareholders having the right <br>to vote on the resolution; (ii) any shareholder(s) <br>representing not less than 10% of the total voting <br>rights of all the shareholders having the right to <br>vote on the resolution (excluding any voting <br>rights attaching to treasury shares); or (iii) any <br>shareholder(s) holding shares in the company <br>conferring a right to vote on the resolution <br>(excluding any voting rights attaching to treasury <br>shares) being shares on which an aggregate sum <br>has been paid-up equal to not less than 10% of <br>the total sum paid-up on all the shares conferring <br>that right. A company's articles of association <br>may provide more extensive rights for <br>shareholders to call a poll.<br>Under English law, an ordinary resolution is <br>passed on a show of hands if it is approved by a <br>simple majority (more than 50%) of the votes cast <br>by shareholders present (in person or by proxy) <br>and entitled to vote. If a poll is demanded, an <br>ordinary resolution is passed if it is approved by <br>holders representing a simple majority of the <br>total voting rights of shareholders present, in <br>person or by proxy, who, being entitled to vote, <br>vote on the resolution. Special resolutions <br>require the affirmative vote of not less than 75% <br>of the votes cast by shareholders present, in <br>person or by proxy, at the meeting.<br>| Delaware law provides that, unless otherwise <br>provided in the certificate of incorporation, each <br>stockholder is entitled to one vote for each share <br>of capital stock held by such stockholder.<br>|

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KLARNA GROUP PLC235

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| Shareholder <br>Vote on <br>Certain <br>Transactions <br>| The Companies Act provides for schemes of <br>arrangement, which are arrangements or <br>compromises between a company and any class <br>of shareholders or creditors and used in certain <br>types of reconstructions, amalgamations, capital <br>reorganizations or takeovers. These <br>arrangements require:<br>• the approval at a shareholders' or creditors' <br>meeting convened by order of the court, of a <br>majority in number of shareholders or creditors <br>representing 75% in value of the capital held by, <br>or debt owed to, the class of shareholders or <br>creditors, respectively, present and voting, either <br>in person or by proxy; and<br>•the approval of the court.<br>| Generally, under Delaware law, unless the <br>certificate of incorporation provides for the vote <br>of a larger portion of the stock, completion of a <br>merger, consolidation, sale, lease or exchange of <br>all or substantially all of a corporation's assets or <br>dissolution requires:<br>•the approval of the board of directors; and<br>•the approval by the vote of the holders of a <br>majority of the outstanding stock or, if the <br>certificate of incorporation provides for more or <br>less than one vote per share, a majority of the <br>votes of the outstanding stock of the corporation <br>entitled to vote on the matter.<br>|

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KLARNA GROUP PLC236

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| Standard of <br>Conduct for <br>Directors <br>| Under English law, a director owes various <br>statutory and fiduciary duties to the company, <br>including:<br>• to act in the way he considers, in good faith, <br>would be most likely to promote the success of <br>the company for the benefit of its members as a <br>whole;<br>•to avoid a situation in which he has, or can have, <br>a direct or indirect interest that conflicts, or <br>possibly conflicts, with the interests of the <br>company;<br>• to act in accordance with the company's <br>constitution and only exercise his or her powers <br>for the purposes for which they are conferred;<br>•to exercise independent judgment;<br>•to exercise reasonable care, skill and diligence;<br>•not to accept benefits from a third party <br>conferred by reason of his or her being a director <br>or doing, or not doing, anything as a director; and<br>•to declare any interest that he has, whether <br>directly or indirectly, in a proposed or existing <br>transaction or arrangement with the company.<br>| Delaware law does not contain specific <br>provisions setting forth the standard of conduct <br>of a director. The scope of the fiduciary duties of <br>directors is generally determined by the courts of <br>the State of Delaware. In general, directors have <br>a duty to act without self-interest, on a well-<br>informed basis and in a manner they reasonably <br>believe to be in the best interests of the <br>stockholders.<br>Directors of a Delaware corporation owe <br>fiduciary duties of care and loyalty to the <br>corporation and to its stockholders. The duty of <br>care generally requires that a director acts in <br>good faith, with the care that an ordinarily <br>prudent person would exercise under similar <br>circumstances. Under this duty, a director must <br>inform himself of all material information <br>reasonably available regarding a significant <br>transaction. The duty of loyalty requires that a <br>director act in a manner he reasonably believes <br>to be in the best interests of the corporation. <br>They must not use their corporate position for <br>personal gain or advantage. In general, but <br>subject to certain exceptions, actions of a <br>director are presumed to have been made on an <br>informed basis, in good faith and in the honest <br>belief that the action taken was in the best <br>interests of the corporation. However, this <br>presumption may be rebutted by evidence of a <br>breach of one of the fiduciary duties. Delaware <br>courts have also imposed a heightened standard <br>of conduct upon directors of a Delaware <br>corporation who take any action designed to <br>defeat a threatened change in control of the <br>corporation.<br>In addition, under Delaware law, when the board <br>of directors of a Delaware corporation approves <br>the sale or breakup of a corporation, the board of <br>directors may, in certain circumstances, have a <br>duty to obtain the highest value reasonably <br>available to the shareholders.<br>|
| Shareholder <br>Litigation <br>| Under English law, generally, the company, rather <br>than its shareholders, is the proper claimant in <br>an action in respect of a wrong done to the <br>company or where there is an irregularity in the <br>company's internal management. <br>Notwithstanding this general position, the <br>Companies Act provides that (i) a court may allow <br>a shareholder to bring a derivative claim (that is, <br>an action in respect of and on behalf of the <br>company) in respect of a cause of action arising <br>from a director's negligence, default, breach of <br>duty or breach of trust and (ii) a shareholder may <br>bring a claim for a court order where the <br>company's affairs have been or are being <br>conducted in a manner that is unfairly prejudicial <br>to some or all of its shareholders.<br>| Under Delaware law, a stockholder may initiate a <br>derivative action to enforce a right of a <br>corporation if the corporation fails to enforce the <br>right itself. The complaint must:<br>•state that the plaintiff was a stockholder at the <br>time of the transaction of which the plaintiff <br>complains or that the plaintiff's shares thereafter <br>devolved on the plaintiff by operation of law; and<br>•allege with particularity the efforts made by the <br>plaintiff to obtain the action the plaintiff desires <br>from the directors and the reasons for the <br>plaintiff's failure to obtain the action; or<br>•state the reasons for not making the effort.<br>Additionally, the plaintiff must remain a <br>stockholder through the duration of the <br>derivative suit. The action will not be dismissed <br>or compromised without the approval of the <br>Delaware Court of Chancery.<br>|

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KLARNA GROUP PLC237

**Legal Name; Formation**

Our current legal and commercial name is Klarna Group plc, and we were incorporated under the laws

of England and Wales as a public limited company on November 7, 2022 under number 14467769.

**Stock Exchange Listing**

Our ordinary shares are listed on the NYSE under the symbol "KLAR."

C.Material contracts

Not applicable.

D.Exchange Controls

United Kingdom

Klarna Group plc is incorporated in England and Wales. There are currently no UK foreign exchange

control restrictions or laws that would affect the remittance of dividends, interest, or other payments to

holders of our ordinary shares who are non-residents of the United Kingdom. The UK does not currently

restrict the export or import of capital, and there are no limitations under English law or in our Articles of

Association restricting the right of non-residents to hold or vote our ordinary shares, except as described

under "Description of Share Capital and Articles of Association."

Following the United Kingdom's withdrawal from the European Union, UK sanctions and financial

restrictions are administered by the Office of Financial Sanctions Implementation (OFSI) under HM

Treasury. These sanctions apply to designated persons and entities and could affect transfers of funds in

certain circumstances. Holders of our ordinary shares who are or become designated persons under

applicable UK sanctions regimes may be subject to restrictions on their ability to receive or transfer funds

related to our securities.

E.Taxation

The material U.K. and U.S. federal income tax considerations relevant to holders of our ordinary shares are

set forth in "Item 3. Key Information—Material U.K. Tax Considerations for U.K. Holders" and "Item 3. Key

Information—Material U.S. Federal Income Tax Considerations for U.S. Holders" of this Form 20-F.

F.Dividend and paying agents

Not applicable.

G.Statement by experts

Not applicable.

H.Documents on display

Our SEC filings are available to you on the SEC's website at http://www.sec.gov. This site contains reports,

proxy and information statements and other information regarding issuers that file electronically with the

SEC. The information on that website is not part of this report.

We also make available on the Investors section of our website, free of charge, our annual reports on Form

20-F and the text of our reports on Form 6-K, including any amendments to these reports, as well as

certain other SEC filings, as soon as reasonably practicable after they are electronically filed with or

furnished to the SEC. Our website address is www.klarna.com. The information on that website is not part

of this report.

KLARNA GROUP PLC238

We announce material financial information to our investors using our Investors website

(investors.klarna.com.), SEC filings, press releases, public conference calls, and webcasts. We use these

channels, as well as social media, to communicate with our users and the public about our company, our

services, and other issues. It is possible that the information we post on these channels could be deemed

to be material information. Therefore, we encourage investors, the media, and others interested in our

company to review the information we post on the channels listed on our Investors website. Information

contained on our website is not part of this annual report on Form 20-F or any other filings we make with

the SEC.

I.Subsidiary information

For further information regarding the Company's principal subsidiaries, see Exhibit 8.1\*

J.Annual report to security holders

Not applicable.

KLARNA GROUP PLC239

**Item 11. Quantitative and Qualitative Disclosures About Market Risk**

Market risk generally represents the risk of loss that may result from the potential change in the value

of a financial instrument as a result of fluctuations in interest rates and market prices. We are exposed to

market risks in the ordinary course of our business, as described below.

Currency Risk

We are exposed to currency risks in light of our global operations.

The functional currency of Klarna Group plc is the U.S. dollar. The functional currency of our

subsidiaries is generally the currency of the country in which they are located. Foreign currency risk

primarily relates to the extent that sales, purchases and borrowings of our foreign operations are

denominated in currencies other than the functional currency of the legal entity in which the transaction is

recorded by us. Assets and liabilities arising from such transactions are translated into the legal entity's

functional currency using the exchange rate in effect on the balance sheet date. Revenue and expenses

are translated using the average exchange rate over the relevant period. We present our financial

statements in U.S. dollars and record transactions in foreign currencies at the rate in effect on the

transaction date and assets and liabilities denominated in foreign currencies that are outstanding at the

end of a financial period are translated at the closing rate in effect on the applicable balance sheet date.

In 2023, we recognized a gain from exchange differences on translation of foreign operations of $58

million in other comprehensive losses. The gain primarily resulted from a $81 million gain from the

translation of the financial results of our Swedish entities (primarily Klarna Holding and Klarna Bank, for

which SEK is the functional currency) to USD, as the Swedish krona strengthened by 3.6% against the U.S.

dollar in 2023. This gain was partially offset by a $16 million loss from the translation of the financial results

of our German operations, for which EUR is the functional currency, to USD.

In 2024, we recognized a loss from exchange differences on translation of foreign operations of $151

million in other comprehensive losses. The loss primarily resulted from an $215 million loss from the

translation of the financial results of our Swedish entities (primarily Klarna Holding, Klarna Bank and our

PriceRunner entities, for which SEK is the functional currency) to USD, following a weakening of the

Swedish krona of 9.8% against the U.S. dollar in 2024. This loss was partially offset by a $42 million gain

from the translation of the financial results of our German operations, for which EUR is the functional

currency, to USD.

In 2025, we recognized a gain from exchange differences on translation of foreign operations of $369

million in other comprehensive losses. The gain primarily resulted from a $739 million gain on the

translation of the financial results of our Swedish entities (primarily Klarna Holding, Klarna Bank and our

PriceRunner entities, for which SEK is the functional currency) to USD, as the Swedish krona weakened by

(19.6)% against the U.S in 2025. This gain was partially offset by a $(90) million loss from the translation of

the financial results of our German operations, for which EUR is the functional currency, to USD.

We aim to minimize currency risks through offsetting currency transactions in order to minimize the

impact that changes in currency rates may have on our earnings. Nonetheless, it is not practical for us to

mitigate all of our foreign currency exposure, nor are we able to accurately predict the possible impact of

future foreign currency exchange rate fluctuations on our results of operations, due to our constantly

changing exposure to various foreign currencies, difficulty in predicting fluctuations in foreign currency

exchange rates relative to the U.S. dollar and the significant number of foreign currencies involved. We

have experienced and we will continue to experience fluctuations in our net income (loss) as a result of

revaluing our assets and liabilities that are not denominated in the functional currency of the entity that

recorded the asset or liability.

The table below shows possible impacts of a hypothetical 10% strengthening in the exchange rate of

significant currencies to which we have exposure relative to the value of the U.S. dollar on December 31,

2025 on our operating income (loss) in the consolidated financial statements for the year ended

KLARNA GROUP PLC240

December 31, 2025. The sensitivity associated with a 10% weakening of a particular currency would be

equal and opposite. This assumes that each currency moves in isolation.

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| | | | |
|:---|:---|:---|:---|
| **(in $ million)** | **SEK** | **EUR** | **GBP** |
| (Increase)/decrease in operating income (loss) ........................................ | $(76) | $46 | $2 |

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Interest Rate Risk

Our cash as of December 31, 2025 was held primarily with the European Central Bank and the Swedish

Central Bank (Sw. Sveriges Riksbank) while our cash equivalents primarily consisted of treasury bills with

maturities of less than three months and cash held in demand deposit accounts at these central banks.

Our cash and cash equivalents are held for liquidity and regulatory purposes. As of December 31, 2025, we

had $543 million of cash equivalents invested in short-term highly liquid securities. The fair value of our

cash and cash equivalents would not be significantly affected by either an increase or decrease in interest

rates given the short-term nature of these instruments.

At the same time, interest rates may adversely impact our consumers' spending levels and ability and

willingness to pay outstanding amounts owed to us. Higher interest rates often lead to higher payment

obligations by consumers of our financing products to us, or to lenders under mortgage, credit card and

other consumer and merchant loans, which may reduce our consumers' ability to remain current on their

obligations to us and therefore lead to increased delinquencies, charge-offs and allowances for loans and

interest receivable, which could have an adverse effect on our operating results. In addition, higher

interest rates may require us to offer higher interest rates on our consumer deposits or when raising

additional funds. Also, certain of our funding arrangements bear a variable interest rate. See "—

Indebtedness" above. Dramatic increases in interest rates may make these forms of funding nonviable.

Additionally, certain of our loan sale agreements are repriced on a recurring basis using a mechanism tied

to interest rates. We maintain an interest rate hedging program which eliminates some, but not all, of the

interest rate risk.

As of December 31, 2025, a hypothetical 10% relative change in interest rates, after taking into account

the effect of our hedging program currently in place, would not have a material impact on our interim

condensed consolidated financial statements.

Equity Price Risk

On occasion, we make strategic equity investments in other companies to accelerate innovation and/

or expand and improve our network and offerings. We are therefore subject to equity risks related to the

potential changes in the value of these investments, including potential losses following any decline in

their fair market value.

As of December 31, 2025, a hypothetical 10% relative change in the valuation of our equity investments

would not have a material impact on our interim condensed consolidated financial statements.

Other Risks

In addition to market risks, we are exposed to various risks in the ordinary course of our business. We

categorize the key risks we are exposed to into several categories. These categories are subsequently

further refined and managed within Klarna. These risk categories form the basis of how we identify, assess,

manage and report against risk.

**Credit risk**

We define credit risk as the risk of loss due to a counterparty failing to meet its contractual obligations

or concentrations of exposures. Extending credit is fundamental to our mission of providing consumers a

KLARNA GROUP PLC241

smooth payment experience and better financial management as well as supporting our merchants'

growth.

We aim to ensure that our consumer credit portfolio is resilient to volatile economic conditions by

extending short duration financing solutions to our consumers and maintaining a low AOV. In the year

ended December 31, 2025, our average balance per active Klarna consumer was $124 (Pay in Full: $0; Pay

Later: $120 Fair Financing:$393) and based on contractual repayment schedules, our weighted average

life (WAL) was approximately 39 days (27 days for Pay Later and 109 days for Fair Financing) . We also limit

the concentration of non-performing loans and large single exposures in the consumer credit portfolio.

This, together with the dispersion of millions of active Klarna consumers across multiple countries and

continents and the low average order value discussed above, keeps our consumer portfolio diversified. We

also take precautions to ensure that approved consumers can meet their financial obligations to us.

Exposure and potential losses from merchants, card networks, PSPs, other participants in the

payments ecosystem and our bank partners are managed by limiting single exposures based on the risk

class of the counterparty as well as the aggregated exposure and concentration to different segments.

Exposures to partners are managed using mitigation tools to increase our collateral, such as payment

delays, rolling reserves, insurances and withholding payments.

We enter into arrangements that provide credit protection for portions of our consumer receivables

portfolio. These arrangements may reduce the regulatory capital Klarna Bank is required to maintain under

applicable capital adequacy requirements and are fully funded with eligible collateral.

**Liquidity risk**

We define liquidity risk as the risk of being unable to meet financial obligations as they fall due or

unable to fund operational needs without incurring unacceptable costs. We are dependent upon the

effective management of liquidity risk to realize our long-term strategy. Failure to secure any necessary

financing in a timely manner and on favorable terms could adversely affect our growth strategy as well as

our ability to timely repay our existing commitments or to meet applicable capital adequacy requirements.

We are primarily exposed to liquidity risk due to the potential for unexpected increased demand for

consumer credit. We may fail to maintain or obtain sufficient funding at a reasonable cost in a timely

manner, if at all, to match the increased demand. Further, potential changes to capital adequacy

requirements applicable to us may require us to obtain additional funding, which may not be available to

us on favorable terms or at all.

We manage our liquidity risk exposure and sources of liquidity by actively managing and forecasting

the size of our liquid asset portfolio and our funding needs to ensure that we are able to fund our

operations, including to meet our financial obligations as they become due, and remain compliant with the

applicable capital adequacy and liquidity requirements. We invest in financial instruments as part of our

liquidity management process, primarily in sovereign and municipal government securities.

**Operational risk**

We define operational risk as the risk of inadequate or failed processes, personnel, products or third

parties. Operational risk is a natural consequence of our business model and operations. The continued

delivery of our products, solutions and services to consumers relies on the resilience and stability in how

our internal processes, personnel, products, solutions and services as well as relationships with third

parties are managed.

We maintain an operational risk management framework outlined in our operational risk policy, which

is supported and supplemented by more detailed risk-specific policies and procedures, including those

governing our use and development of AI. For example, we incorporate human involvement in the training

and monitoring of our AI tools and align our AI development policies and procedures with guidelines for

secure development practices. On an annual basis, we identify business-critical products, solutions and

KLARNA GROUP PLC242

services and conduct a risk assessment process, including review of internal controls applicable to such

products and services and identification of any needed mitigation actions. We also maintain business

continuity plans to ensure uninterrupted operations of our network. Additionally, to sustain operational

delivery, we maintain incident management processes to provide for a structured approach to continuous

learning and improvement through analysis of past incidents.

We also operate a change management approval process (the new product approval (NPA) process)

designed to ensure a sound understanding of the business change and adequately identify any associated

risks. All major identified changes undergo a risk assessment process designed to identify potential related

risks and, where applicable, implement adequate controls and/or mitigation actions. Finally, we maintain

an AML and CTF policy designed to address risks related with potential violations of applicable AML and

CTF laws and regulations through the use of our network.

**ICT and security risk**

We define ICT and security risk as the risk of failures or breaches of our information or communication

systems or physical facilities. Such failures could stem from internal software errors or bugs, security

vulnerabilities, defects or errors from open source software, use and development of AI, natural

catastrophes, conversion errors due to system upgrades, data breaches or other cybersecurity incidents,

other security incidents, loss or corruption of data, hardware malfunctions or external threats, including

sophisticated cyberattacks aimed at disrupting our operations or cybersecurity. We utilize many

automated and standardized security measures in a layered approach designed to protect our systems.

We maintain a detailed ICT management framework designed to manage ICT and security risks. This

includes regular IT security/vulnerability assessments and testing, ongoing system monitoring, software

change management controls, strict access management controls and regular ICT and employee training,

including security awareness training and exercises. Key ICT and security risk controls are tested and

measured at least annually through an independent assurance reporting audit. We have also implemented

policies, technical controls and training measures designed to safeguard customer data in AI operations.

For example, we have in place AI model-building controls, a company-wide policy that defines safeguards

to limit customer data use, agreements with third-party AI providers prohibiting customer data from being

used for model training and AI tool reviews before onboarding. We also adopted an AI ethics and

governance policy, which establishes the ethical and legal framework for developing, deploying and using

AI systems in our operations.

**Business risk**

We define business risk as the risk to the delivery of Klarna's business objectives, its long-term

valuation and overall viability, including the risks from sustainability factors. Our strategy is executed

through our business plan, which establishes an informed decision-making process for assessing business

risks. The business plan defines our objectives and the steps needed to achieve those objectives. It is

designed to be resilient to changes in external economic and competitive conditions. Our goal is to

maintain a sustainable long-term strategy and business model and therefore expect to be able to realize

our business plan with limited variations and adjustments.

As a part of the business planning cycle, we comprehensively assess risks to our business plan and

consider the impact of competitors and market conditions to test the business plan's feasibility under

different scenarios. The progress and status of our business plan is reviewed monthly by our management

based on updates to our key financial and operational metrics, including current risk profile vis-à-vis our

risk appetite. Where appropriate or required, we adjust our operations and business decisions to remain

on track to execute on our business plan. To deliver on our sustainable, global growth strategy in an

efficient way, we prioritize lower-risk products that we can quickly test, iterate and then scale on our

platform. Launches of new products or markets go through a structured assessment and decision-making

process to ensure applicable risks have been properly identified and addressed.

KLARNA GROUP PLC243

Sustainability risks are in turn identified through a periodic double-materiality assessment designed to

identify the key sustainability-related themes that could impact our operations. Detailed action plans are

developed to further manage specific risks.

KLARNA GROUP PLC244

**Item 12. Description of Securities Other than Equity Securities**

None.

KLARNA GROUP PLC245

**Part II**

**Item 13. Defaults, Dividend Arrearages and Delinquencies**

None.

KLARNA GROUP PLC246

**Item 14. Material Modifications to the Rights of Security Holders and Use of** 

**Proceeds**

Material Modifications to the Rights of Security Holders

There were no material modifications to the rights of holders of our registered securities during the

fiscal year ended December 31, 2025.

Use of Proceeds

On September 9, 2025, our registration statement on Form F-1 (File No. 333-285826) relating to our

initial public offering was declared effective by the SEC, pursuant to which we offered and sold a total of

39,457,965 ordinary shares (including exercise of the underwriters' over-allotment option to purchase

additional shares) at a public offering price of $40 per share. Goldman Sachs & Co. LLC, J.P. Morgan and

Morgan Stanley acted as joint book-running managers for the offering. BofA Securities, Citigroup, Deutsche

Bank Securities, Societe Generale and UBS Investment Bank acted as bookrunners for the offering. BNP

Paribas, Keefe, Bruyette & Woods, A Stifel Company, Nordea, Rothschild & Co, Wedbush Securities and

Wolfe \| Nomura Alliance acted as co-managers for the offering. The offering began on September 2, 2025

and was completed on September 11, 2025. The Company raised net proceeds of $169 million through the

IPO, net of underwriting discounts and other offering costs of $22.41 million. Directly attributable

transaction costs related to the issuance of new ordinary shares of $8.5 million were deducted from the

proceeds of the offering.

The net proceeds received from our initial public offering have been applied toward general corporate

purposes, including working capital, operating expenses, and capital expenditures.

Selling shareholders also sold ordinary shares in the offering, and we did not receive any proceeds

from such sales.

KLARNA GROUP PLC247

**Item 15. Controls and Procedures**

A. Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the

Exchange Act, which are designed to ensure that information required to be disclosed by us in reports that

we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the

time periods specified in the rules and forms of the U.S. Securities and Exchange Commission ("SEC").

These controls include processes designed to accumulate and communicate the required information to

management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions

regarding required disclosures.

In connection with the preparation of our consolidated financial statements under International

Financial Reporting Standards ("IFRS") as issued by the International Accounting Standards Board ("IASB"),

our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has

conducted an evaluation of the effectiveness of our disclosure controls and procedures as of

December 31, 2025 and concluded that they were effective.

B. Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over

financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Internal control over financial

reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief

Financial Officer, and effected by our board of directors, management and other personnel, to provide

reasonable assurance regarding the reliability of financial reporting and the preparation of financial

statements in accordance with IFRS.

In connection with the preparation of our consolidated financial statements, we previously identified a

material weakness in our internal control over financial reporting related to our IT general controls for

information systems that are relevant to the preparation of our consolidated financial statements, related

to (i) user access controls, including management of privileged access, (ii) change management with

respect to monitoring segregation of duties, and (iii) IT operations controls with respect to certain third-

party service providers. We implemented remediation measures to address the material weakness which

we have concluded is remediated as of December 31, 2025. This included; strengthening user access

controls, including utilizing central access management tools, enhancing change management controls

and establishing a standardized framework for the review and assessment of third-party IT service

provider controls.

Neither our management nor our independent registered public accounting firm has performed an

evaluation of our internal control over financial reporting in accordance with the provisions of the

Sarbanes-Oxley Act because no such evaluation has been required. Such evaluation will commence with

our second annual report on Form 20-F.

C. Management's Annual Report on Internal Control Over Financial Reporting

As this is our first annual report on Form 20-F, we are not yet required to provide management's

annual report on internal control over financial reporting pursuant to SEC rules and regulations.

D. Changes in Internal Control Over Financial Reporting

Other than the remediation measures described above, there were no changes in our internal control

over financial reporting during the fiscal year ended December 31, 2025, that have materially affected, or

are reasonably likely to materially affect, our internal control over financial reporting. We remain

committed to implementing and operating effective controls and procedures to support our financial

reporting objectives and ensure compliance with applicable SEC requirements.

KLARNA GROUP PLC248

**Item 16. [Reserved]**

**Item 16A. Audit committee financial expert**

Our board of directors has determined that Sarah Smith is an "audit committee financial expert" within

the meaning of Item 407(d) of Regulation S-K.

**Item 16B. Code of Ethics**

We have adopted a Code of Business Conduct and Ethics ("the Code") that applies to all contributors

of the Company, including our principal executive officer, principal financial officer, principal accounting

officer or controller, and persons performing similar functions. The Code is intended to promote honest

and ethical conduct, including the ethical handling of actual or apparent conflicts of interest, compliance

with applicable laws and regulations, the integrity of financial reporting and accounting practices, and the

timely and accurate disclosure of information in reports and documents filed with or submitted to the

Securities and Exchange Commission.

The Code also provides mechanisms for reporting and escalating concerns and includes protections

against retaliation for individuals who raise ethics or compliance issues in good faith.

The Code of Business Conduct and Ethics is publicly available on our website.

**Item 16C. Principal Accountant Fees and Services**

Ernst & Young AB have acted as our principal accountants for the years ended December 31, 2025 and

2024, respectively. The following table summarizes the charge for professional fees rendered in those

periods:

---

| | | |
|:---|:---|:---|
| **Amounts in USD millions** | **2025** | **2024** |
| Audit fee | 7.6 | 9.1 |
| Audit related fee | 2.4 | 0.7 |
| Tax fee |  |  |
| All other fees |  |  |
| **Total** | **$10.0** | **$9.8** |

---

"Audit fees" are the aggregate fees earned by the Ernst & Young entities for the audit of our

consolidated annual financial statements, reviews of interim financial statements and attestation services

that are provided in connection with statutory and regulatory filings or engagements.

"Audit-related fees" are fees charged by the Ernst & Young entities for assurance and related services

that are reasonably related to the performance of the audit or review of our financial statements and are

not reported under "Audit fees." This category comprises fees for internal control reviews, agreed-upon

procedure engagements and other attestation services subject to regulatory requirements.

"Tax Fees" include fees billed for tax compliance. "All other fees" are the fees for products and

services other than those in the above three categories.

All audit services and non-audit services to be performed for us by our independent auditor must be

approved by our Audit Committee in advance to ensure that such engagements do not impair the

independence of our independent registered public accounting firm. The Audit Committee generally pre-

KLARNA GROUP PLC249

approves particular services or categories of services on a case-by-case basis. All services provided to us

by our independent auditor in 2025 and 2024 were pre-approved by the Audit Committee.

**Item 16D. Exemptions from the Listing Standards for Audit Committees**

The Company does not rely on any exemptions from the audit committee requirements applicable

under the listing standards of the New York Stock Exchange.

**Item 16E. Purchases of Equity Securities by the Issuer and Affiliated Purchasers**

We did not repurchase any of our equity securities during 2025.

**Item 16F. Change in Registrant's Certifying Accountant**

Not applicable.

**Item 16G. Corporate Governance**

Foreign Private Issuer Status; Overview of Governance Framework

We are a public limited company incorporated in England and Wales. Our ordinary shares are listed on

the New York Stock Exchange ("NYSE"). We are a "foreign private issuer" as defined under the U.S.

Securities Exchange Act of 1934, as amended (the "Exchange Act"). As a result, we are permitted under

NYSE rules to follow certain English home-country corporate governance practices in lieu of certain

corporate governance requirements applicable to U.S. domestic issuers listed on the NYSE, subject to

applicable mandatory requirements.

As an NYSE-listed foreign private issuer, we are required, among other things, to maintain an audit

committee that satisfies the requirements of Rule 10A-3 under the Exchange Act, as reflected in Section

303A.06 of the NYSE Listed Company Manual, and to disclose in this report on Form 20-F any significant

ways in which our corporate governance practices differ from those followed by U.S. domestic issuers

under NYSE corporate governance standards, as required by Section 303A.11 of the NYSE Listed Company

Manual.

Our corporate governance framework is informed by English law, including the Companies Act 2006

and applicable common law principles, and by our constitutional and governance documents. These

include our articles of association, our Board Charter, the charters or terms of reference of the Audit

Committee and the combined Remuneration and Nomination Committee, and our Corporate Governance

Guidelines, together with Klarna Group governance frameworks. Collectively, these documents set out the

roles, responsibilities and authorities of the Board of Directors, its committees and management, and

provide the framework for oversight of the Company's business, risk management and internal governance

and control.

In addition, we have adopted a Code of Business Conduct and Ethics, approved by the Board of

Directors, which applies to all contributors, including directors and executive officers. The Code is

intended to promote lawful and ethical conduct, integrity and accountability, and includes standards

relating to compliance with applicable laws and internal rules, as well as mechanisms for reporting and

escalating concerns.

KLARNA GROUP PLC250

Although the Company is not subject to the UK Corporate Governance Code, we are committed to

maintaining high standards of corporate governance appropriate to the Company's scale, complexity and

regulatory profile, taking into account our status as a foreign private issuer listed on the NYSE.

Composition of the Board

The Board of Directors is responsible for the overall management and strategic direction of the

Company and for oversight of risk management and internal controls, including financial, operational,

reporting and compliance controls.

The Board is composed of ten directors. As a foreign private issuer, the Company is not required under

the listing requirements and rules of the New York Stock Exchange ("NYSE") to have a board composed of

a majority of independent directors. The Board has determined, however, that eight of its ten directors are

independent within the meaning of Section 303A.02 of the NYSE Listed Company Manual, as they do not

have any relationships that would interfere with the exercise of independent judgment in carrying out the

responsibilities of a director.

Board Committees; Independence; Charters

The Board has established (i) an Audit Committee and (ii) a combined Remuneration and Nomination

Committee (the "Remuneration and Nomination Committee"). Each committee operates pursuant to a

written charter approved under authority delegated by the Board, and the Board retains ultimate oversight

of the committees' mandates and responsibilities.

**Audit Committee**

The Audit Committee assists the Board in overseeing the Company's accounting and financial

reporting processes and the audits of the Company's consolidated financial statements. In addition, the

Audit Committee is directly responsible for the compensation, retention and oversight of the work of the

Company's independent registered public accounting firm, which is elected by the Company's

shareholders.

The Audit Committee is composed solely of independent directors. As of the date of this report, the

members of the Audit Committee are Sarah Smith (Chair), Omid R. Kordestani and Roger W. Ferguson, Jr.

The Board has determined that each member of the Audit Committee satisfies the independence

requirements of Rule 10A-3 under the U.S. Securities Exchange Act of 1934, as amended (the "Exchange

Act"), and the applicable listing standards of the New York Stock Exchange ("NYSE"), as well as the

financial literacy requirements.

The Board has also determined that Sarah Smith qualifies as an "audit committee financial expert"

within the meaning of Item 407(d) of Regulation S-K.

As a newly listed company, the Company was required to have an audit committee composed entirely

of independent directors no later than one year following the effective date of its registration statement,

and the Company is in compliance with these requirements.

**Remuneration and Nomination Committee**

The Remuneration and Nomination Committee supports the Board in establishing and reviewing the

Company's remuneration and benefits strategy and guidelines, including by preparing proposals to the

annual general meeting of shareholders regarding the compensation of the members of the Board and the

Company's executive officers. The committee may also submit proposals to the Board on other

remuneration-related matters.

____________

<sup>1</sup> UK equivalent to a Compensation Committee

KLARNA GROUP PLC251

In addition, the Remuneration and Nomination Committee supports the Board in connection with Board

and committee composition, director nominations, succession planning, performance evaluation, and the

review and amendment, as appropriate, of the Company's corporate governance framework and

guidelines.

The Remuneration and Nomination Committee is composed solely of non-executive directors. As of

the date of this report, the members of the Remuneration and Nomination Committee are Omid R.

Kordestani (Chair), Andrew Reed, Michael J. Moritz and Sarah Smith. The Board has determined that the

members of the Remuneration and Nomination Committee meet the independence requirements of the

NYSE listing standards applicable to U.S. domestic issuers and qualify as "non-employee directors" within

the meaning of Rule 16b-3 under the Exchange Act.

Code of Business Conduct and Ethics

The Company has adopted a Code of Business Conduct and Ethics (the "Code"), which applies to all

contributors, including directors and executive officers. The Code is intended to promote lawful and

ethical conduct, integrity and accountability, and sets out standards of ethical behavior and compliance

with applicable laws and internal rules. The Code also provides mechanisms for reporting and escalating

concerns and includes protections against retaliation for individuals who raise ethics or compliance issues

in good faith.

Corporate Governance Guidelines

The Company has adopted Corporate Governance Guidelines that apply on a global basis and are

approved on behalf of the Board and reviewed at least annually. The Guidelines set out principles relating

to the composition, independence, and responsibilities of the Board, the structure and role of Board

committees, director qualifications and evaluations, and the Company's framework for internal governance

and control. The Guidelines are intended to support effective Board oversight and align Klarna's

governance practices with applicable regulatory requirements, including relevant New York Stock

Exchange standards, while reflecting the Company's status as a foreign private issuer incorporated in

England and Wales.

Differences from NYSE Corporate Governance Standards

As a foreign private issuer, the Company is permitted to follow certain English home-country corporate

governance practices in lieu of certain NYSE requirements applicable to U.S. domestic issuers. In

particular, the Company follows English law with respect to shareholder approval of equity issuances and

quorum requirements for shareholder meetings, and is not subject to the NYSE requirement for regularly

scheduled executive sessions of independent directors. In addition, the Company's directors and

executive officers are not subject to the reporting and short-swing profit provisions of Section 16 of the

Exchange Act.

The following table summarizes the significant differences (if any) between the corporate governance

practices followed by the Company and the corporate governance standards applicable to U.S. domestic

issuers listed on the NYSE. This disclosure is not intended to suggest that the corporate governance

practices of any particular jurisdiction are better or more effective than those of another jurisdiction.

____________

<sup>1</sup> Under English law, the issuance of shares is governed by the Companies Act 2006 and English Common Law and Equity

KLARNA GROUP PLC252

**Summary of Significant Differences Between NYSE Domestic Standards and Klarna Practices**

---

| | |
|:---|:---|
| **NYSE Domestic Issuer Standard** <br>**(Selected)**<br>| **Klarna Group plc Practice / Home-Country Practice** |
| Compensation Committee (NYSE <br>303A.05)<br>| The Company has a combined Remuneration and Nomination Committee <br>governed by a written charter and composed entirely of independent directors. <br>The committee discharges responsibilities typically allocated to separate NYSE <br>domestic issuer compensation and nominating/corporate governance <br>committees, including executive remuneration policy and determinations and <br>Board/committee composition, nomination and succession planning.<br>|
| Nominating/Corporate <br>Governance Committee (NYSE <br>303A.04)<br>| The Company addresses nomination and governance matters through the <br>combined Remuneration and Nomination Committee (rather than a separate <br>committee). The committee is composed entirely of independent directors and <br>operates under a written charter.<br>|
| Shareholder Approval of Equity <br>Compensation plans (NYSE Listed <br>Company Manual §303A.08)<br>| Under NYSE rules applicable to U.S. domestic issuers, shareholder approval is <br>generally required for equity compensation plans and material amendments <br>thereto. Under English law and the Company's articles of association, <br>shareholder approval of equity compensation plans or grants thereunder is not <br>required in all circumstances, provided that shareholders have approved <br>sufficient authority to allot shares and to disapply pre-emption rights. While <br>shareholders may be required to vote on the Company's remuneration policy and <br>remuneration report in accordance with English law, such votes do not constitute <br>plan-specific shareholder approval of equity compensation arrangements. Klarna <br>follows its English home-country practice in this regard.<br>|

---

**Item 16H. Mine Safety Disclosure**

Not applicable.

**Item 16I. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections**

Not applicable.

**Item 16J. Insider Trading Policies**

Klarna is committed to complying with all applicable securities laws and regulations relating to the

protection of material non-public information. Klarna has adopted an Insider Trading Policy governing the

purchase, sale and other dispositions of its securities. The Insider Trading Policy prohibits directors,

officers, employees and other covered persons from purchasing or selling Klarna securities, or the

securities of any other company, while in possession of material non-public information.

The policy also prohibits the unauthorized disclosure or "tipping" of material non-public information to

any third party.

A copy of the Insiders Insider Trading Policy is filed as an exhibit to this Annual Report on Form 20-F.

**Item 16K. Cybersecurity**

At Klarna, cybersecurity risk management is an integral part of our risk management framework. Our

cybersecurity risk management program is based on industry best practices and provides a framework for

handling cybersecurity threats and incidents, including threats and incidents associated with the use of

KLARNA GROUP PLC253

services provided by third-party service providers, and facilitate coordination across different

departments . This framework includes assessing the severity of a cybersecurity threat, identifying the

source of a cybersecurity threat including whether the cybersecurity threat is associated with a third-

party service provider, implementing cybersecurity countermeasures and mitigation strategies and

informing management and our board of directors of material cybersecurity threats and incidents. Our

cybersecurity team also engages third-party security experts for risk assessment and system

enhancements.Our cybersecurity risk management program includes processes designed to identify and

mitigate digital-asset-specific risks, such as private-key management, third-party custody and service

provider dependencies. In addition, all employees are required to complete mandatory training on our

cybersecurity framework

Our board of directors has overall oversight responsibility for our risk management, and delegates

cybersecurity risk management oversight to the Audit Committee (AuditCo) of the board of directors. The

AuditCo is responsible for ensuring that management has processes in place designed to identify and

evaluate cybersecurity risks to which the company is exposed and implement processes and programs to

manage cybersecurity risks and mitigate cybersecurity incidents. The AuditCo also reports material

cybersecurity risks to our full board of directors. Management is responsible for identifying, considering

and assessing material cybersecurity risks on an ongoing basis, establishing processes to monitor such

potential cybersecurity risk, putting in place appropriate mitigation measures and maintaining

cybersecurity programs. Our cybersecurity programs operate under the direction of our Chief Information

Security Officer, or CISO who receives reports from our cybersecurity team and monitors the prevention,

detection, mitigation, and remediation of cybersecurity incidents. Our CISO and dedicated personnel are

certified and experienced information systems security professionals and information security managers .

Management, including the CISO, our cybersecurity team and our second line risk function, regularly

update the AuditCo on the company's cybersecurity programs, material cybersecurity risks and mitigation

strategies and provide cybersecurity reports that cover, among other topics, third-party assessments of

the company's cybersecurity programs, developments in cybersecurity and updates to the company's

cybersecurity programs and mitigation strategies].

In 2025, we did not identify any cybersecurity threats that have materially affected or are reasonably

likely to materially affect our business strategy, results of operations, or financial condition. However,

despite our efforts, we cannot eliminate all risks from cybersecurity threats, or provide assurances that we

have not experienced an undetected cybersecurity incident. For more information about these risks,

please see "Risk Factors " in this report.

KLARNA GROUP PLC254

**Part III**

**Item 17. Financial Statements**

See "Item 18. Financial Statements"

KLARNA GROUP PLC255

**Item 18. Financial Statements**

The audited Consolidated Financial Statements as required under Item 18 are attached hereto starting

on page F-1 of this Form 20-F.

**Item 19. Exhibits**

(1)Exhibits.

The following documents are filed as part of this registration statement:

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Exhibit No.** | **Description** | **Schedule/**<br>**Form**<br>| **File Number** | **Exhibit** | **File Date** |
| 2.1\*\* | <u>[Description of Securities](exhibit21-descriptionofs.htm)</u> |  |  |  |  |
| 3.1\* | <u>[Articles of Association](exhibit31-articlesofasso.htm)</u> |  |  |  |  |
| 4.1\* | <u>[Form of Ordinary Share Certificate](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit41-fx1.htm)</u> | Form F-1/<br>A<br>| 333-285826 | 4.1 | September 2, <br>2025<br>|
| 4.2\* | <u>[Terms and Conditions of Senior Unsecured Notes due 2026,](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit42-fx1.htm)</u><br><u>[issued by Klarna Bank AB on March 21, 2024, Senior Unsecured](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit42-fx1.htm)</u><br><u>[Notes due 2026, issued by Klarna Bank AB on June 24, 2024, and](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit42-fx1.htm)</u><br><u>[Senior Unsecured Notes due 2027, issued by Klarna Bank AB on](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit42-fx1.htm)</u><br><u>[June 24, 2024](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit42-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.2 | September 2, <br>2025<br>|
| 4.3\* | <u>[Final Terms of Senior Unsecured Notes due 2026, issued by](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit43-fx1.htm)</u><br><u>[Klarna Bank AB on March 21, 2024](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit43-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.3 | September 2, <br>2025<br>|
| 4.4\* | <u>[Final Terms of Senior Unsecured Notes due 2026, issued by](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit44-fx1.htm)</u><br><u>[Klarna Bank AB on June 24, 2024](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit44-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.4 | September 2, <br>2025<br>|
| 4.5\* | <u>[Final Terms of Senior Unsecured Notes due 2027, issued by](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit45-fx1.htm)</u><br><u>[Klarna Bank AB on June 24, 2024](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit45-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.5 | September 2, <br>2025<br>|
| 4.6\* | <u>[Terms and Conditions of Tier 2 Subordinated Notes due 2033,](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit46-fx1.htm)</u><br><u>[issued by Klarna Holding AB on May 16, 2023](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit46-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.6 | September 2, <br>2025<br>|
| 4.7\* | <u>[Terms and Conditions of Tier 2 Subordinated Notes due 2033,](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit47-fx1.htm)</u><br><u>[issued by Klarna Holding AB on August 16, 2023](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit47-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.7 | September 2, <br>2025<br>|
| 4.8\* | <u>[Terms and Conditions of Tier 2 Subordinated Notes due 2034,](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit48-fx1.htm)</u><br><u>[issued by Klarna Holding AB on April 19, 2024](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit48-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.8 | September 2, <br>2025<br>|
| 4.9\* | <u>[Pricing Supplement of Tier 2 Subordinated Notes due 2034,](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit49-fx1.htm)</u><br><u>[issued by Klarna Holding AB on April 19, 2024](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit49-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.9 | September 2, <br>2025<br>|
| 4.10\* | <u>[Terms and Conditions of perpetual Additional Tier 1 Capital](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit410-fx1.htm)</u><br><u>[Notes, issued by Klarna Bank AB on March 25, 2022, as amended](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit410-fx1.htm)</u><br><u>[and restated on April 4, 2024](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit410-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.10 | September 2, <br>2025<br>|
| 4.11\* | <u>[Terms and Conditions of perpetual Additional Tier 1 Capital](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit411-fx1.htm)</u><br><u>[Notes, issued by Klarna Holding AB on February 1, 2024](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit411-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.11 | September 2, <br>2025<br>|
| 4.12\* | <u>[Final Terms of Senior Preferred Floating Rate Notes due 2027,](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000015/exhibit412-fx1a2.htm)</u><br><u>[issued by Klarna Bank AB on June 11, 2025](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000015/exhibit412-fx1a2.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.12 | September 2, <br>2025<br>|
| 4.13\* | <u>[Final Terms of Senior Preferred Floating Rate Notes due 2028,](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000015/exhibit413-fx1a2.htm)</u><br><u>[issued by Klarna Bank AB on June 11, 2025](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000015/exhibit413-fx1a2.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 4.13 | September 2, <br>2025<br>|
| 8.1\* | <u>[List of Subsidiaries of the registrant](exhibit81-listofsubsidia.htm)</u> |  |  |  |  |
| 10.1+\* | <u>[Form of Option Agreement between Klarna Group plc and certain](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit101-fx1.htm)</u><br><u>[executive officers](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit101-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 10.1 | September 2, <br>2025<br>|
| 10.2+\* | <u>[Form of Warrant Agreement (Series L\[x\]) between Klarna Bank](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit102-fx1.htm)</u><br><u>[AB and certain executive officers](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit102-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 10.2 | September 2, <br>2025<br>|
| 10.3+\* | <u>[Form of Terms and Conditions for Warrants](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit103-fx1.htm)</u> | Form F-1/<br>A<br>| 333-285826 | 10.3 | September 2, <br>2025<br>|
| 10.4+\* | <u>[Form of Fixed Equity Option Agreement between Klarna Group](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit104-fx1.htm)</u><br><u>[plc and certain executive officers](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit104-fx1.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 10.4 | September 2, <br>2025<br>|
| 10.5+\* | <u>[Omnibus Equity Incentive Plan](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000024/exhibit105-fx1a3.htm)</u> | Form F-1/<br>A<br>| 333-285826 | 10.5 | September 2, <br>2025<br>|
| 10.6†\*\* | <u>[Registration Rights Agreement](exhibit106-registrationr.htm)</u> |  |  |  |  |
| 10.7\* | <u>[Form of Indemnification Agreement](https://www.sec.gov/Archives/edgar/data/2003292/000162828025012824/exhibit107-fx1.htm)</u> | Form F-1/<br>A<br>| 333-285826 | 10.7 | September 2, <br>2025<br>|
| 10.8+\* | <u>[Klarna RSU Plan Rules](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000024/exhibit108-fx1a3.htm)</u> | Form F-1/<br>A<br>| 333-285826 | 10.8 | September 2, <br>2025<br>|

---

KLARNA GROUP PLC256

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| 10.9+\* | <u>[Form of Option Agreement between Klarna Group plc and](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000024/exhibit109-fx1a3.htm)</u><br><u>[Sebastian Siemiatkowski with respect to C Shares](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000024/exhibit109-fx1a3.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 10.9 | September 2, <br>2025<br>|
| 10.10+\* | <u>[Form of Fixed Equity Option Agreement between Klarna Group](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000024/exhibit1010-fx1a3.htm)</u><br><u>[plc and Sebastian Siemiatkowski with respect to C Shares](https://www.sec.gov/Archives/edgar/data/2003292/000200329225000024/exhibit1010-fx1a3.htm)</u><br>| Form F-1/<br>A<br>| 333-285826 | 10.10 | September 2, <br>2025<br>|
| 11.1\*\* | <u>[Insider Trading Policy](exhibit111-insidertradin.htm)</u> |  |  |  |  |
| 12.1\*\* | <u>[Certification of Sebastian Siemiatkowski, Chief Executive Officer](exhibit121-certification.htm)</u><br><u>[of Klarna Group plc, pursuant to Section 302 of Sarbanes-Oxley](exhibit121-certification.htm)</u><br><u>[Act of 2002](exhibit121-certification.htm)</u><br>|  |  |  |  |
| 12.2\*\* | <u>[Certification of Niclas Neglén, Chief Financial Officer of Klarna](exhibit122-certification.htm)</u><br><u>[Group plc, pursuant to Section 302 of Sarbanes-Oxley Act of](exhibit122-certification.htm)</u><br><u>[2002](exhibit122-certification.htm)</u><br>|  |  |  |  |
| 12.3\*\* | <u>[Certification of Sebastian Siemiatkowski, Chief Executive Officer](exhibit123-certification.htm)</u><br><u>[of Klarna Group plc, pursuant to pursuant to Section 18 U.S.C.](exhibit123-certification.htm)</u><br><u>[Section 1350, as adopted pursuant to Section 906 of the](exhibit123-certification.htm)</u><br><u>[Sarbanes-Oxley Act of 2002](exhibit123-certification.htm)</u><br>|  |  |  |  |
| 12.4\*\* | <u>[Certification of Niclas Neglén, Chief Financial Officer of Klarna](exhibit124-certification.htm)</u><br><u>[Group plc, pursuant to pursuant to Section 18 U.S.C. Section](exhibit124-certification.htm)</u><br><u>[1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley](exhibit124-certification.htm)</u><br><u>[Act of 2002](exhibit124-certification.htm)</u><br>|  |  |  |  |
| 23.1\*\* | <u>[Consent of Ernst & Young AB](exhitit231-consentoferns.htm)</u> |  |  |  |  |
| 97.1\*\* | <u>[Compensation Recoupment Policy](exhibit971-compensationr.htm)</u> |  |  |  |  |

---

____________

\* Incorporated by reference.

\*\* Filed herewith.

+ Indicates management contract or compensatory plan or arrangement.

† Portions of this exhibit (indicated by asterisks) have been omitted as the registrant has determined that (i) the omitted

information is not material and (ii) the omitted information is the type that the registrant treats as private or confidential.

(2)Financial Statement Schedules.

No financial statement schedules are provided because the information called for is not applicable or

is shown in the financial statements or notes thereto.

KLARNA GROUP PLC257

**SIGNATURES**

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it

has duly caused and authorized the undersigned to sign this Annual Report on Form 20-F filed on its

behalf.

---

| | | |
|:---|:---|:---|
|  | **KLARNA GROUP PLC** | **KLARNA GROUP PLC** |
| Date: February 26, 2026 | By: | /s/ Sebastian Siemiatkowski |
|  |  | Name: Sebastian Siemiatkowski |
|  |  | Title: Chief Executive Officer  |
| Date: February 26, 2026 | By: | /s/ Niclas Neglén |
|  |  | Name: Niclas Neglén |
|  |  | Title: Chief Financial Officer |

---

KLARNA GROUP PLC258

**GLOSSARY OF TERMS**

The following are abbreviations, acronyms and definitions of certain terms used in this report:

"Active Klarna consumers" means consumers who have made a purchase or a payment using a Klarna-

branded product or logged into the Klarna app within the past 12 months, calculated as of the end of that

12-month period. This metric represents the number of our consumers who engaged in a revenue-

generating activity in a relevant period, either by making a purchase or a payment using Klarna (therefore

generating merchant and/or interest revenue) or logging into the Klarna app (therefore generating

advertising revenue).

"Adjusted operating result" means our operating income (loss) for a period, adjusted to exclude the

effects of items that we believe are not reflective of our underlying operating performance, including

share-based compensation charges, depreciation and amortization of acquired intangible assets and

certain other non-recurring items. We present adjusted operating result as a supplemental measure

because we believe it provides useful information to investors regarding our financial performance.

Adjusted operating result is not a measure defined by IFRS and should not be considered in isolation or as

a substitute for our operating income (loss) presented in accordance with IFRS.

"AI" means artificial intelligence. This term encompasses various technologies that enable computers

and machines to simulate human learning, comprehension, problem-solving, decision-making, creativity

and autonomy. As such, "AI" includes, but is not limited to, generative AI (which refers to AI technologies

capable of generating text, images, videos or other data using generative models, including in response to

prompts) and machine learning ("ML") (which refers to AI technologies using algorithms and statistical

models to analyze and draw inferences from patterns in data without following explicit instructions).

"AOV" means average order value, measured by dividing our GMV for a period by the number of

transactions conducted on our network in that period.

"API" means application programming interface, which is a general term for programming techniques

that are available for software developers when they integrate with a particular service or application. In

the payments industry, APIs are usually provided by any party participating in the money flow (such as

payment gateways, processors and service providers) to facilitate the money transfer process.

"ARPAC" means average revenue per active consumer, measured as our total revenue for the trailing

twelve months, divided by the number of active Klarna consumers over that period.

"Average balance per active Klarna consumer" means our total loan receivables outstanding at the end

of a period, divided by the number of active Klarna consumers for that period.

"Average revenue per employee" means our total revenue from the trailing twelve months (adjusted for

the sale of KCO), divided by the period end number of our employees.

"BNPL" means buy now, pay later, a form of short-term consumer financing that allows consumers to

make purchases and pay for them over time, typically in installments, often without interest if repaid within

a specified period. BNPL products are a core component of our consumer offering.

"CAGR" means the compound annual growth rate, measured as the annualized average rate of the

growth between given dates, assuming growth takes place at an exponentially compounded rate.

"CET1" means common equity tier 1, a measure of a bank's core capital under the Basel III regulatory

framework. CET1 capital consists primarily of ordinary shares, retained earnings and other comprehensive

income. The CET1 ratio is calculated by dividing CET1 capital by total risk-weighted assets and is a key

indicator of a bank's financial strength and ability to absorb losses.

"CFPB" means the Consumer Financial Protection Bureau.

KLARNA GROUP PLC259

"Cohort" means a group of consumer loans originated within the same defined time period, typically a

calendar quarter. Cohort-based analysis is used to track the credit performance and loss development of

loans sharing a common origination period over time.

"Conversion rate" means the percentage of consumer sessions or checkout initiations on a merchant's

platform that result in a completed purchase. We present conversion rate as an indicator of the

effectiveness of our checkout and payment solutions in reducing friction for consumers and merchants.

"Companies Act" means the U.K. Companies Act 2006.

"Customers" means consumers and merchants using our network.

"DKK" means the Danish kroner, the official currency of Denmark, Greenland and the Faroe Islands.

"Dodd-Frank Act" means the Dodd-Frank Wall Street Reform and Consumer Protection Act.

"DPD" means days past due, a measure of the number of calendar days that have elapsed since a

scheduled payment on a consumer loan became overdue. We use DPD thresholds (such as 30+ DPD and

60+ DPD) as indicators of delinquency and credit quality within our loan receivables portfolio.

"DTC" means The Depository Trust Company.

"EEA" means the European Economic Area.

"EU" means the European Union.

"EU GDPR" means the EU General Data Protection Regulation (EU) 2016/679.

"EUR" or "€" means the euro, the official currency of the European Union.

"Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.

"FDIC" means the Federal Deposit Insurance Corporation.

"GBP" means the British pound, the official currency of The United Kingdom of Great Britain and

Northern Ireland.

"GMV" means gross merchandise volume, measured for a period as the total monetary value of all

completed purchases on our network in that period, excluding any additional fees (such as interest,

reminder or other fees) and any subsequent actions (such as returns, settlements and disputes).

"HMRC" means HM Revenue & Customs, the U.K. tax authority.

"IASB" means the International Accounting Standards Board.

"IFRS" means the International Financial Reporting Standards.

"Interchange" means the fee paid by a merchant's bank (the acquiring bank) to a consumer's bank (the

issuing bank) each time a card-based payment transaction is processed. Where we act as or partner with

an issuing bank, interchange revenue represents a component of our merchant revenue.

"IT" means information technology.

"KCO" means Klarna Checkout, our online checkout solution, which was sold by us effective October 1,

2024. "KFSUK" means Klarna Financial Services UK Limited, our U.K. subsidiary.

"Klarna Bank" means Klarna Bank AB (publ), our banking subsidiary.

KLARNA GROUP PLC260

"Klarna Holding" means Klarna Holding AB (publ), our indirect subsidiary and former parent entity.

"Larkan" means Larkan AB (publ), our indirect subsidiary through which we historically granted RSUs.

"LCR" means liquidity coverage ratio. The LCR has been developed by the Basel Committee on

Banking Supervision (the "Basel Committee") to promote the short-term resilience of the liquidity risk

profile of banks by ensuring that they have sufficient high-quality liquid assets ("HQLA"), i.e., assets that

can be converted easily and immediately in private markets into cash, to survive a significant stress

scenario lasting 30 calendar days. This ratio should be equal to at least 100% on an ongoing basis. LCR is

calculated by dividing HQLA by projected net cash outflows during a 30-day stressed period.

"Merchants" means the businesses that offer their goods and services to consumers on our network.

The number of merchants presented in this report refers to the number of unique combinations of brands

(e.g., H&M) available on our network and the markets where such brands are available (e.g., Sweden).

"MoR" means merchant of record.

"Net Dollar Revenue Retention Rate" measures our revenue retained from merchants over a given

period. We calculate Net Dollar Revenue Retention Rate for a given period (the "current period") by dividing

our revenue in that period by our revenue in the immediately preceding period of the same length (the

"prior period"), in each case, from merchants that processed transactions on our network in the prior

period. Our Net Dollar Revenue Retention Rate therefore includes the effect on revenue of any merchant

renewals, expansion, contraction and churn but excludes the effect of revenue from merchants that

contributed to our revenue in the current period but not in the prior period. A Net Dollar Revenue

Retention Rate greater than 100% for a given period implies overall growth in revenue from merchants that

were already processing transactions on our network in the prior period.

"NSFR" means net stable funding ratio. The NSFR has been developed by the Basel Committee and

requires banks to maintain a stable funding profile in relation to the composition of their assets and off-

balance sheet activities. The NSFR is defined as the amount of available stable funding relative to the

amount of required stable funding. This ratio should be equal to at least 100% on an ongoing basis.

"Available stable funding" is defined as the portion of capital and liabilities expected to be reliable over the

time horizon considered by the NSFR, which extends to one year. The amount of required stable funding

corresponds to the funding required to meet applicable regulatory liquidity requirements, mainly the LCR.

"NOK" means the Norwegian kroner, the official currency of the Kingdom of Norway.

"NPS" means the net promoter score. NPS is a metric used to measure customer satisfaction, loyalty

and enthusiasm. NPS is reported as a number between negative 100 and positive 100. For more

information about the method that we used to calculate our NPS, see the section titled "About this report—

Market and Industry Data" elsewhere in this report.

"OCC" means the Office of the Comptroller of the Currency.

"Open banking" means a framework under which banks and other financial institutions are required or

permitted to share consumer financial data with authorized third parties, including payment service

providers, through standardized APIs, subject to consumer consent. We utilize open banking data as one

input in our credit underwriting process.

"Origination" means the process by which we extend credit to a consumer in connection with a

purchase transaction on our network. Origination volume refers to the aggregate principal amount of

consumer loans extended during a given period.

"PSP" means payment service provider.

"Raisin" means Raisin GmbH, a savings platform through which we collect deposits in certain

jurisdictions.

KLARNA GROUP PLC261

"ROI" means return on investment.

"RSUs" means restricted share units.

"SDRT" means the U.K. stamp duty reserve tax.

"SEC" means the U.S. Securities and Exchange Commission.

"SEK" means the Swedish krona, the official currency of the Kingdom of Sweden.

"SFSA" means the Swedish Financial Supervisory Authority (*Finansinspektionen*).

"SKU" means a stock-keeping unit.

"S&P" means S&P Global Ratings.

"Takeover Code" means the City Code on Takeovers and Mergers.

"Take rate" means our total revenue for a period expressed as a percentage of our GMV for that same

period. Take rate is used to measure the revenue we generate per unit of transaction volume processed

on our network.

"U.K." or the "United Kingdom" means The United Kingdom of Great Britain and Northern Ireland.

"U.K. GDPR" means, collectively, the U.K. Data Protection Act 2018 and the EU GDPR, as it forms part of

the laws of England and Wales, Scotland and Northern Ireland by virtue of section 3 of the European Union

Withdrawal Act 2018.

"U.S." or the "United States" means the United States of America.

"U.S. dollar," "U.S. dollars" or "$" means the U.S. dollar, the official currency of the United States of

America.

"U.S. GAAP" means the generally accepted accounting principles in the United States of America.

"xIBOR" means the interbank money market rate.

KLARNA GROUP PLCF-1

**KLARNA GROUP PLC**

**INDEX TO CONSOLIDATED FINANCIAL STATEMENTS**

---

| | |
|:---|:---|
| <u>[Report of Independent Registered Public Accounting Firm](#i9081d9e2b8b94bd284aa0c3cb95258fc_151)</u> (Firm ID - 1433) ................................... | <u>[F-2](#i9081d9e2b8b94bd284aa0c3cb95258fc_151)</u> |
| <u>[Consolidated Statements of Profit or Loss for the Years Ended December 31, 2025, 2024](#i9081d9e2b8b94bd284aa0c3cb95258fc_154)</u><br><u>[and 2023](#i9081d9e2b8b94bd284aa0c3cb95258fc_154)</u> .........................................................................................................................................................<br>| <u>[F-4](#i9081d9e2b8b94bd284aa0c3cb95258fc_154)</u> |
| <u>[Consolidated Statements of Comprehensive Loss for the Years Ended December 31, 2025,](#i9081d9e2b8b94bd284aa0c3cb95258fc_157)</u><br><u>[2024 and 2023](#i9081d9e2b8b94bd284aa0c3cb95258fc_157)</u> ...............................................................................................................................................<br>| <u>[F-5](#i9081d9e2b8b94bd284aa0c3cb95258fc_157)</u> |
| <u>[Consolidated Balance Sheets for the Years Ended December 31, 2025 and 2024](#i9081d9e2b8b94bd284aa0c3cb95258fc_160)</u> ...................... | <u>[F-6](#i9081d9e2b8b94bd284aa0c3cb95258fc_160)</u> |
| <u>[Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2025,](#i9081d9e2b8b94bd284aa0c3cb95258fc_163)</u><br><u>[2024 and 2023](#i9081d9e2b8b94bd284aa0c3cb95258fc_163)</u> ...............................................................................................................................................<br>| <u>[F-7](#i9081d9e2b8b94bd284aa0c3cb95258fc_163)</u> |
| <u>[Consolidated Statements of Cash Flows for the Years Ended December 31, 2025, 2024 and](#i9081d9e2b8b94bd284aa0c3cb95258fc_166)</u><br><u>[2023](#i9081d9e2b8b94bd284aa0c3cb95258fc_166)</u> .................................................................................................................................................................<br>| <u>[F-8](#i9081d9e2b8b94bd284aa0c3cb95258fc_166)</u> |
| <u>[Notes to consolidated financial statements](#i9081d9e2b8b94bd284aa0c3cb95258fc_169)</u> ........................................................................................... | <u>[F-9](#i9081d9e2b8b94bd284aa0c3cb95258fc_172)</u> |

---

KLARNA GROUP PLCF-2

**Report of Independent Registered Public Accounting Firm**

To the Shareholders and the Board of Directors of Klarna Group plc

**Opinion on the Financial Statements**

We have audited the accompanying consolidated balance sheets of Klarna Group plc ("the Company")

as of December 31, 2025 and 2024, the related consolidated statements of profit or loss, comprehensive

loss, shareholders' equity and cash flows for each of the three years in the period ended December 31,

2025, and the related notes (collectively referred to as the "consolidated financial statements"). In our

opinion, the consolidated financial statements present fairly, in all material respects, the financial position

of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for

each of the three years in the period ended December 31, 2025, in conformity with IFRS Accounting

Standards as issued by the International Accounting Standards Board.

**Basis for Opinion**

These financial statements are the responsibility of the Company's management. Our responsibility is

to express an opinion on the Company's financial statements based on our audits. We are a public

accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB)

and are required to be independent with respect to the Company in accordance with the U.S. federal

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and

the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial

statements are free of material misstatement, whether due to error or fraud. The Company is not required

to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of

our audits we are required to obtain an understanding of internal control over financial reporting but not

for the purpose of expressing an opinion on the effectiveness of the Company's internal control over

financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the

financial statements, whether due to error or fraud, and performing procedures that respond to those

risks. Such procedures included examining, on a test basis, evidence regarding the amounts and

disclosures in the financial statements. Our audits also included evaluating the accounting principles used

and significant estimates made by management, as well as evaluating the overall presentation of the

financial statements. We believe that our audits provide a reasonable basis for our opinion.

**Critical Audit Matters**

The critical audit matters communicated below are matters arising from the current period audit of the

financial statements that were communicated or required to be communicated to the audit committee and

that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our

especially challenging, subjective or complex judgments. The communication of critical audit matters does

not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not,

by communicating the critical audit matters below, providing separate opinions on the critical audit

matters or on the accounts or disclosures to which they relate.

KLARNA GROUP PLCF-3

**Allowance for expected credit losses for consumer receivables**

---

| | |
|:---|:---|
| Description of the Matter ................. | As described in Notes 2 and 6 to the consolidated financial statements, the <br>Company recorded consumer receivables of $10,459 million net of allowances <br>for expected credit losses of $492 million. Allowances for expected credit losses <br>("ECL") are based on the individual loan's estimated repayment performance <br>and the evaluation of accumulated credit risk by product, geography, and days <br>past due. The probability of default, magnitude of estimated loss, and expected <br>changes in exposure are derived from historical internal and external data.<br>Auditing the Company's allowance for ECL was complex due to the estimation <br>uncertainty in loan repayment performance, accumulated credit risk <br>assumptions, the highly automated nature of the Company's consumer <br>receivable process, and the complexity of the models and assumptions used to <br>calculate ECL. <br>|
| How We Addressed the Matter in <br>Our Audit ..............................................<br>| To test the Company's allowance for ECL our audit procedures included, among <br>others, testing inputs and assumptions noted above used in management's <br>model calculations including but not limited to, days past due, historical loan <br>repayment performance and probability of default. With the support of our <br>internal specialists, we performed procedures on certain models used to <br>determine the allowance for ECL, including, new model implementation testing, <br>assessment of model performance, and sensitivity analyses. We evaluated the <br>Company's validation procedures over a sample of models and assessed the <br>potential impact of future economic conditions and the application of historical <br>internal and external data by comparing realized losses to previous estimates <br>made by management. <br>|

---

**Merchant fees**

---

| | |
|:---|:---|
| Description of the Matter ................. | As described in Notes 2 and 4 to the consolidated financial statements, <br>merchant revenue primarily refers to merchant fees, which are derived from the <br>volume of consumer transactions processed and a combination of value-based <br>and fixed pricing. The transaction price is recognized at the point in time when <br>the merchant successfully confirms the transaction, which is when the terms of <br>the contract are fulfilled. A reduction of merchant fees to certain merchants is <br>provided based on performance measures, including volume of processed <br>transactions. <br>Auditing merchant fees was complex due to the judgment required to assess <br>management's accounting for key terms and conditions within certain merchant <br>contracts. <br>|
| How We Addressed the Matter in <br>Our Audit ..............................................<br>| Our audit procedures to test the Company's merchant fees included among <br>others, on a sample basis, reviewing and evaluating merchant contracts, <br>including those with performance measures. We tested transactions with value-<br>based and fixed pricing terms and recalculated merchant fees by comparing <br>rates within contracts to transaction data. We tested occurrence and evaluated <br>completeness by reviewing consumer transaction evidence and comparing <br>merchant fee amounts to subsequent cash settlements. <br>|

---

/s/ Ernst & Young AB

We have served as the Company's auditor since 2016.

Stockholm, Sweden

February 26, 2026

KLARNA GROUP PLCF-4

**Consolidated Statements of Profit or Loss for the Years Ended December 31,** 

**2025, 2024 and 2023**

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Amounts in USD millions, except share and per share** <br>**amounts**<br>| **Note** | **2025** | **2024** | **2023** |
| Transaction and service revenue .............................................. |  | 2500 | 2136 | 1768 |
| Gain on sale of consumer receivables ...................................... |  | 73 |  |  |
| Interest income .............................................................................. |  | 937 | 675 | 508 |
| **Total revenue ..................................................................................** | **4** | **3509** | **2811** | **2276** |
| Processing and servicing costs .................................................. |  | (809) | (596) | (541) |
| Provision for credit losses ........................................................... |  | (794) | (495) | (353) |
| Funding costs ................................................................................. | 17 | (667) | (503) | (297) |
| Technology and product development .................................... |  | (486) | (444) | (389) |
| Sales and marketing ...................................................................... |  | (414) | (328) | (381) |
| Customer service and operations .............................................. |  | (207) | (203) | (240) |
| General and administrative ......................................................... |  | (306) | (281) | (270) |
| Depreciation, amortization and impairments .......................... |  | (55) | (82) | (128) |
| **Operating expenses ........................................................................** |  | **(3739)** | **(2932)** | **(2599)** |
| **Operating loss ..................................................................................** |  | **(230)** | **(121)** | **(323)** |
| Other income (expense) ............................................................... |  | (11) | 154 | 19 |
| **Profit (loss) before taxes ...............................................................** |  | **(241)** | **33** | **(304)** |
| Tax (expense) benefit ................................................................... |  | (32) | (12) | 60 |
| **Net profit (loss) ...............................................................................** |  | **(273)** | **21** | **(244)** |
| **Whereof attributable to:** |  |  |  |  |
| Shareholders of Klarna Group plc .............................................. |  | (294) | 3 | (249) |
| Non-controlling interests ............................................................. |  | 21 | 12 |  |
| Other equity holders ..................................................................... |  |  | 6 | 5 |
| **Total ..................................................................................................** |  | **(273)** | **21** | **(244)** |
| **Net profit (loss) per share attributable to shareholders of** <br>**Klarna Group plc**<br>|  |  |  |  |
| Basic ................................................................................................. | 25 | $(0.79) | $0.01 | $(0.69) |
| Diluted | 25 | $(0.79) | $0.01 | $(0.69) |

---

*The accompanying notes are an integral part of the consolidated financial statements.*

KLARNA GROUP PLCF-5

**Consolidated Statements of Comprehensive Loss for the Years Ended** 

**December 31, 2025, 2024 and 2023**

---

| | | | |
|:---|:---|:---|:---|
| **Amounts in USD millions, except share and per share amounts** | **2025** | **2024** | **2023** |
| **Net profit (loss) ...................................................................................................** | **(273)** | **21** | **(244)** |
| **Items that are or may be reclassified to the statement of profit or loss:** |  |  |  |
| <u>Foreign currency translation differences</u> ................................................... |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Exchange differences on translation of foreign operations ................ | 369 | (151) | 58 |
| &nbsp;&nbsp;&nbsp;&nbsp;Reclassification of cumulative translation adjustments ....................... |  | (18) |  |
| <u>Consumer receivables at fair value through OCI</u> ....................................... |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Net changes in fair value for the year ....................................................... | 11 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Changes in expected credit losses ............................................................ | 27 |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Reclassification to the statement of profit and loss ............................. | (25) |  |  |
| **Other comprehensive income (loss) for the year ..........................................** | **381** | **(169)** | **58** |
| **Total comprehensive income (loss) .................................................................** | **108** | **(148)** | **(186)** |
| **Comprehensive income (loss) attributable to:** |  |  |  |
| Shareholders of Klarna Group plc ................................................................. | 87 | (165) | (191) |
| Non-controlling interests ................................................................................ | 21 | 11 |  |
| Other equity holders ........................................................................................ |  | 6 | 5 |
| **Total comprehensive income (loss) .................................................................** | **108** | **(148)** | **(186)** |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

KLARNA GROUP PLCF-6

**Consolidated Balance Sheets for the Years Ended December 31, 2025 and 2024** 

---

| | | | |
|:---|:---|:---|:---|
| **Amounts in USD millions, except share and per share amounts** | **Note** | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| **Assets** |  |  |  |
| Cash and cash equivalents ........................................................................................ | 5 | 3803 | 3243 |
| Debt securities .............................................................................................................. | 8 | 1518 | 454 |
| Consumer receivables ................................................................................................ | 6 | 10459 | 8141 |
| Consumer receivables at fair value through OCI .................................................. | 20 | 386 |  |
| Consumer receivables at fair value through profit and loss .............................. | 20 | 400 | 2 |
| Settlement and trade receivables ............................................................................ | 7 | 580 | 493 |
| Property and equipment ............................................................................................ | 12 | 60 | 85 |
| Goodwill .......................................................................................................................... | 11 | 685 | 613 |
| Intangible assets .......................................................................................................... | 11 | 383 | 376 |
| Deferred tax assets ..................................................................................................... | 24 | 36 | 33 |
| Other assets .................................................................................................................. | 13 | 487 | 364 |
| **Total Assets ...................................................................................................................** |  | **18797** | **13804** |
| **Liabilities** |  |  |  |
| Accounts payable and accrued expenses ............................................................. |  | 655 | 572 |
| Consumer deposits ...................................................................................................... |  | 13003 | 9510 |
| Payables to merchants ............................................................................................... |  | 736 | 696 |
| Notes payable and other borrowings ...................................................................... | 14 | 1359 | 513 |
| Deferred tax liabilities ................................................................................................. | 24 | 2 | 1 |
| Other liabilities .............................................................................................................. | 15 | 358 | 255 |
| **Total Liabilities ..............................................................................................................** |  | **16113** | **11547** |
| **Equity** |  |  |  |
| Share capital ................................................................................................................. | 21 |  |  |
| Additional paid in capital ............................................................................................ |  | 427 | 4646 |
| Other equity instruments ........................................................................................... |  |  |  |
| Reserves ........................................................................................................................ |  | (90) | (479) |
| Retained Earnings (Accumulated deficit) ............................................................... |  | 2170 | (2081) |
| **Total equity excluding non-controlling interests .....................................................** |  | **2507** | **2086** |
| Non-controlling interests ............................................................................................ |  | 177 | 171 |
| **Total equity ....................................................................................................................** |  | **2684** | **2257** |
| **Total equity and liabilities ............................................................................................** |  | **18797** | **13804** |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

KLARNA GROUP PLCF-7

**Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 2025, 2024 and 2023**

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Amounts in USD millions, except share and per share** <br>**amounts**<br>| **Share capital** | **Additional paid** <br>**in capital**<br>| **Reserves** | **Other equity** <br>**instruments**<sup>1</sup><br>| **Retained** <br>**earnings**<br>| **Equity excluding** <br>**non-controlling** <br>**interests**<br>| **Non-controlling** <br>**interests**<sup>1</sup><br>| **Total equity** |
| **Balance as of January 1, 2023** | **—** | **4577** | **(369)** | **61** | **(1948)** | **2321** | **6** | **2327** |
| Net loss |  |  |  |  | (244) | **(244)** |  | **(244)** |
| Exchange differences on translating foreign <br>currencies<br>|  |  | 58 |  |  | **58** |  | **58** |
| New share issue |  | 47 |  |  |  | **47** |  | **47** |
| Share-based payments |  | 1 |  |  | 46 | **47** |  | **47** |
| Redemption of other equity instruments |  |  |  | (24) | (7) | **(31)** |  | **(31)** |
| Changes in non-controlling interests |  |  |  |  | (6) | **(6)** | (1) | **(7)** |
| **Balance as of December 31, 2023** | **—** | **4625** | **(311)** | **37** | **(2159)** | **2192** | **5** | **2197** |
| Net loss |  |  |  |  | 21 | **21** |  | **21** |
| Exchange differences on translating foreign <br>currencies<br>|  |  | (150) |  |  | **(150)** | (1) | **(151)** |
| Reclassification |  |  | (18) |  |  | **(18)** |  | **(18)** |
| New share issue |  | 21 |  |  |  | **21** |  | **21** |
| Share-based payments |  |  |  |  | 64 | **64** |  | **64** |
| Issuance of other equity instruments |  |  |  | 142 | (6) | **136** | (12) | **124** |
| Changes in non-controlling interests |  |  |  | (179) | (1) | **(180)** | 179 | **(1)** |
| **Balance as of December 31, 2024** | **—** | **4646** | **(479)** | **—** | **(2082)** | **2086** | **171** | **2257** |
| Net loss |  |  |  |  | (294) | **(294)** | 21 | **(273)** |
| Exchange differences on translating foreign <br>currencies<br>|  |  | 379 |  |  | **379** | (9) | **369** |
| Consumer Receivables Fair Value through OCI |  |  | 12 |  |  | **12** |  | **12** |
| Share capital reduction<sup>2</sup> |  | (4579) |  |  | 4579 | **(1)** |  | **(1)** |
| New share issue |  | 360 |  |  | (168) | **192** |  | **192** |
| Share-based payments |  |  |  |  | 135 | **135** |  | **135** |
| Tax effects on share based payments |  |  |  |  | (18) | **(18)** |  | **(18)** |
| Other equity instruments coupons paid |  |  |  |  | 21 | **21** | (21) | **—** |
| Changes in non-controlling interests |  |  | (1) |  | (3) | **(4)** | 16 | **12** |
| **Balance as of December 30, 2025** | **—** | **427** | **(90)** | **—** | **2170** | **2507** | **177** | **2684** |

---

*The accompanying notes are an integral part of these consolidated financial statements.*

____________

<sup>1</sup> Following the Group's corporate reorganization in May 2024, AT1 securities are considered non-controlling interests as they are issued by subsidiaries of Klarna Group plc. For

further details refer to Note 21.

<sup>2</sup>During the year a capital reduction of $4.6 billion resulting in a reallocation from share capital and additional paid in capital to retained earnings. See Note 21.

KLARNA GROUP PLCF-8

**Consolidated Statements of Cash Flows for the Years Ended December 31, 2025,** 

**2024 and 2023**

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| **Operating activities** |  |  |  |
| Profit (loss) before taxes ............................................................................................................ | (241) | 33 | (304) |
| Income taxes paid ....................................................................................................................... | (53) | (15) | (11) |
| Interest expense paid ................................................................................................................ | (425) | (312) | (214) |
| Interest income received .......................................................................................................... | 1022 | 558 | 412 |
| **Adjustments for non-cash items in operating activities** |  |  |  |
| Depreciation, amortization and impairment ......................................................................... | 125 | 189 | 227 |
| Share-based payments .............................................................................................................. | 157 | 92 | 43 |
| Provisions excluding credit losses .......................................................................................... |  | 1 | 1 |
| Provision for credit losses ......................................................................................................... | 794 | 671 | 506 |
| Net gain from divestment<sup>1</sup> ........................................................................................................ |  | (190) |  |
| Net losses from divestment of shares in equity investments .......................................... |  | 7 |  |
| Financial items including fair value effects ........................................................................... | 75 | (282) | (219) |
| **Changes in the assets and liabilities of operating activities** |  |  |  |
| Change in consumer receivables at fair value through OCI .............................................. | (378) |  |  |
| Change in consumer receivable at FV through P&L ........................................................... | (413) | (2) |  |
| Change in consumer receivables ............................................................................................ | (2787) | (1373) | (1552) |
| Change in settlement and trade receivables ........................................................................ | (32) | 197 | (172) |
| Change in notes payable and other borrowings .................................................................. | (32) | (16) | (115) |
| Change in consumer deposits .................................................................................................. | 2148 | 820 | 1516 |
| Change in bonds and treasury bills with maturity > 90 days ............................................. | (852) | 286 | 335 |
| Change in other assets and liabilities ..................................................................................... | (140) | (77) | 355 |
| **Cash flow from operating activities ............................................................................................** | **(1032)** | **587** | **808** |
| **Investing activities** |  |  |  |
| Investments in intangible assets .............................................................................................. | (27) | (44) | (84) |
| Investments in property and equipment ................................................................................ | (3) | (1) | (1) |
| Sale of fixed assets ..................................................................................................................... |  |  | 1 |
| Divestment, net of cash disposed |  | 188 |  |
| Net purchase of equity investments |  | 11 |  |
| **Cash flow from investing activities .............................................................................................** | **(30)** | **154** | **(83)** |
| **Financing activities** |  |  |  |
| New share issuance .................................................................................................................... | 191 |  | 39 |
| Share warrants ............................................................................................................................. |  |  | 1 |
| Other equity instruments issued ............................................................................................. |  | 142 |  |
| Other equity instruments redeemed ...................................................................................... |  |  | (24) |
| Convertible promissory notes redeemed ............................................................................. |  |  | (32) |
| Subordinated debt issued ........................................................................................................ |  | 100 | 75 |
| Subordinated debt redeemed ................................................................................................. |  |  | (33) |
| Notes payable and other borrowings issued ....................................................................... | 903 | 264 | 104 |
| Notes payable and other borrowings redeemed ................................................................ | (86) | (169) | (150) |
| Principal payments of lease liabilities .................................................................................... | (20) | (25) | (42) |
| **Cash flow from financing activities .............................................................................................** | **988** | **312** | **(62)** |
| **Cash flow for the year ...................................................................................................................** | **(74)** | **1053** | **663** |
| **Cash and cash equivalents at the beginning of the year ........................................................** | **3243** | **2391** | **1694** |
| Cash flow for the year ................................................................................................................ | (74) | 1053 | 663 |
| Exchange rate difference in cash and cash equivalents ................................................... | 634 | (201) | 34 |
| **Cash and cash equivalents at the end of the year ...................................................................** | **3803** | **3243** | **2391** |

---

____________

<sup>1</sup> Includes reclassification of currency translation effects from other comprehensive income of $18 million in 2024.

*The accompanying notes are an integral part of these consolidated financial statements.*

KLARNA GROUP PLCF-9

**Note 1 Corporate information** 

Klarna Group plc is a public company with limited liability incorporated under the laws of England and

Wales. The consolidated financial statements consist of Klarna Group plc and its direct and indirect

subsidiaries (collectively, "Klarna," the "Company," the "Group," "we," "us," or "our").

Klarna is a technology-driven payments company, with operations spanning multiple countries. We

connect consumers and merchants with comprehensive payment solutions and tailored advertising

solutions, both online and offline. Our payment solutions provide consumers with more control and

flexibility over their payments.

On September 10, 2025, the Company completed its initial public offering ("IPO") of 5,000,000 ordinary

shares, completed the sale of additional 29,311,274 ordinary shares from "selling shareholders" and on

September 22, 2025, completed the sale of 5,146,691 of additional ordinary shares to the underwriters

pursuant to their option to purchase additional shares, at an offering price of $40.00 per share. The

Company raised net proceeds of $169 million through the IPO, net of underwriting discounts and other

offering costs of $22.41 million. Directly attributable transaction costs related to the issuance of new

ordinary shares of $8.5 million were deducted from equity. These costs, primarily underwriting fees, were

offset against the gross proceeds recognized in Additional paid in capital.

The Company's registration statement on Form S-8 (File No. 333-290150) registering shares under its

employee equity plans, was declared effective by the Securities and Exchange Commission ("SEC") on

September 10, 2025.

**Note 2 Accounting principles**

1. Basis of preparation and consolidation

The consolidated financial statements are prepared in accordance with International Financial

Reporting Standards ("IFRS") Accounting Standards as issued by the International Accounting Standards

Board ("IASB") and have been prepared on a historical cost basis, except for equity investments,

derivatives and consumer receivables at fair value through profit and loss or at fair value through other

comprehensive income, which have been measured at fair value, and lease liabilities, which are measured

at present value. These consolidated financial statements are prepared on a going concern basis. All

amounts in the notes to the consolidated financial statements are stated in millions of United States

Dollars ("USD"), unless otherwise stated.

On May 23, 2024, Klarna Holding AB (publ) completed a reorganization which resulted in Klarna Group

plc becoming the new ultimate parent company of the Group. Through a series of share for share

exchange steps, the shareholders of Klarna Holding AB (publ) exchanged their shares for an equal number

of shares in Klarna Group plc. As a result of our corporate reorganization, Klarna Group plc became our

ultimate holding company and the parent company of Klarna Holding AB (publ). There was no change in

the legal ownership of any of the assets of Klarna Holding AB (publ), nor any change in the ultimate

controlling ownership of existing shares or securities of Klarna Holding AB (publ) or Klarna Group plc as a

result of the reorganization. The accounting predecessor of Klarna Group plc is Klarna Holding AB (publ).

The exchange has been presented on a retrospective basis as a reorganization transaction beginning in

the earliest period presented.

Subsidiaries are all entities over which the Group has control. The Group controls an entity when the

Group is exposed, or has right to, variable returns from its involvement with the entity and has the ability to

affect those returns through its power over the entity. The consolidated subsidiaries of Klarna are

consolidated as from the date when control is transferred to Klarna and deconsolidated from the date that

control ceases. All intercompany accounts and transactions between members of the Group have been

eliminated on consolidation.

KLARNA GROUP PLCF-10

**Share Split**

In March 2025, Klarna Group plc's board of directors approved a subdivision of ordinary shares of

Klarna Group plc on a 1-to-12 basis (the "Share Split"), which was effected on March 6, 2025. Refer to Note

21 for further details. Accordingly, all share data and per share data amounts for all periods presented in

the consolidated financial statements and notes thereto have been retrospectively adjusted to reflect the

effect of the Share Split.

2. New and amended standards and interpretations

**Standards and amendments effective for the year**

No significant new IFRS standards, amendments or interpretations applicable to the Group became

effective during the period.

**New standards and amendments issued but not yet effective**

In April 2024, the IASB issued IFRS 18 "Presentation and Disclosure in Financial Statements" that

replaces IAS 1 "Presentation of Financial Statements." IFRS 18 introduces new requirements for

information presented in the primary financial statements and disclosed in the notes. IFRS 18 is effective

for annual reporting periods beginning on or after January 1, 2027, but earlier adoption is permitted. The

Group is currently evaluating the impact of this standard.

In May 2024, the IASB issued amendments to IFRS 9 "Financial Instruments" and IFRS 7 "Financial

Instruments: Disclosures," clarifying recognition and derecognition principles and introducing an exception

for the early derecognition of certain financial liabilities settled electronically. The amendments also

provide guidance on assessing contractual cash flow characteristics and introduce new disclosure

requirements. These amendments are effective for annual reporting periods beginning on or after January

1, 2026, with earlier adoption permitted. The Group is currently evaluating their impact.

The Group has not early adopted any issued standards, interpretations or amendments that are not

yet effective.

3. Significant accounting judgments, estimates and assumptions

The preparation of the consolidated financial statements in accordance with IFRS requires

management to make judgments, estimates and assumptions that affect the reported amount of revenues,

expenses, assets and liabilities, and the accompanying disclosures, as well as the disclosure of contingent

liabilities. On an ongoing basis, we evaluate our estimates, including those related to provisions for credit

losses, revenue recognition, income taxes, the evaluation for impairment of intangible assets and goodwill,

contingent liabilities, securitizations, leases, divestitures and share-based compensation, including the fair

value of restricted share units, options and warrants issued. We base our estimates on historical

experience and various other assumptions which we believe to be reasonable under the circumstances.

Actual results could materially differ from these estimates.

Macroeconomic and geopolitical developments may adversely impact consumer spending, merchant

performance and counterparty creditworthiness. These conditions may introduce additional uncertainties

that can affect the global economy and, consequently, the Group's operations. These factors are

considered into credit loss estimates and other significant accounting estimates.

KLARNA GROUP PLCF-11

4. Foreign currency translation

**Presentation currency and functional currency**

The financial statements are presented in USD. In general, each entity within the Group uses the

currency of its primary economic environment as its functional currency. For Klarna Group plc, the

functional currency is USD.

The assets and liabilities of the Company and its subsidiaries are translated from the functional

currency of the operations to USD using the exchange rates at the reporting date. The revenues and

expenses are translated to USD using average exchange rates, which approximate the exchange rates at

the date of the transaction. All resulting foreign exchange differences are recognized in other

comprehensive income (loss) and included in foreign exchange translation reserve in equity.

**Foreign currency transactions**

Transactions denominated in currencies other than the functional currency of the respective entity

are translated into the functional currency at the exchange rate on the date of the transaction. Monetary

assets and liabilities denominated in currencies other than the functional currency are remeasured using

the exchange rates prevailing at the end of the reporting period. Any foreign exchange gains or losses

arising from the remeasurement of these monetary assets and liabilities are recognized in other income

(expense) in the consolidated statement of profit or loss.

5. Cash and cash equivalents

Cash and cash equivalents consist of cash in hand, demand deposits with banks, short-term treasury

bills and other short-term highly liquid investments with original maturities of three months or less.

6. Debt securities

Debt securities primarily comprise treasury bills chargeable at central banks with original maturities of

more than three months, mandatory deposits at central banks, and bonds and other interest-bearing

securities. The Group classifies investments as financial assets measured at amortized cost, with interest

recognized within interest income in the consolidated statements of profit or loss.

7. Consumer receivables

Consumer receivables represent unsecured amounts due from consumers that elect to pay over time

either through Pay Later or Fair Financing options as well as receivables related to other consumer fees as

discussed in our revenue recognition accounting principles. Pay Later consumer receivables arise from

transactions that enable consumers to purchase goods or services at the time of the transaction and defer

payment to a later date or in short-term installments (e.g., Pay in 30, Pay in 3, Pay in 4). Fair Financing

consumer receivables arise from transactions that enable consumers to pay for purchases over a longer-

term installment plan, typically ranging from three to 48 months.

Consumer receivables that Klarna has the objective of holding to collect contractual cash flows are

measured at amortized cost, including outstanding principal balances, accrued interest and net of

allowances for expected credit losses.

Consumer receivables which are managed within a business model whose objective is to originate and

sell or within a hold-to-collect-and-sell business model are measured either at fair value through profit or

loss ("FVTPL") or fair value through OCI ("FVOCI") and presented separately on the consolidated balance

sheet.

KLARNA GROUP PLCF-12

8. Settlement and trade receivables

Settlement and trade receivables primarily include receivables from payment solution providers

("PSPs"), amounts due from merchants for services and receivables from third-party debt collection

agencies and financial institutions. Settlement and trade receivables are reported at amortized cost net of

an allowance for expected credit losses.

9. Allowance for expected credit losses

Klarna estimates allowances for expected credit losses ("ECL") for debt securities, consumer

receivables and settlement and trade receivables. The ECL allowance is based on either 12-month

expected credit losses ("12m ECL") or on lifetime expected credit losses ("Lifetime ECL"). The ECL

allowance is based on the latter if the simplified approach, as defined by IFRS 9, is applicable or if there

has been a significant increase in credit risk since initial recognition.

Lifetime ECL and 12m ECL are calculated on a collective basis at an asset class level. The asset class is

defined by shared credit risk characteristics, which are generally by market and geography.

**Debt securities** 

Klarna invests in treasury bills issued by central banks, loans to highly rated financial institutions and

bonds issued by highly rated government entities. The credit rating status of issuing entities is monitored

throughout the investment holding period. The high credit quality of the issuers results in a low probability

of default, loss given default and exposure at default resulting in an immaterial ECL estimate for debt

securities.

**Consumer receivables**

To measure the ECL for consumer receivables, the Group assigns outstanding loans to one of three

stages with the stage corresponding to the individual loan's estimated repayment performance. The

estimated repayment performance is informed by the Group's records, including the customer's history

with Klarna and purchase behavior from active Klarna consumers, merchant data, credit bureau reports

and open banking data. Klarna defines the stages as follows:

*Stage 1:* New loan origination that is not credit impaired at origination. A loan remains in Stage 1 unless

there is a significant increase in credit risk ("SICR"), such as when a loan becomes 30 days or more past

due or if the consumer has other loans that are in Stage 2 or 3. While a consumer could have a loan that

did not experience SICR, if they have a loan in Stage 2 or 3, Klarna applies a more prudent approach to all

loans for the consumer as part of its risk management practices. A loan may also be transferred back to

Stage 1 if credit risk has significantly improved and it is not delinquent 30 or more days. For Stage 1 loans,

the allowance is calculated based on 12-month ECL.

*Stage 2*: Loan with an observed significant increase in credit risk since origination. Klarna defines

significant increase in credit risk as a loan with an outstanding balance more than 30 days overdue. The

allowance for these loans is calculated based on Lifetime ECL. Stage 2 also includes loans that are

reclassified from Stage 3 because they are no longer considered credit impaired.

*Stage 3*: Loan considered credit impaired. A loan is defined as credit impaired if it is 90 days past due

or is classified as fraudulent. The allowance for Stage 3 loans is calculated based on Lifetime ECL. A loan

may be reclassified from Stage 3 if it is no longer considered credit impaired.

**Settlement and trade receivables**

For settlement and trade receivables, Klarna estimates credit losses using the Lifetime ECL model.

Each counterparty is subject to a credit risk assessment at onboarding and periodically throughout its

relationship with Klarna. Based on the credit risk assessment, a counterparty is assigned a risk

KLARNA GROUP PLCF-13

classification that correlates to a probability of default. For higher risk counterparties, Klarna extends

settlement windows for payments to the counterparties to serve as collateral for their non-performance if

a consumer returns products.

When a settlement and trade receivable is determined to be uncollectible, the gross amount is written

off through the allowance for expected credit losses for settlement and trade receivables in general and

administrative on the consolidated statements of profit or loss. Recoveries of trade receivables that were

previously written off are recognized when received in general and administrative on the consolidated

statements of profit or loss. See Note 7 for information on written-off and recovered settlement and trade

receivables.

**Significant inputs**

Klarna utilizes a series of models to calculate allowance estimates, which depend on certain significant

inputs.

**Definition of default**

An asset is considered to be in default when it is 90 days or more past due on any payments, has

entered debt collection or is classified as fraudulent.

**Probability of Default ("PD")** 

Historical balances as well as the proportion of those balances that have defaulted over time are used

as a basis to determine the PD. This approach provides values for 12-month and lifetime PDs applied over

different vintages for different countries and for days since origination. In cases where the maturity of the

loans is very short (i.e., less than 12 months), which is common for Klarna's products, the 12-month PD and

lifetime PD have equal values.

**Loss Given Default ("LGD")**

LGD is the magnitude of the likely loss if there is a default. The LGD is dependent on geographical

region, days past due, and, in some cases, recoveries from the sale of non-performing portfolios. The loss

given default is calculated using the historical balances over different vintages as a basis. Furthermore, the

LGD component is determined based on days past due.

**Exposure at Default ("EAD")**

EAD represents the estimate of the exposure at a future default date, taking into account expected

changes in the exposure as of each reporting date, including repayments of principal and interest, whether

scheduled by contract or otherwise.

**Measurement of ECL**

Expected credit loss estimates are based on these key inputs: PD, LGD and the EAD, which are derived

from internal statistics and other external data. PD and LGD estimates are an accumulation of

segmentation, such as product and geography, within each asset class, which are used to calculate the

ECL on a collective basis. For unsecured assets, there is no collateral factored into the ECL calculations.

For quantitative information on the reported ECL amounts see Note 6 and Note 7.

**Write-off of financial assets**

Consumer receivables and settlement and trade receivables are written off when either the entire

outstanding amount or a proportion thereof are considered uncollectible, which is generally when an

outstanding balance is 180 days past due. For consumer receivables and settlement and trade receivables,

KLARNA GROUP PLCF-14

Klarna monitors significant counterparty relationships for current information and events to assess if there

is a risk the counterparty is experiencing financial difficulty or is in breach of contract.

If a loan or receivable is determined to be uncollectible, the gross amount will be charged off through

the allowance for expected credit losses. Charged-off balances may still be subject to enforcement

activities to attempt to recover the amounts due. When enforcement activities are exhausted or the loan

or receivable is sold to an external party, the loan or receivable is formally written off in Klarna's systems.

For information on the written-off consumer receivables and settlement and trade receivables,

including those subject to enforcement activities, see Note 6 and Note 7, respectively.

**Sale of uncollectible consumer receivables**

Klarna enters into agreements to sell certain uncollectible receivables to debt collection agencies to

maximize recovery and manage credit risk. These uncollectible receivables are sold on a non-recourse

basis, with the Group transferring substantially all risks and rewards of ownership to the debt collection

agencies meeting the derecognition criteria on the date of sale. When a receivable is deemed to be

uncollectible it is written down to the recoverable amount.

**Recoveries**

Recoveries for consumer receivables that were previously written off are recognized when received in

provisions for credit losses on the consolidated statements of profit or loss. Recoveries of consumer

receivables that were previously written off were not material in 2025, 2024 and 2023.

10. Commitments

Klarna enters into certain arrangements that create commitments to purchase certain consumer loans

originated by partner banks in the United States ("Loan funding commitments"). Upon purchase of these

consumer loans, Klarna recognizes them on the consolidated balance sheet. Klarna may also provide

consumers with committed credit limits or other committed financing arrangements. Amounts drawn

under these commitments are recognized on the consolidated balance sheet. Amounts committed under

these arrangements that are not yet recognized are disclosed in Note 19.

11. Structured entities

A structured entity is an entity in which voting or similar rights are not the dominant factor in deciding

who controls the entity, such as when any voting rights may relate to administrative tasks only, with the

relevant activities of the entity being directed by means of contractual arrangements. Structured entities

are generally created to achieve a narrow and well-defined objective with restrictions around their ongoing

activities.

Klarna consolidates such structured entities when we determine that we control the structured entity

in accordance with IFRS 10. In the case of structured entities, this determination involves judgment,

particularly as voting rights are often not the determining factor in decisions over the relevant activities.

This judgment involves assessing the purpose and design of the entity, and whether we have power over

the relevant activities and exposure, or rights, to variable returns, and the ability to use its power over the

investee to affect the amount of the returns. In determining this, we also assess whether we are acting as

a principal or as an agent on behalf of others.

**Warehouse financing facility and synthetic securitizations** 

Klarna enters into transactions with securitization vehicles ("SPVs"), where it economically transfers a

portion of credit risk for certain pools of consumer receivables (the "Referenced Pools") with the primary

objective to lower the regulatory capital risk weights of the underlying assets.

KLARNA GROUP PLCF-15

In certain transactions, Klarna enters into synthetic securitizations with unconsolidated SPVs. in which

credit risk for each Referenced Pool is separated into three tranches: junior, mezzanine and senior. In

these structures, Klarna retains the junior and senior tranches and transfers the credit risk associated with

the mezzanine tranche to an unconsolidated SPV, which issues credit-linked notes ("CLNs") to investors.

Klarna pays a fee to the SPVs for the transfer of credit risk, which is recognized as incurred in funding

costs, see Note 17. This fee provides for a guarantee from the SPV to reimburse the Company for any

credit losses incurred within transfers of the credit risk associated with the mezzanine tranche.

In other transactions, Klarna enters into arrangements with consolidated SPVs, typically through

warehouse financing facilities with an institutional lender, as the funder, and Klarna Bank AB, a subsidiary

of Klarna Group plc, as the borrower. In these structures, the SPV issues CLNs to the funder and advances

the proceeds to Klarna, which in turn pledges Referenced Pools as collateral. Credit risk for the Reference

Pool is separated into two tranches: a junior tranche retained by Klarna and a senior tranche transferred to

the funder through the consolidated SPV.

The CLNs are recognized within *Notes Payables and Other Borrowings* and are classified and

measured at amortized cost using the effective interest method. Interest and senior expenses related to

the facility are recognized within funding costs, see Note 17.

In both structures, Klarna retains the contractual rights to the cash flows and substantially all of the

associated risks and rewards of ownership of the receivables within the Reference Pool. Accordingly, the

receivables are not derecognized and continue to be recognized in the statement of financial position.

Should the Company experience credit losses exceeding the retained tranche and fall within the

transferred tranche, it would be entitled to recoveries consistent with that contractual reimbursement

right. The Company's estimated credit losses for the Reference Pools was below the contractual range of

the transferred tranches for the periods presented. Accordingly, no claims have been made against the

SPVs in respect of the reporting periods.

**Forward flow securitization**

Klarna enters into forward flow loan sale arrangements with unconsolidated SPVs whereby specified

pools of consumer receivables ("Eligible Receivables") are transferred to the SPVs.

Klarna classifies the Eligible Receivables into either fair value through OCI ("FVOCI"), or fair value

through profit or loss ("FVTPL") on the basis of both (a) Klarna's business model for managing the assets,

and (b) the contractual cash flow characteristics of the financial assets.

Eligible Receivables classified and measured at FVOCI are subsequently remeasured at fair value and

changes therein are recognized in other comprehensive income, except for interest income, impairment,

and foreign exchange, until the assets are sold. Interest income is recognized using the effective interest

method, in the same manner as for financial assets measured at amortized cost, until derecognition

requirements are met. Eligible Receivables classified and measured at FVTPL are subsequently

remeasured at fair value and changes therein are recognized in the statements of profit or loss.

Expected credit losses ("ECL") on Eligible Receivables measured at FVOCI do not reduce the carrying

amount of the financial assets, which remain at fair value. Instead, the ECLis recognized in other

comprehensive income as an accumulated impairment amount, with a corresponding charge to profit or

loss.

Klarna derecognizes receivables upon transferring the contractual rights to the cash flows and

substantially all associated risks and rewards. The transfers are deemed to occur on the sale date, at

which point, the derecognition criteria are satisfied.

Upon disposal of Eligible Receivables measured at FVOCI, the cumulative gains or losses previously

recognized in other comprehensive income, including the accumulated impairment amount are

KLARNA GROUP PLCF-16

reclassified from other comprehensive income to the statements of profit or loss. Upon disposal of Eligible

Receivables measured at FVTPL, gains and losses are recognized in the statements of profit or loss.

Gains and losses from disposals of Fair Financing receivables are recognized within revenue as Gain

on sale of consumer receivables, and losses from disposals of Pay Later receivables are recognized within

Funding costs, reflecting the nature and underlying characteristics of the sold eligible receivables. See

Note 4 and Note 17.

Klarna may continue to service certain sold receivables on behalf of the SPVs in exchange for

receiving a servicing income from providing professional services such as cash flow collection and credit

risk management in the event of customer defaults. We recognize this servicing fee within Transaction and

service revenue. The servicing fee is typically calculated daily by applying a fixed percentage to the

outstanding loan principal balance. The servicing fee represents a fair market fee, and no servicing asset

or liability is recognized in the financial statements. See Note 4.

12. Fair value measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly

transaction between market participants at the measurement date in the principal or, in its absence, the

most advantageous market to which Klarna has access at that date.

When available, Klarna measures fair value using the quoted price in an active market. If a quoted price

in an active market is not available, the Group uses valuation methods that maximize the use of relevant

observable inputs and minimize the use of unobservable inputs to determine fair value.

The fair value of a financial instrument on initial recognition is generally best evidenced by its

transaction price (i.e., the fair value of consideration paid or received). If Klarna determines that the

transaction price differs from the fair value and the fair value is not evidenced by a quoted price in an

active market for an identical asset or liability nor based on a valuation method where unobservable inputs

are considered to be insignificant in relation to the difference, then the financial instrument is initially

measured at fair value, adjusted to defer the difference between the fair value on initial recognition and

the transaction price. Subsequently, that difference is recognized in profit or loss on an appropriate basis

over the life of the instrument but no later than when the valuation is wholly supported by observable

market data or the transaction is settled.

All assets and liabilities for which fair value is measured or disclosed in these consolidated financial

statements are categorized within the fair value hierarchy, described as follows, based on the lowest level

input that is significant to the fair value measurement as a whole.

**Level 1**

Level 1 in the fair value hierarchy consists of assets and liabilities where the inputs used in the

valuation are unadjusted quoted prices from active markets for identical assets or liabilities.

**Level 2**

Level 2 consists of assets and liabilities where the significant inputs used for valuation are derived

from directly or indirectly observable market data available over the entire period of the instrument's life.

Such inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for

identical instruments in inactive markets and observable inputs other than quoted prices such as interest

rates and yield curves, implied volatilities and credit spreads.

**Level 3**

Level 3 includes estimated values based on assumptions and assessments where one or more

significant inputs are not based on observable market information.

KLARNA GROUP PLCF-17

Klarna recognizes transfers between levels of the fair value hierarchy at the end of the reporting

period during which the change has occurred.

13. Repurchase agreements

Repurchase agreements are used to obtain liquidity and fluctuate over time based on many factors,

including market conditions, consumer receivables and consumer deposit growth and balance sheet

management activities.

Treasury bills and other interest-bearing securities that are sold under agreements to repurchase at a

specified future date are not derecognized from the balance sheet as Klarna retains substantially all of the

risks and rewards of ownership. Assets under repurchase agreements are transferred to the counterparty,

and the counterparty has the right to sell or re-pledge the assets. Such securities are kept on the balance

sheet and pledged as collateral when the securities have been transferred and cash consideration has

been received. Payment received is recognized under notes payable and other borrowings. The difference

between the sale and repurchase price is accrued over the life of the agreement using the effective

interest method and recognized within funding costs in the consolidated statements of profit or loss.

14. Derivative instruments and hedge accounting

Derivative instruments are recognized in the balance sheet on their trade date and are measured at

fair value, both initially and in subsequent periods. Derivative instruments are presented in other assets or

notes payable and other borrowings. Changes in the fair value of derivative instruments are included in

funding costs in the consolidated statements of profit or loss.

The Group uses hedge accounting for fair value hedges to manage the interest rate risk of liabilities.

Changes in the fair value of derivatives that are designated and qualify as fair value hedging

instruments are included in funding costs, together with any changes in the fair value of the hedged

liability that are attributable to the hedged risk. Any residual mismatch between the hedging instrument

and the hedged item is recognized as ineffective.

When hedging interest rate risk, any interest accrued or paid on both the hedging instrument and the

hedged item is included in funding costs. If the hedge no longer meets the criteria for hedge accounting,

the adjustment to the carrying amount of a hedged item for which the effective interest method is used is

amortized to the consolidated statements of profit or loss over the period for which the item was hedged.

If the hedged item is sold or repaid, the unamortized fair value adjustment is recognized immediately in

funding costs.

15. Consumer deposits

Consumer deposits are initially recorded at fair value and then at amortized cost and with application

of the effective interest method. Where a consumer deposit is in a qualifying fair value hedge relationship,

its carrying value is adjusted for changes in fair value attributable to the hedged risk. All consumer

deposits are interest-bearing.

Klarna offers certain consumer deposit arrangements under which funds are held on behalf of

consumers by third-party financial institutions. Under these arrangements, consumer deposit balances

that are not controlled by Klarna are not recognized in the consolidated balance sheet.

16. Payables to merchants

Payables to merchants arise when Klarna facilitates payment transactions for merchants and holds the

corresponding funds on their behalf. The settlement cycle is dependent on the counterparty, but is usually

within a few working days of the transaction. As a result, Klarna records a liability towards the merchant,

KLARNA GROUP PLCF-18

representing the money owed to them. Payables to merchants are recognized at amortized cost. On

settlement, the Group derecognizes these amounts from the balance sheet.

17. Leasing

The Group assesses at contract inception whether a contract is, or contains, a lease. That is, if the

contract conveys the right to control the use of an identified asset for a period of time in exchange for

consideration. The length of a lease term includes options to extend or terminate the lease when it is

reasonably certain that the Group will exercise those options. The Group applies judgment in evaluating

whether it is reasonably certain to exercise extension or termination options. For most leases, the Group

has determined that the lease term does not include additional periods after the initial period.

A right-of-use asset and a lease liability are recognized at the lease commencement date. The right-of-

use asset is initially measured at cost, which comprises the initial amount of the lease liability adjusted for

initial direct costs, incentive payments, restoration costs and lease payments before the commencement

date. The right-of-use asset is subsequently depreciated using the straight-line method from the

commencement date to the end of the lease term.

The lease liability is initially measured at the present value of the remaining lease payments that are

not paid at the commencement date. As most leases do not provide an implicit interest rate, the Group

uses the incremental borrowing rate at the lease commencement date in determining the present value of

lease payments.

The lease liability is remeasured when there is a change in future lease payments arising, for example,

from a change in an index or rate, a reassessment of extension, termination or purchase options, or a

change in the amount expected to be payable under a residual value guarantee. If a remeasurement of the

lease liability occurs, a corresponding adjustment to the carrying amount of the right-of-use asset is made.

Lease payments included in the measurement of the lease liability are fixed payments, variable lease

payments that depend on an index or rate, amounts expected to be payable under a residual value

guarantee and the exercise price under a purchase option, if applicable. The Group excludes payments for

related services and other components of a lease. The Group presents right-of-use assets in property and

equipment and lease liabilities in other liabilities in the balance sheet.

The Group has elected not to recognize right-of-use assets and lease liabilities for short-term leases

and leases of low-value assets, primarily relating to IT equipment and short-term office rentals. Payments

for such leases are recognized as an expense on a straight-line basis over the lease term.

18. Business combinations

Business combinations are accounted for using the acquisition method. Identifiable assets acquired

and liabilities assumed are measured initially at their fair values at the acquisition date. The excess of the

consideration transferred and the acquisition-date fair value of any previous equity interest in the

acquiree, over the fair value of the identifiable net assets acquired is recognized as goodwill. Acquisition-

related costs, other than those incurred for the issuance of debt or equity instruments, are charged to the

consolidated statement of profit or loss as they are incurred.

19. Divestitures

Non-current assets or disposal groups are classified as held for sale when their carrying amount is

expected to be recovered principally through a sale transaction rather than through continuing use. The

classification is made when the asset or disposal group is available for immediate sale in its present

condition, and the sale is highly probable within one year. Upon such classification, the assets or disposal

group are measured at the lower of their carrying amount and fair value less costs to sell.

The gain or loss on divestment is determined as the difference between the consideration received,

net of transaction costs, and the carrying value of the net assets disposed of. The gain or loss is

KLARNA GROUP PLCF-19

recognized within other income (expense) in the statements of profit or loss. Where goodwill has been

allocated to the disposed operation, typically measured based on the relative values of the disposed

operation, such goodwill is included in the carrying amount of the operation when determining the gain or

loss on disposal.

An operation is classified as discontinued when it represents a separate major line of business or

geographical area of operations that either has been disposed of or is classified as held for sale.

For foreign operations, cumulative foreign currency translation differences previously recognized in

other comprehensive income are reclassified to the statements of profit or loss upon divestment. This

reclassification is included as part of the gain or loss on disposal.

20. Goodwill and intangible assets

**Goodwill**

Goodwill represents the excess of consideration paid over the fair value of the identifiable net assets

acquired in a business combination. Goodwill is not amortized but is reviewed for impairment annually and

more frequently if an event occurs or circumstances change that would more likely than not reduce the

fair value of a reporting unit below its carrying value. Impairment of goodwill is not reversed. The Group

monitors goodwill for impairment considerations at the operating segment level. In the event of a disposal

that qualifies as a business, or where there is a significant reorganization of the business, goodwill is

allocated based upon relative fair values.

**Trademarks, tradenames, licenses and other customer-related intangible assets**

Identifiable intangible assets following business combinations include trademarks, tradenames,

licenses, developed technology and customer relationships. Acquired intangible assets are recorded at

fair value on the date of acquisition and amortized over their estimated useful lives, generally 3-20 years.

The Group reviews the carrying amounts of intangible assets for impairment at the asset group level

whenever events or changes in circumstances indicate that the carrying amount of the asset group may

not be recoverable.

**Capitalized development costs**

Costs associated with IT systems, software and licenses, whether developed internally or acquired, are

recognized as intangible assets when the following criteria are met:

• It is technically feasible to complete the intangible asset so that the asset will be available for use

or sale;

• Adequate resources are available to complete the development;

• There is an intention to complete and use the intangible asset for the provision of services;

• Use of the intangible asset will generate probable future economic benefits; and

• Expenditures attributable to the intangible asset can be measured reliably.

Depreciation is computed using the straight-line method over the estimated useful lives of the

depreciable capitalized development costs and licenses (generally, 3-5 years) and reported within

depreciation, amortization and impairments and in technology and product development in the

consolidated statements of profit or loss depending on the nature of the assets. Costs related to

development activities that do not satisfy the above criteria, including for maintenance, are expensed as

incurred.

KLARNA GROUP PLCF-20

**Impairment**

Goodwill is tested for impairment annually. This is tested by estimating the recoverable amount, which

is the higher of the fair value less costs of disposal and the value in use. If the recoverable amount is lower

than the carrying amount, the asset is written down. See Note 11 for further information on the

measurement of goodwill and significant assumptions used in the annual impairment test.

Intangible assets with finite useful lives undergo impairment testing whenever events or changes in

circumstances indicate that the carrying amount may not be recoverable.

21. Property and equipment

Property and equipment is stated at historical cost less accumulated depreciation and impairment.

Depreciation is computed using the straight-line method over the estimated useful lives of the depreciable

assets, generally, by applying the following useful lives to each class of property and equipment:

---

| | |
|:---|:---|
| Equipment, tools and fixtures and fittings ............................... | 5 years |
| Computers and other machinery .............................................. | 3 years |
| Leasehold improvements............................................................ | The shorter of lease term and useful life |

---

If there is an indication that the recoverable value is less than the carrying amount, an impairment

review is completed and any impairment loss is recognized within depreciation, amortization and

impairments in the consolidated statements of profit or loss. The cost and accumulated depreciation for

property and equipment that is sold, retired or otherwise disposed of are derecognized and the resulting

gains or losses are recorded in the consolidated statements of profit or loss.

22. Treasury shares

Shares in the Company that are held by wholly owned subsidiaries or other Group entities are

classified as treasury shares. Amounts paid to repurchase the Company's own shares, including any

directly attributable incremental costs (net of related income tax effects), are recognized as a deduction

from equity. The repurchased shares are presented as treasury shares and remain deducted from equity

until they are either cancelled or reissued. These shares are deducted from the issued and weighted

average number of shares in calculating earnings per share. Dividends received on treasury shares are

eliminated on consolidation, and no gain or loss is recognized in profit or loss or other comprehensive

income on the purchase, sale, reissue, or cancellation of such shares.

23. Revenue Recognition

**Transaction and service revenue**

Revenue is recognized when control of the promised goods or services is transferred to customers, in

an amount that reflects the consideration the Group expects to be entitled to in exchange for those goods

or services. The product offerings from which revenues are recognized do not differ in any significant way

between geographical markets.

**Transaction revenue**

Transaction revenue includes merchant revenue and advertising revenue. Merchant revenue refers to

fees paid by our merchants, generated when consumers transact on our network. It includes merchant

fees, interchange revenue and fees for settling disputes. Merchant revenue is derived from the volume of

transactions we process multiplied by the fees we charge, which vary among our geographies. Our pricing

is a combination of value-based and fixed pricing, charged either ad valorem (proportional to the

estimated value of goods and services purchased on our network) or fixed fees on each transaction, or a

KLARNA GROUP PLCF-21

mix of both. Where consumers return merchandise or goods and merchants process a refund, merchant

fees charged for the original transaction are not returned to the merchant.

Our contracts with merchants consist of a master agreement including terms, conditions and pricing.

We are not obligated to perform under the contract until a transaction occurs and thus each transaction

represents a separate performance obligation to the merchant as our customer. Our service offering

comprises a single performance obligation to merchants to facilitate transactions with consumers. The

transaction price is recognized at the point in time when the merchant successfully confirms the

transaction, which is when the terms of the contract are fulfilled. We provide a reduction of merchant fees

to certain merchants based on performance measures, including volume of processed transactions. The

nature of our contracts may give rise to variable consideration, which may be constrained. We estimate the

expected transaction volumes at the beginning of the period and include the estimated rebates in the

transaction price as a reduction of merchant revenue. We also enter into contracts with certain merchants

to expand our user base and market presence and for brand promotion through co-marketing activities, as

detailed in section Promotional and marketing arrangements below.

Advertising revenue is earned from merchants who place advertisements on our network, including

sponsored search, affiliate programs and brand ads. We enter into contracts for advertising either directly

with merchants or through other third parties. The transaction price is determined based on the

advertising model, with fees that may be fixed or variable, typically based on the number of impressions

delivered or actions taken by users, such as clicks or purchases. Revenue from impression-based ads is

recognized in the period when an ad is displayed to users. For action-based ads, revenue is generally

recognized at a point in time, when a specified action, such as a click or purchase, occurs.

Our contracts for advertising services are separate from other merchant contracts and include a single

performance obligation. For advertising revenue generated through other third parties, we recognize

revenue on a gross basis if we are the principal and on a net basis if we are the agent. This assessment is

based on whether we control the service before it is delivered to the customer.

**Consumer service revenue**

Consumer service revenue refers to revenue we earn from consumer fees, primarily consisting of

certain administrative fees, including reminder fees and fees for issuing one-time cards. Consumers may

be charged a fee, being a fixed amount that constitutes the transaction price and recognized at the point

in time that the consumer is charged. This fee income is earned in relation to the Company's ordinary

activities.

Consumer service revenue also includes subscription revenue. Subscription revenue represents

monthly subscription fees related to a single performance obligation for a bundle of services and are

recognized over the subscription period as those services are provided.

**Distribution partner referral arrangements**

We enter into contracts with third-party partners to distribute our payment solutions to our merchants.

For these contracts, we evaluate who our customer is and if we are acting as the principal or agent in the

specific arrangement. Generally, our customer is considered to be the merchant and we are considered to

be the principal in these arrangements, while third-party partners are determined to be an agent in the

transaction. We recognize incremental costs of obtaining a contract in accordance with IFRS 15 "Revenue

from Contract with Customers" for the commission paid to these third-party partners. These expenses are

classified within sales and marketing expenses in the consolidated statements of profit or loss. During

2025, 2024 and 2023, the Company recognized $109 million, $81 million and $59 million, respectively,

related to these commissions within sales and marketing expenses.

KLARNA GROUP PLCF-22

**Promotional and marketing arrangements**

We enter into contracts with certain merchants and other partners to expand our user base and

market presence, and for brand promotion through co-marketing activities, in which Klarna provides cash,

share warrants, or both as consideration. We evaluate if the consideration payable is in exchange for a

distinct good or service. Where the payment is for a distinct good or service, it is recognized as sales and

marketing expenses. If a payment is not for a distinct good or service, it is recognized as a reduction of the

transaction price. We recognize the expense of such services as incurred. When the consideration

represents a payment against which economic benefits are expected to be realized over a future period,

we recognize a commercial agreement asset. These assets are amortized over the period of the contract

for when the services are expected to be provided, which is typically between 3-5 years.

We also offer promotions to consumers, including cashback, with the purpose of acquiring new

consumers, promoting the Klarna brand, the use of the Klarna app and payment options. These promotions

typically represent a reduction on the total amount collected from consumers. Where we assess there is

no explicit or implicit expectation for promotions to be provided, we recognize within sales and marketing

expenses. Where we assess there is an expectation, the cost of the promotion is recognized as a reduction

in the revenue earned from the transaction, with any excess of the cost of the promotion above the

revenue recognized within sales and marketing expenses.

**Interest income**

Interest income includes interest earned when consumers choose to spread the cost of transactions

over time through one of our interest-bearing financing products or to delay the cost of transactions with

our payment flexibility features, such as "snooze." We also recognize interest income related to

incremental fees earned from certain merchants for providing interest-free promotional loans to their

consumers.

Interest income on financial assets measured at amortized cost, as well as "snooze" fees charged, is

recognized in profit or loss using the effective interest method.

Interest income also includes interest from debt securities. See Note 8.

From time to time, we may enter into contracts with merchants under which we pay a fee for their role

as intermediary in arranging a consumer financing facility. We recognize such fees as a reduction of

interest income. During 2025, 2024 and 2023, the Group recognized $12 million, $10 million and $13 million

as a reduction of interest income, respectively.

24. Operating expenses

**Processing and servicing costs**

Processing and servicing costs primarily consist of the following and include cost of fulfilling a

contract: authentication costs to verify user identities, scoring costs related to purchasing credit and fraud

data from various bureaus, distribution costs related to direct communication with consumers,

commissions paid to third parties for debt collection and payment fees to credit card companies and

financial institutions. Processing and servicing costs are expensed as incurred.

**Provision for credit losses**

Impairment losses from consumer receivables are reported as Provision for credit losses.

Provision for credit losses for the period consist of realized credit losses, provisions for credit losses

for granted credit, less reversal of provisions for credit losses made previously. Realized credit losses are

losses whose amount is, for example, determined via bankruptcy, a composition arrangement, a statement

by an enforcement authority or the sale of receivables.

KLARNA GROUP PLCF-23

**Funding costs**

Funding costs include interest that we pay on our consumer deposits, calculated using the effective

interest method, and securitization costs, including fair value adjustments on Pay Later receivables held at

fair value through profit and loss related to forward flow agreements, and premiums paid in connection

with our synthetic securitization transactions.

**Technology and product development**

Technology and product development expenses primarily consist of personnel-related costs for

technology functions as well as other expenses, including hosting, software licenses, external service

providers, hardware costs and amortization of internally developed and acquired technology assets.

**Sales and marketing** 

Sales and marketing expenses primarily consist of personnel costs, general marketing and promotional

activities costs, referral commissions, costs related to sponsorships and partnerships, and costs related to

consumer promotional programs.

**Customer service and operations** 

Customer service and operations expenses primarily consist of personnel costs for customer support

functions and outsourced assistance to help with purchases, account management, returns and merchant

disputes.

**General and administrative** 

General and administrative expenses consist of personnel costs for directors and executives, legal and

human resources, and finance functions, lease expenses related to short-term leases, low-value assets,

and variable lease expenses, professional services costs and merchant and other losses.

25. Income taxes

Income taxes consist of current tax and deferred tax. Income taxes are reported directly in the

consolidated statement of profit or loss except when the underlying transaction is reported directly

against equity or other comprehensive income, in which case the accompanying tax also is reported in

equity or other comprehensive income. The tax rates and tax laws used to compute the amount are those

that are enacted or substantively enacted at the reporting date in the countries where the Group operates

and generates taxable income.

Deferred tax is reported according to the balance sheet method for all taxable temporary differences

between an asset's or a liability's tax base and its carrying amount in the balance sheet. Deferred tax

assets are reported for deductible temporary differences to the extent it is probable that the taxable profit

will be available against which the deductible temporary difference can be utilized. Deferred tax assets

and liabilities are measured at the tax rates that are expected to apply in the year when the asset is

realized or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively

enacted at the reporting date.

The Group assesses on an ongoing basis as well as at the end of the year the possibility of recognizing

deferred tax assets related to tax losses carried-forward. Deferred tax assets attributable to tax losses

carried forward are reported only if it is probable that they will be used towards taxable profits in the

foreseeable future. Significant management judgment is required to determine the amount of deferred tax

assets that can be recognized, based upon the probability of taxable profits being available in the future

and the quantum of taxable profits that are forecasted to arise. These judgments include management's

expectations of the growth of profit before tax in different jurisdictions, forecasted revenues and

expenses and the timing of the reversal of taxable temporary differences.

KLARNA GROUP PLCF-24

Uncertain tax positions are measured on an ongoing basis, and the method is determined by taking all

known facts and circumstances into account.

26. Share-based payments

Klarna offers equity-based programs to employees and certain third-party contributors, including

merchants, partners and service providers.

**Employee Restricted Share Unit Program and Individual Contributor Share Warrants and Share Options**

The Group grants share-based awards in the form of restricted share units ("RSUs"), share warrants

and options, to certain individual contributors, including employees, executive officers and directors.

Restricted share units granted to employees generally vest on a graded vesting schedule over a four years

period. The share warrants and options are subject to graded vesting over a term of typically four to five

years. These arrangements are equity-settled and are accounted for as equity-settled share-based

payments.

For share-based awards granted to certain individual contributors, including employees as well as

executive officers and directors, the services rendered are measured with reference to the grant-date fair

value of the equity instruments using a Black-Scholes model. The cost of the share-based payments

granted to employees is recognized over the vesting period, which represents the period the service

conditions are fulfilled.

The Group also grants ordinary shares through direct share issuances to employees, executive officers

and directors. The shares are accounted for as equity-settled share-based payments. Typically there are

no vesting conditions or restrictions placed on the awards and, accordingly, the related share-based

compensation expense, based on the grant-date fair value of the awards, is recognized immediately.

The share-based payment expenses related to awards granted to individual contributors, including

employees, executive officers and directors are recognized under technology and product development,

sales and marketing, customer service and operations or general and administrative expenses depending

on the function of the related employee or individual contributor in the consolidated statements of profit

or loss. The employment vesting condition is a non-market based condition and a forfeiture estimate is

factored into the assumption of how many equity instruments are expected to vest.

Any related social security charges relating to share-based payments are recognized as an expense

during the corresponding period based on the fair value that serves as the basis for a payment of social

security charges. The expense is recognized under the function of the related employee or individual

contributor in the consolidated statements of profit or loss. In many jurisdictions, tax authorities levy taxes

on share-based compensation transactions with employees that give rise to a personal tax liability for the

employee. In some cases, Klarna is required to withhold the tax due and to settle it with the tax authority

on behalf of the employees. To fulfill this obligation, the terms of Klarna's restricted share unit

arrangements permit the Group to withhold the number of shares that are equal to the monetary value of

the employee's tax.

**Partner Share Warrants**

Klarna has granted share warrants to certain partners, including merchants and other service

providers, in return for services. Share-based payments to partners are generally measured at the fair

value of the goods or services received and measured at the time when such goods and services are

received. If the fair value of goods and services cannot be reliably measured, the fair value of the equity

instruments is used. We recognize commercial agreement assets where the consideration paid represents

a future economic benefit, and these assets are amortized over the relevant performance period within

the commercial agreement and recognized within sales and marketing expenses where the payment is in

exchange for a distinct service or as a reduction to transaction prices if in exchange for no distinct service.

KLARNA GROUP PLCF-25

Further information relating to share-based payment transactions is presented in Note 22.

27. Provisions

The Group recognizes provisions for present obligations arising from past events when payment of the

obligations is probable and can be reliably estimated. Refer to Note 15 for information regarding the

Group's provisions.

Klarna operates in a regulatory and legal environment that involves an element of litigation risk

inherent to its operations, and from time to time Klarna may be party to litigation, arbitration and regulatory

investigations and proceedings arising during the ordinary course of business. When Klarna can reliably

measure the outflow of economic benefits in relation to a specific case and considers such outflow to be

probable, a provision is recorded. Given the subjectivity and uncertainty of determining the probability and

amount, a number of factors are assessed, including legal advice, the stage of the matter and historical

evidence from similar incidents. Judgment is required in concluding such assessments.

28. Employee Benefits

Employee benefits include all forms of consideration provided by the Group in exchange for services

rendered by employees, including post-employment pension plans. The Group's pension plans are defined

contribution plans, which means that contributions are made to an independent legal entity according to a

fixed pension plan. These contributions are recognized as personnel costs in the period they apply to.

After the contributions are made, the Group has no legal or other obligations. Employee benefits expenses

are composed of:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Salaries and other remuneration .................................................................. | $(417) | $(393) | $(379) |
| Statutory and contractual social security expenses ................................ | (102) | (113) | (109) |
| of which: pension expenses ........................................................................... | (25) | (25) | (26) |
| **Total employee benefits ....................................................................................** | **$(520)** | **$(506)** | **$(488)** |

---

**Note 3 Risk management and management of capital**

Klarna's objectives when managing capital are to safeguard the Group's ability to continue as a going

concern and to comply with regulatory capital requirements.

Regulatory requirements

Within the Group, Klarna Holding AB and its subsidiary, Klarna Bank AB, are subject to the regulatory

capital requirements imposed by the SFSA. The regulatory capital framework requires Klarna to maintain a

minimum level of capital to cover its operational, credit and market risks. Klarna's regulatory capital is

composed of Tier 1 and Tier 2 capital, which include common equity, retained earnings, and subordinated

debt.

Capital adequacy

Klarna monitors its capital and liquidity adequacy ratios through the Internal Capital and Liquidity

Adequacy Assessment Process ("ICLAAP") in accordance with the regulatory definition of these measures.

As of December 31, 2025, Klarna was in compliance with these requirements.

KLARNA GROUP PLCF-26

Capital structure

Klarna's capital structure is regularly reviewed by the board of directors. The review involves assessing

the cost of capital and ensuring compliance with regulatory capital requirements. The key components of

Klarna's capital structure include:

*Equity:* Common shares, additional paid-in capital, and retained earnings.

*Debt:* Debt obligations, including subordinated debt.

Risk descriptions

The Group categorizes the key risks it is exposed to in the sections below. These risk categories form

the basis of how Klarna identifies, assesses, manages and monitors risk.

Credit risk

Credit risk is the risk of financial loss due to a counterparty failing to meet its contractual obligations or

concentrations in exposure. Cash and cash equivalents, consumer receivables, other receivables, and

debt securities are potentially subject to concentrations of credit risk. To manage the Group's credit risk,

cash and securities held are placed with financial institutions that management believes are of high credit

quality, and the quality of the Group's lending is closely monitored through our underwriting process.

Klarna makes real-time underwriting decisions for each transaction, leveraging its records, including the

customer's history with Klarna and purchase behavior from active Klarna consumers, merchant data,

credit bureau reports and open banking data to understand the financial position of the consumer at that

point in time. For further details on credit risk, refer to Note 2.

Market Risk

Market risk is the risk of movements in market prices impacting Klarna's earnings or capital position.

Risk Measurement and Exposure

**Currency exposure**

The currency exposure is a result of transactions denominated in a currency other than the functional

currency. The table below shows the net average currency exposure and the effects of a 10% change in

foreign exchange rates on the exposure of the group as of the end of the period.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2025** | **EUR** | **USD** | **GBP** | **Other** | **Total** <br>**Exposure**<br>|
| Net average currency exposure ................... | 11 | 22 | 13 | 12 | 58 |
| Effect of 10% change ...................................... | (1) | (2) | (1) | (1) | (6) |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2024** | **EUR** | **USD** | **GBP** | **Other** | **Total** <br>**Exposure**<br>|
| Net average currency exposure ................... | 18 | 14 | 10 | 22 | 63 |
| Effect of 10% change ...................................... | (2) | (1) | (1) | (2) | (6) |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2023** | **EUR** | **USD** | **GBP** | **Other** | **Total** <br>**Exposure**<br>|
| Net average currency exposure ................... | 29 | 11 | 4 | 28 | 72 |
| Effect of 10% change ...................................... | (3) | (1) |  | (3) | (7) |

---

KLARNA GROUP PLCF-27

**Interest rate exposure**

As a bank, Klarna is required to monitor exposures toward interest rate risks using the Economic Value

of Equity (EVE) approach according to the relevant EU regulations, EBA guidelines and SFSA

methodologies. The EVE approach measures interest rate driven changes to the net present value of

future cash flows generated by balance sheet items. The change to EVE is measured using various interest

rate scenarios, including parallel shifts.

The table below shows the change in the EVE after applying a parallel shift to the yield curve.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **December 31, 2025** | **SEK** | **EUR** | **USD** | **GBP** | **Other** | **Total** <br>**Exposure**<br>|
| -200 bps parallel shift in interest <br>rates ......................................................<br>| 10 | (28) | 10 | 6 | 1 | (1) |
| 200 bps parallel shift in interest <br>rates ......................................................<br>| (10) | 26 | (9) | (6) | (1) | 1 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **December 31, 2024** | **SEK** | **EUR** | **USD** | **GBP** | **Other** | **Total** <br>**Exposure**<br>|
| -200 bps parallel shift in interest <br>rates ......................................................<br>| 4 | (34) | 3 | 6 | 1 | (20) |
| 200 bps parallel shift in interest <br>rates ......................................................<br>| (4) | 32 | (2) | (6) | (1) | 19 |

---

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| **December 31, 2023** | **SEK** | **EUR** | **USD** | **GBP** | **Other** | **Total** <br>**Exposure**<br>|
| -200 bps parallel shift in interest <br>rates ......................................................<br>| 5 | (43) | 5 | 4 |  | (29) |
| 200 bps parallel shift in interest <br>rates ......................................................<br>| (5) | 41 | (5) | (4) |  | 27 |

---

Liquidity Risk

The risk of the Group being unable to meet its financial obligations, as they fall due, or unable to fund

its operational needs without incurring unacceptable costs.

Risk Measurement and Exposure

The Group complies with all liquidity regulatory requirements, including Liquidity Coverage Ratio

("LCR") and Net Stable Funding Ratio ("NSFR"), and monitoring and management of Klarna's liquidity

survival horizon.

Funding Obligations

The tables below show the undiscounted funding obligations including interest by contractual maturity:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2025** | **<12 months** | **1-5 years** | **>5 years** | **Total** |
| Consumer deposits ............................................................ | $11043 | $2294 | $— | $13337 |
| Notes payable and other borrowings ............................. | 450 | 876 | 240 | $1565 |
| Lease liabilities ................................................................... | 26 | 54 | 5 | 85 |
| **Total ......................................................................................** | **$11518** | **$3224** | **$245** | **$14987** |

---

KLARNA GROUP PLCF-28

---

| | | | | |
|:---|:---|:---|:---|:---|
| **December 31, 2024** | **<12 months** | **1-5 years** | **>5 years** | **Total** |
| Consumer deposits ............................................................ | $7681 | $2109 | $— | $9790 |
| Notes payable and other borrowings ............................. | 234 | 219 | 245 | 698 |
| Lease liabilities ................................................................... | 23 | 61 | 9 | 93 |
| **Total .......................................................................................** | **$7938** | **$2389** | **$254** | **$10581** |

---

The Group's commitments for loan funding are disclosed in Note 19.

**Note 4 Operating segments** 

Klarna determines operating segments based on how the Chief Operating Decision Maker ("CODM")

manages the business, makes operating decisions around the allocation of resources and evaluates

Klarna's operating performance.

Klarna's CODM role is fulfilled by the executive officers as a group, who collaboratively assess financial

performance and make resource allocation decisions on a consolidated basis. Klarna operates as one

operating segment and has one reportable segment.

Geographic Information

Transaction revenue, consumer service revenue and interest income are presented by major

geographic regions based upon the billing address of the consumer. Interest income derived from the cash

and liquidity management of the Group is based on the geographic location of the financial institution for

which financial instruments have been purchased.

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| **Geographical breakdown** |  |  |  |
| United States ..................................................................................................... | $1243 | $850 | $609 |
| Germany ............................................................................................................. | 848 | 755 | 620 |
| United Kingdom ................................................................................................. | 442 | 348 | 268 |
| Other countries ................................................................................................. | 976 | 858 | 779 |
| **Revenue ...............................................................................................................** | **$3509** | **$2811** | **$2276** |

---

No individual country within other countries contributed more than 10% of revenues in 2025.

The following table presents Klarna's revenue disaggregated by category:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Transaction revenue ........................................................................................ | $2103 | $1792 | $1531 |
| Consumer service revenue ............................................................................ | 397 | 344 | 237 |
| Gain on sale of consumer receivables ......................................................... | 73 | 0 | 0 |
| Interest income ................................................................................................. | 937 | 675 | 508 |
| **Revenue ..............................................................................................................** | **$3509** | **$2811** | **$2276** |

---

Transaction revenue

Transaction revenue consists of merchant revenue and advertising revenue. Merchant revenue

primarily refers to fees paid by our merchants, generated when consumers transact on our network and

also includes interchange revenue and fees for settling disputes.

KLARNA GROUP PLCF-29

Advertising revenue is earned from merchants who place advertisements on our network, including

sponsored search, affiliate programs and brand ads. During 2025, 2024 and 2023, advertising revenue

amounted to $190 million, $180 million and $157 million.

Gain on sale of consumer receivables

During the year ended December 31, 2025, the Company entered into sales agreements of Fair

Financing receivables comprising both an initial sale of existing portfolio and additional forward flow

agreements. The total Fair Financing receivables sold during the year was $1.6 billion. These sales of

receivables resulted in a gain on sale $73 million, of which $25 million was reclassified from other

comprehensive income during 2025. There was no comparable revenue for the year ended December 31,

2024. Consumer service revenue

Consumer service revenue refers to revenue we earn from consumer fees, primarily consisting of

certain administrative fees, including reminder fees of $261 million, $254 million and $198 million in 2025,

2024 and 2023, respectively, and other administrative fees, such as fees for issuing one-time cards.

Consumer service revenue also includes subscription revenue of $29 million and $6 million in 2025

and 2024, respectively.

Interest income

The following table presents Klarna's interest income by category:

---

| | | | |
|:---|:---|:---|:---|
| **Interest income** | **2025** | **2024** | **2023** |
| Fair Financing .................................................................................................... | $617 | $383 | $318 |
| "Snooze" fees .................................................................................................... | 161 | 128 | 96 |
| Debt securities .................................................................................................. | 134 | 144 | 75 |
| Incremental merchant fees ............................................................................ | 25 | 20 | 19 |
| **Interest income ..................................................................................................** | $937 | $675 | $508 |

---

Interest income includes interest earned when consumers choose to spread the cost of transactions

over time through one of our interest-bearing financing products or to delay the cost of transactions with

our payment flexibility features, such as "snooze." We also recognize interest income related to

incremental fees earned from certain merchants for providing interest-free promotional loans to their

consumers. Interest income also includes interest from debt securities. See Note 8.

Fair Financing includes interest income of $20 million attributable to consumer receivables originated

and measured at fair value through OCI during 2025.

Significant customers

For the year ended December 31, 2025, 2024 and 2023, there were no single customers that on an

individual level accounted for more than 10% of total revenue.

Klarna's non-current assets, composed of property and equipment, goodwill, intangible assets and

other assets that are expected to be recovered more than twelve months after the reporting period:

KLARNA GROUP PLCF-30

---

| | | | |
|:---|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>| **December 31,** <br>**2023**<br>|
| Non-current assets |  |  |  |
| Sweden ............................................................................................................... | $1284 | $412 | $1017 |
| Germany ............................................................................................................. | 180 | 194 | 234 |
| United States ..................................................................................................... | 100 | 101 | 155 |
| United Kingdom ................................................................................................. | 199 | 167 | 151 |
| Other countries ................................................................................................. | 232 | 326 | 200 |
| **Total non-current assets ...................................................................................** | **$1995** | **$1200** | **$1757** |

---

No individual country within other countries made up more than 10% of non-current assets.

**Note 5 Cash and cash equivalents**

The Group's cash and cash equivalents consisted of:

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| Cash held at central banks ........................................................................................................... | $2578 | $2466 |
| Treasury bills held at central banks ............................................................................................ | 543 | 272 |
| Other bank deposits ....................................................................................................................... | 682 | 505 |
| **Total cash and cash equivalents ....................................................................................................** | **$3803** | **$3243** |

---

Cash held at central banks consist of deposits in accounts with central banks under government

authority primarily where the (i) the central bank is domiciled and (ii) the balance is readily available.

**Note 6 Consumer receivables**

Consumer receivables represent amounts due from consumers related to Klarna's flexible payment

options, including Pay Later and Fair Financing solutions. Consumer receivables, except those which are

managed within a business model whose objective is to originate and sell or within a hold-to-collect-and-

sell business model (see Note 20), are measured at amortized cost, including outstanding principal

balances, unamortized deferred origination costs, accrued interest and net of allowances for expected

credit losses. The below table summarizes consumer receivables for the years ended December 31, 2025

and 2024:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **Gross Carrying** <br>**Amount**<br>| **Allowance for** <br>**ECL**<br>| **Net Carrying** <br>**Amount**<br>|
| Fair Financing receivables .............................................................................. | $4604 | $(272) | $4332 |
| Pay Later receivables ...................................................................................... | 6347 | (220) | 6127 |
| **Total .....................................................................................................................** | **$10951** | **$(492)** | **$10459** |

---

KLARNA GROUP PLCF-31

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Gross Carrying** <br>**Amount**<br>| **Allowance for** <br>**ECL**<br>| **Net Carrying** <br>**Amount**<br>|
| Fair Financing receivables ........................................................................ | $3085 | $(131) | $2954 |
| Pay Later receivables ................................................................................ | 5388 | (201) | 5187 |
| Total ............................................................................................................... | **$8473** | **$(332)** | **$8141** |

---

As detailed in Note 2, to measure the ECL of consumer receivables, Klarna assigns outstanding loans

to one of three stages based on repayment performance. See Note 2 for more information. The below

tables reconcile the Group's classification of Fair Financing and Pay Later consumer receivables by stage

for the opening and closing balances:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Fair Financing receivables** | **Stage 1** | **Stage 2** | **Stage 3** | **Total** |
| **Gross carrying amount as of January 1, 2025 ..................** | **$2893** | **$140** | **$53** | **$3085** |
| New assets originated or purchased ............................. | 11046 | 98 | 17 | 11161 |
| Assets repaid<sup>1</sup>...................................................................... | (9128) | (385) | (69) | (9581) |
| Transfers to stage 1 ............................................................ | 473 | (466) | (7) |  |
| Transfers to stage 2 ........................................................... | (1151) | 1166 | (15) |  |
| Transfers to stage 3 ........................................................... | (45) | (320) | 364 |  |
| Amounts written off ........................................................... | (26) | (21) | (203) | (249) |
| Proceeds received from the sale of uncollectible <br>consumer receivables .......................................................<br>| (2) | (11) | (23) | (36) |
| Other adjustments<sup>2</sup> ............................................................ | 206 | 15 | 4 | 225 |
| **Gross carrying amount as of December 31, 2025 ............** | **$4267** | **$216** | **$121** | **$4604** |

---

____________

<sup>1</sup> Assets repaid includes the sale of an existing portfolio of Fair Financing receivables within the period

<sup>2</sup>Other adjustments are primarily driven by fluctuations in the USD foreign exchange rate.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Pay Later receivables** | **Stage 1** | **Stage 2** | **Stage 3** | **Total** |
| **Gross carrying amount as of January 1, 2025 ..................** | **$5059** | **$227** | **$102** | **$5388** |
| New assets originated or purchased ............................. | 55477 | 69 | 13 | 55559 |
| Assets repaid ...................................................................... | (53591) | (1049) | (183) | (54823) |
| Transfers to stage 1 ............................................................ | 169 | (164) | (5) |  |
| Transfers to stage 2 ........................................................... | (1795) | 1797 | (1) |  |
| Transfers to stage 3 ........................................................... | (25) | (623) | 648 |  |
| Amounts written off ........................................................... | (31) | (21) | (324) | (376) |
| Proceeds received from the sale of uncollectible <br>consumer receivables .......................................................<br>|  |  | (109) | (109) |
| Other adjustments<sup>1</sup> ............................................................ | 673 | 27 | 8 | 708 |
| **Gross carrying amount as of December 31, 2025 ............** | **$5936** | **$263** | **$149** | **$6347** |

---

____________

<sup>1</sup>Other adjustments are primarily driven by fluctuations in the USD foreign exchange rate.

KLARNA GROUP PLCF-32

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Stage 1** | **Stage 2** | **Stage 3** | **Total** |
| **Gross carrying amount as of January 1, 2024** .................. | **$7753** | **$497** | **$144** | **$8394** |
| New assets originated or purchased ............................. | 55836 | 163 | 18 | 56017 |
| Assets repaid ...................................................................... | (52841) | (1730) | (242) | (54813) |
| Transfers to stage 1 ............................................................ | 816 | (799) | (17) |  |
| Transfers to stage 2 ........................................................... | (3067) | 3080 | (13) |  |
| Transfers to stage 3 ........................................................... | (19) | (784) | 803 |  |
| Amounts written off ........................................................... | (27) | (38) | (402) | (467) |
| Proceeds received from the sale of consumer <br>receivables ..........................................................................<br>|  | (20) | (135) | (155) |
| Other adjustments ............................................................. | (499) | (3) | (1) | (503) |
| **Gross carrying amount as of December 31, 2024** ........... | **$7952** | **$366** | **$155** | **$8473** |

---

The activity in the Group's allowance for credit losses recognized for Fair Financing and Pay Later

consumer receivables, based on the above stage classifications, is detailed in the below table:

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Fair Financing receivables** | **Stage 1** | **Stage 2** | **Stage 3** | **Total** |
| **Allowance as of January 1, 2025 .......................................** | **$(69)** | **$(26)** | **$(36)** | **$(131)** |
| New assets originated or purchased ............................. | (318) | (20) | (11) | (349) |
| Assets repaid ...................................................................... | 227 | 66 | 52 | 345 |
| Transfers to stage 1 ............................................................ | (50) | 46 | 4 |  |
| Transfers to stage 2 ........................................................... | 109 | (117) | 8 |  |
| Transfers to stage 3 ........................................................... | 1 | 182 | (183) |  |
| Other movements in ECL allowance .............................. | (29) | (193) | (69) | (291) |
| Amounts written off ........................................................... | 3 | 9 | 142 | 154 |
| Other adjustments<sup>1</sup> ............................................................ | (1) | 1 |  |  |
| **Allowance as of December 31, 2025 .................................** | **$(127)** | **$(52)** | **$(93)** | **$(272)** |

---

____________

<sup>1</sup>Other adjustments are primarily driven by fluctuations in the USD foreign exchange rate.

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Pay Later receivables** | **Stage 1** | **Stage 2** | **Stage 3** | **Total** |
| **Allowance as of January 1, 2025 .......................................** | **$(77)** | **$(57)** | **$(67)** | **$(201)** |
| New assets originated or purchased ............................. | (383) | (19) | (7) | (409) |
| Assets repaid ...................................................................... | 455 | 126 | 116 | 697 |
| Transfers to stage 1 ............................................................ | (7) | 3 | 4 |  |
| Transfers to stage 2 ........................................................... | 168 | (169) | 1 |  |
| Transfers to stage 3 ........................................................... | 1 | 345 | (346) |  |
| Other movements in ECL allowance .............................. | (227) | (294) | (99) | (620) |
| Amounts written off ........................................................... | 5 | 15 | 313 | 333 |
| Other adjustments<sup>1</sup> ............................................................ | (8) | (6) | (6) | (20) |
| **Allowance as of December 31, 2025 .................................** | **$(73)** | **$(56)** | **$(91)** | **$(220)** |

---

____________

<sup>1</sup>Other adjustments are primarily driven by fluctuations in the USD foreign exchange rate.

KLARNA GROUP PLCF-33

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Stage 1** | **Stage 2** | **Stage 3** | **Total** |
| **Allowance as of January 1, 2024** ....................................... | **$(139)** | **$(87)** | **$(85)** | **$(311)** |
| New assets originated or purchased ............................. | (551) | (26) | (15) | (592) |
| Assets repaid ...................................................................... | 612 | 172 | 162 | 946 |
| Transfers to stage 1 ............................................................ | (54) | 44 | 10 |  |
| Transfers to stage 2 ........................................................... | 178 | (185) | 7 |  |
| Transfers to stage 3 ........................................................... | 2 | 402 | (404) |  |
| Impact on ECL from change in credit risk .................... | (215) | (419) | (143) | (777) |
| Amounts written off ........................................................... | 4 | 20 | 365 | 389 |
| Other adjustments ............................................................. | 19 | (5) | (1) | 13 |
| **Allowance as of December 31, 2024** ................................. | **$(144)** | **$(84)** | **$(104)** | **$(332)** |

---

Consumer receivables increased primarily as a result of growth in Klarna's key markets. Loans with

contractual amounts of $173 million and $241 million that were written off during 2025 and 2024 are still

subject to enforcement activity. Other adjustments within consumer receivables during 2025 primarily

relate to the impact of movements in foreign exchange rates on consumer receivables during the year.

**Note 7 Settlement and trade receivables** 

Settlement and trade receivables primarily include receivables from payment solution providers ("PSP

receivables"), which arise from timing differences in the settlement process between the cash settlement

of a transaction and the derecognition of the associated receivable. Settlement and trade receivables are

initially measured at fair value and subsequently measured at amortized cost less an allowance for ECL.

Settlement and trade receivables are composed of:

---

| | | | |
|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| | **Gross Carrying** <br>**Amount**<br>| **Allowance for** <br>**ECL**<br>| **Net Carrying** <br>**Amount**<br>|
| Payment service providers receivables | 454 | (1) | 453 |
| Merchant receivables | 92 | (25) | 67 |
| Debt collection receivables | 20 |  | 20 |
| Other receivables | 40 |  | 40 |
| Total  | **606** | **(26)** | **580** |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| | **Gross Carrying** <br>**Amount**<br>| **Allowance for** <br>**ECL**<br>|  | **Net Carrying** <br>**Amount**<br>|
| Payment service providers receivables ........................................................ | $368 | $— | -<br>1<br>| $368 |
| Merchant receivables ....................................................................................... | 128 | (17) | -<br>2<br>5<br>| 111 |
| Debt collection receivables ............................................................................. | 8 |  | 0 | 8 |
| Other receivables ............................................................................................... | 6 |  | 0 | 6 |
| Total ..................................................................................................................... | **$510** | **$(17)** |  | **$493** |

---

The Group applies the simplified approach to calculating the allowance for expected credit losses. The

Group's provisions for expected credit losses related to merchant receivables are included within general

and administrative expense in the consolidated statements of profit or loss. The balances throughout

fiscal years 2025 and 2024 for the allowance for expected credit losses related to PSP receivables, debt

collection receivables and other receivables were immaterial due to the short-term nature of the

KLARNA GROUP PLCF-34

receivables and low credit risk associated with transacting with large PSPs, debt collection agencies and

other counterparties.

**Note 8 Debt securities** 

Debt securities are composed of:

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| Treasury bills chargeable at central banks ............................................................................... | $1365 | $401 |
| Mandatory deposits at central banks ......................................................................................... | 93 | 42 |
| Bonds and other interest bearing securities ............................................................................ | 60 | 11 |
| **Total ...................................................................................................................................................** | **$1518** | **$454** |

---

The Group monitors the credit ratings for the securities held throughout the investment holding period.

The allowance for expected credit losses is immaterial due to the credit quality of the issuers and low risk

of default.

Mandatory deposits at central banks are held with local central banks for the purpose of satisfying

regulatory requirements. These deposits are not available for immediate use to support the Company's

day-to-day operations.

**Note 9 Leases**

Klarna's leases are primarily composed of office facilities and IT office equipment with various

expiration dates through December 2031. We have the option to renew or extend our leases, and certain

agreements also provide the option to terminate with prior written notice. As of December 31, 2025 and

December 31, 2024, we have not included these provisions in determining the lease term, as it is not

reasonably certain that these options will be exercised.

During 2025, 2024 and 2023, Klarna recognized impairment loss of $16 million, $6 million and $32

million, respectively, related to the early termination of certain lease agreements for office space. Refer to

Note 12 for additional information regarding right-of-use assets.

The following table presents lease expenses and expenses for short-term and low-value leases

recognized in 2025, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Depreciation of right-of-use assets .............................................................. | (15) | (16) | (28) |
| Impairments of right-of-use assets ............................................................... | (16) | (6) | (32) |
| Interest expense for lease liabilities ............................................................. | (2) | (3) | (4) |
| **Total right-of-use lease cost .............................................................................** | **(33)** | **(25)** | **(64)** |
| Expenses relating to short-term leases ....................................................... | (9) | (10) | (7) |
| **Total short-term and low-value leases ............................................................** | **(9)** | **(10)** | **(7)** |

---

**Note 10 Divestitures**

There were no divestitures in 2025.

KLARNA GROUP PLCF-35

On October 1, 2024, the Group completed the divestment of Klarna Checkout ("KCO"), its online

checkout solution, to a consortium of investors. This transaction allows Klarna to focus on its flexible

payment methods and partner more closely with payment service providers.

KCO was a shopping solution providing consumers and merchants with a personalized shopping

experience. KCO provided several different payment options as well as Klarna's proprietary products and

other offerings from, or supported by, third-party payment option providers. KCO had approximately 24

thousand merchants.

The Group received cash proceeds of $195 million and recognized a net gain of $171 million within

other income in our statements of profit and loss as a result of the sale in 2024.

In addition, further cash proceeds up to a maximum of $28 million may be receivable contingent upon

the disposed operation achieving certain performance criteria in 2026 and 2027. At the time of the sale

and through December 31, 2025, Klarna had not recognized any contingent consideration.

---

| | |
|:---|:---|
| | **October 1, 2024** |
| **Consideration received or receivable: ......................................................................................................................** |  |
| Cash ............................................................................................................................................................................... | $195 |
| Fair value of contingent consideration ................................................................................................................... |  |
| Less: transaction costs .............................................................................................................................................. | (4) |
| **Total disposal consideration ......................................................................................................................................** | **191** |
| Carrying amount of net assets sold ......................................................................................................................... | (20) |
| **Gain on sale before income tax and reclassification of foreign currency translation reserve ..........................** | **171** |
| **Gain on sale after income tax .....................................................................................................................................** | **$171** |

---

The carrying amounts of net assets sold primarily consisted of goodwill of $20 million allocated to KCO

using a relative value approach, settlement and trade receivables of $4 million, other assets of $1 million,

cash and cash equivalents of $8 million, accounts payable and accrued expenses related to payment fees,

payroll, social charges among others of $2 million, payables to merchants of $56 million and other

liabilities of $4 million. In connection with the disposal, the former eliminated intercompany receivables

became external, impacting the consolidated financial net assets by $49 million.

Klarna determined that the operation of KCO did not meet the criteria to be classified as discontinued

operations under IFRS as it was not a major business line or a geographic area of operations and KCO's

operations or cash flows have historically not been clearly distinguishable.

**Note 11 Goodwill and Intangible assets**

Klarna's intangible assets include capitalized development expenses and assets acquired as a result of

its business combinations. As of December 31, 2025 and 2024, goodwill and intangible assets consisted of

the following:

KLARNA GROUP PLCF-36

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Goodwill** | **Trademarks,** <br>**Tradenames** <br>**& Licenses**<br>| **Capitalized** <br>**development** <br>**expenses**<br>| **Other** <br>**intangible** <br>**assets**<br>| **Total** |
| **Cost as of January 1, 2025 ...............................** | **$626** | **$117** | **$451** | **$287** | **$1481** |
| Additions ........................................................... |  |  | 27 |  | 27 |
| Sales/disposals ............................................... |  |  |  |  |  |
| Currency translation difference .................. | 72 | 22 | 88 | 42 | 224 |
| **Cost as of December 31, 2025 .........................** | **$698** | **$139** | **$566** | **$329** | **$1732** |
| **Amortization as of January 1, 2025 ................** | **$—** | **$(32)** | **$(266)** | **$(112)** | **$(410)** |
| Amortization for the year .............................. |  | (5) | (69) | (14) | (88) |
| Sales/disposals ............................................... |  |  |  |  |  |
| Currency translation difference .................. |  | (6) | (54) | (12) | (72) |
| **Amortization as of December 31, 2025 ..........** | **$—** | **$(43)** | **$(389)** | **$(138)** | **$(570)** |
| **Impairment as of January 1, 2025 ...................** | **$(13)** | **$(8)** | **$(47)** | **$(14)** | **$(82)** |
| Impairment for the year ................................ |  |  | (2) |  | (2) |
| Sales/disposals ............................................... |  |  |  |  |  |
| Currency translation difference .................. |  | (1) | (9) |  | (10) |
| **Impairment as of December 31, 2025 ............** | **$(13)** | **$(9)** | **$(58)** | **$(14)** | **$(94)** |
| **Carrying amount as of December 31, 2025 ...** | **$685** | **$87** | **$119** | **$177** | **$1068** |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **Goodwill** | **Trademarks,** <br>**Tradenames** <br>**& Licenses**<br>| **Capitalized** <br>**development** <br>**expenses**<br>| **Other** <br>**intangible** <br>**assets**<br>| **Total** |
| **Cost as of January 1, 2024 ................................** | **$680** | **$127** | **$468** | **$313** | **$1588** |
| Additions ............................................................ |  |  | 44 |  | 44 |
| Sales/disposals ................................................ | (20) |  | (21) | (5) | (46) |
| Currency translation difference ................... | (34) | (10) | (40) | (21) | (105) |
| **Cost as of December 31, 2024 .........................** | **$626** | **$117** | **$451** | **$287** | **$1481** |
| **Amortization as of January 1, 2024 .................** | **$—** | **$(21)** | **$(226)** | **$(94)** | **$(341)** |
| Amortization for the year ............................... |  | (13) | (71) | (26) | (110) |
| Sales/disposals ................................................ |  |  | 10 | 3 | 13 |
| Currency translation difference ................... |  | 2 | 21 | 5 | 28 |
| **Amortization as of December 31, 2024 ...........** | **$—** | **$(32)** | **$(266)** | **$(112)** | **$(410)** |
| **Impairment as of January 1, 2024 ...................** | **$(13)** | **$(8)** | **$(25)** | **$(1)** | **$(47)** |
| Impairment for the year ................................. |  |  | (36) | (13) | (49) |
| Sales/disposals ................................................ |  |  | 11 |  | 11 |
| Currency translation difference ................... |  |  | 3 |  | 3 |
| **Impairment as of December 31, 2024 .............** | **$(13)** | **$(8)** | **$(47)** | **$(14)** | **$(82)** |
| **Carrying amount as of December 31, 2024 ....** | **$613** | **$77** | **$138** | **$161** | **$989** |

---

As of December 31, 2025, the Group's goodwill primarily related to goodwill originated from

acquisitions in 2021 and 2022, including PriceRunner Group AB, Stocard GmbH and Sofort GmbH.

KLARNA GROUP PLCF-37

Impairment testing of Goodwill and Intangible assets

The Group conducted its annual goodwill impairment test as of October 1, 2025. No impairment losses

were identified, as the recoverable amount, measured as value in use, exceeded the carrying amount.

The impairment test is performed at the operating segment level, which is the lowest level at which

goodwill is monitored and assessed for internal management purposes, by comparing the carrying amount

of the net assets, including goodwill, with the recoverable amount.

In 2025 and 2024, the Group assessed impairment by calculating value in use, based on estimated

future financials from the operating segment. The Group uses a two-year forecast based on its business

plan which is extrapolated out to a five-year timeframe. Cash flows beyond the five-year period are

determined using an estimated terminal growth rate of 3.5% . Key assumptions and inputs include discount

rate, growth rate and profitability. The discount rate used in 2025 and 2024 was 11.2% and 12.5%,

respectively.

On October 1, 2024, the Group completed the divestment of KCO to a consortium of investors, to which

goodwill of $20 million was allocated using a relative value approach. See Note 10.

**Note 12 Property and equipment**

The Group's property and equipment primarily includes equipment, tools, furniture and fittings,

computer equipment and leasehold improvements related to its office spaces. The Group includes its

right-of-use assets within property and equipment. Refer to Note 9 for additional information regarding the

Group's leases.

Property and equipment is stated at cost less accumulated depreciation and impairment. Depreciation

is calculated using the straight-line method by applying various useful lives to each class of property and

equipment. At December 31, 2025 and 2024, property and equipment consisted of the following:

KLARNA GROUP PLCF-38

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Leasehold** <br>**improvements**<br>| **Equipment** | **Right-of-use** <br>**assets**<br>| **Total** |
| **Cost value as of January 1, 2025 ........................................** | **12** | **53** | **178** | **243** |
| Additions .............................................................................. |  | 3 |  | 3 |
| Sales/disposals ................................................................... |  | (2) | (7) | (9) |
| Remeasurement ................................................................. |  |  | (3) | (3) |
| Currency translation difference ...................................... | 2 | 9 | 31 | 42 |
| **Cost value as of December 31, 2025 ..................................** | **14** | **63** | **199** | **276** |
| **Depreciation as of January 1, 2025 ...................................** | **(9)** | **(39)** | **(77)** | **(125)** |
| Depreciation for the year ................................................. |  | (3) | (15) | (18) |
| Sales/disposals ................................................................... |  | 1 | 7 | 8 |
| Currency translation difference ...................................... | (1) | (7) | (16) | (24) |
| **Depreciation as of December 31, 2025..............................** | **(10)** | **(48)** | **(101)** | **(159)** |
| **Impairment as of January 1, 2025 ......................................** | **(1)** | **(3)** | **(29)** | **(33)** |
| Impairment for the year .................................................... | (3) | (2) | (16) | (21) |
| Sales/disposals ................................................................... |  |  |  |  |
| Currency translation difference ...................................... |  | (1) | (2) | (3) |
| **Impairment as of December 31, 2025 ................................** | **(4)** | **(6)** | **(47)** | **(57)** |
| **Carrying amount as of December 31, 2025 .......................** | **—** | **9** | **51** | **60** |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **Leasehold** <br>**improvements**<br>| **Equipment** | **Right-of-use** <br>**assets**<br>| **Total** |
| **Cost value as of January 1, 2024 .........................................** | **$14** | **$60** | **$226** | **$300** |
| Additions ............................................................................... |  | 1 |  | 1 |
| Sales/disposals ................................................................... | (1) | (4) | (31) | (36) |
| Remeasurement .................................................................. |  |  | (1) | (1) |
| Currency translation difference ...................................... | (1) | (4) | (16) | (21) |
| **Cost value as of December 31, 2024 ..................................** | **$12** | **$53** | **$178** | **$243** |
| **Depreciation as of January 1, 2024 ....................................** | **$(10)** | **$(38)** | **$(95)** | **$(143)** |
| Depreciation for the year .................................................. | (1) | (7) | (16) | (24) |
| Sales/disposals ................................................................... | 1 | 3 | 27 | 31 |
| Currency translation difference ...................................... | 1 | 3 | 7 | 11 |
| **Depreciation as of December 31, 2024 ..............................** | **$(9)** | **$(39)** | **$(77)** | **$(125)** |
| **Impairment as of January 1, 2024 ......................................** | **$(2)** | **$(3)** | **$(30)** | **$(35)** |
| Impairment for the year .................................................... |  |  | (6) | (6) |
| Sales/disposals ................................................................... |  |  | 3 | 3 |
| Currency translation difference ...................................... | 1 |  | 4 | 5 |
| **Impairment as of December 31, 2024 ................................** | **$(1)** | **$(3)** | **$(29)** | **$(33)** |
| **Carrying amount as of December 31, 2024 .......................** | **$2** | **$11** | **$72** | **$85** |

---

KLARNA GROUP PLCF-39

**Note 13 Other assets**

Other assets consisted of the following:

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| Current tax assets ........................................................................................................................... | $18 | $21 |
| VAT receivables .............................................................................................................................. | 41 | 37 |
| Commercial agreement assets .................................................................................................... | 155 | 65 |
| Derivatives ........................................................................................................................................ | 21 | 10 |
| Accrued income .............................................................................................................................. | 70 | 78 |
| Prepaid expenses ........................................................................................................................... | 49 | 28 |
| Equity investments ......................................................................................................................... | 15 | 24 |
| Collateral for derivatives ............................................................................................................... | 14 | 69 |
| Securitization partner receivable ................................................................................................ | 54 |  |
| Other receivables ............................................................................................................................ | 50 | 32 |
| **Total ...................................................................................................................................................** | **$487** | **$364** |

---

During 2025, we granted warrants to certain partners in relation to the commercial agreements, of

which we recognized $85 million under commercial assets related to the fair market value of the service to

be amortized over the period of the agreement over which the related services are expected to be

received. As of December 31, 2025, $75 million of this balance was outstanding under commercial

agreement assets. Refer to Note 22 for details.

**Note 14 Notes payable and other borrowings**

As of December 31, 2025 and 2024, notes payable and other borrowings consisted of the following:

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| Liabilities to financial institutions ................................................................................................ | $163 | $132 |
| Commercial papers ........................................................................................................................ | 84 | 13 |
| Derivatives ........................................................................................................................................ | 13 | 61 |
| Senior unsecured bonds ............................................................................................................... | 326 | 136 |
| Subordinated liabilities .................................................................................................................. | 184 | 171 |
| Warehouse financing facility ........................................................................................................ | 589 |  |
| **Total ...................................................................................................................................................** | **$1359** | **$513** |

---

____________

<sup>1</sup>The warehouse financing facility refers to issued credit-linked notes ("CLNs"), see Note 16.

Liabilities to financial institutions

Liabilities to financial institutions represent borrowings and financing arrangements with external

financial institutions. These liabilities primarily include a bilateral loan, prefunding agreements and

liabilities that arise from collateral or margin placed on derivative transactions.

Senior unsecured bonds

Klarna has established a Swedish Medium Term Note Program (the "SMTN") and Euro Medium Term

Note Program (the "EMTN"). Under both programmes Klarna Bank AB and Klarna Holding AB issue notes

that qualify as Senior Unsecured Bonds and Subordinated liabilities.

KLARNA GROUP PLCF-40

Under the terms of the SMTN, Klarna may issue up to an amount that is not to exceed SEK10 billion

which approximates $1.1 billion as of December 31, 2025.

Under the terms of the EMTN, Klarna may issue notes up to an amount that is not to exceed

EUR3 billion which approximates $3.1 billion as of December 31, 2025.

The medium term notes are initially recorded at fair value based upon proceeds received, net of

issuance costs and subsequently accounted for at amortized cost with interest expense recognized within

funding costs in the consolidated statements of profit or loss.

On March 21, 2024, the Group issued SEK500 million (equated to $49.5 million at the date of issuance)

of senior unsecured bonds due in 2026 under the SMTN. The notes have a floating coupon rate

corresponding to three-month STIBOR plus 2.5% per annum.

On June 24, 2024, the Group issued SEK750 million (equated to $74.2 million at the date of issuance) of

senior unsecured bonds due in 2026 under the SMTN. The notes have a floating coupon rate

corresponding to three-month STIBOR plus 1.8% per annum.

On June 24, 2024, the Group issued SEK250 million (equated to $24.7 million at the date of issuance) of

senior unsecured bonds due in 2027 under the SMTN. The notes have a floating coupon rate

corresponding to three-month STIBOR plus 2.1% per annum.

On June 18, 2025, the Group issued SEK600 million (equated to $65 million at the date of issuance) of

senior unsecured bonds due in 2027 under the SMTN. The notes have a floating coupon rate

corresponding to three-month STIBOR plus 1.6% per annum.

On June 18, 2025, the Group issued SEK900 million (equated to $98 million at the date of issuance) of

senior unsecured bonds due in 2028 under the EMTN. The notes have a floating coupon rate

corresponding to three-month STIBOR plus 1.8% per annum.

During 2025, 2024 and 2023, a total of nil, $34 million and $66 million, respectively, of notes issued

under the SMTN matured. In 2025, no notes were repurchased and in 2024, an aggregate of $8 million of

notes issued under the SMTN were repurchased.

The notes are senior unsecured obligations of Klarna and rank equally in right of payment to all of

Klarna's existing and future senior debt and senior in right of payment to all of Klarna's existing and future

subordinated debt. In 2025, 2024 and 2023, the Group recognized $10 million, $5 million and $4 million,

respectively, of interest expense related to senior unsecured bonds, which are included within funding

costs in the consolidated statements of profit or loss.

Subordinated liabilities

Subordinated liabilities consist of Tier 2 securities ("Tier 2 Notes" or "Subordinated liabilities") which

are floating rate subordinated securities with a fixed redemption date. The securities rank senior in right of

payment to any liabilities or capital instruments of the issuer which constitute CET1 capital or Additional

Tier 1 capital, as defined in Note 21, and junior in right of payment to all of depositors, any unsubordinated

creditors or any subordinated creditors of the issuer whose rights are expressed to rank in priority to the

noteholders by statute or regulation. The securities rank pari passu with any liabilities or capital

instruments of the issuer which constitute Tier 2 capital and any other liabilities or capital instruments that

rank, or are expressed to rank, equally with the securities. As of December 31, 2025, all outstanding Tier 2

securities were issued by Klarna Holding AB.

The Tier 2 Notes bear a variable rate of interest consisting of a reference rate plus a margin ranging

from 7.0% to 7.5% until the redemption date. Interest on the securities is due and payable on a quarterly

basis. The securities are redeemable by the Company at any time during the initial call period, which is the

fifth anniversary from the initiation issue date, or at any interest payment date falling after the initial call

KLARNA GROUP PLCF-41

period, subject to permission from the SFSA. The Company is required to redeem all outstanding Tier 2

Notes on the final redemption date, as specified in the terms of the applicable agreement.

The Tier 2 Notes were determined to be liability classified under IAS 32 "Financial Instruments:

Presentation" and are initially recorded at fair value based upon proceeds received, net of issuance costs

and subsequently accounted for at amortized cost with interest expense recognized within funding costs

in the consolidated statements of profit or loss.

On May 16, 2023, Klarna Holding AB issued SEK 500 million (equated to $50 million at the date of

issuance) of subordinated notes due 2033. The notes have a floating coupon rate corresponding to three-

month STIBOR plus 7.5% per annum. The notes have a first call date of May 16, 2028.

On August 16 2023, Klarna Holding AB issued SEK 250 million (equated to $25 million at the date of

issuance) of subordinated notes due 2033. The notes have a floating coupon rate corresponding to three-

month STIBOR plus 7.5% per annum. The notes were issued in a private placement and have a first call

date of August 16, 2028.

On April 19, 2024, Klarna Holding AB issued $100 million of subordinated notes due 2034 under the

EMTN. The notes have a floating coupon rate corresponding to SOFR plus 7% per annum. The notes were

issued in a private placement and have a first call date of August 16, 2028.

**Note 15 Other liabilities**

The Group's other liabilities as of December 31, 2025 and 2024 consisted of:

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| Lease liabilities ................................................................................................................................ | $80 | $87 |
| Commercial agreement liabilities ................................................................................................ | 40 | 31 |
| Income and payroll tax payables ................................................................................................. | 28 | 32 |
| Provisions .......................................................................................................................................... | 13 | 6 |
| Card scheme liabilities ................................................................................................................... | 54 | 46 |
| Payable to SPV<sup>1</sup> ............................................................................................................................... | 44 | 15 |
| Other liabilities ................................................................................................................................. | 99 | 38 |
| **Total ...................................................................................................................................................** | **$358** | **$255** |

---

____________

<sup>1</sup>Refer to Note 16 for further details on payable to SPV.

Lease liabilities

For information on the contractual maturity of lease liabilities refer to Note 9.

Commercial agreement liabilities

Commercial agreement liabilities represent unpaid costs relating to commercial agreement assets.

Provisions

The Group recognizes provisions for present obligations arising from past events when payment of the

obligations is probable and can be reliably estimated. Provisions primarily consist of consumer refund

commitment, and pending legal and tax litigation. Changes in provisions were immaterial in 2025 and 2024.

Klarna offers a Buyer Protection Policy, pursuant to which the Group reimburses consumers in certain

circumstances, including where a merchant does not adequately resolve a purchase return for purchases

KLARNA GROUP PLCF-42

made using a Klarna payment method. The Group recognizes a provision for the expected unrecovered

portion of such reimbursements. The total gross transaction value covered by the Buyer Protection Policy

as at December 31, 2025 and 2024 was $889 million and $778 million, respectively, which, while not

representing a liability, contingent liability, or commitment, represents the underlying exposure used in

measuring the related provision.

From time to time, we are involved in various legal, arbitration, dispute and administrative proceedings

arising in the ordinary course of our business where the probability of an outflow is considered remote. If,

contrary to the Group's expectations, a future obligation were to arise from such matters pending as of

December 31, 2025, the aggregate outcomes could total up to potential of $130 million.

Card scheme liabilities

Card scheme liabilities relate to card processing fees owed by the Company to card payment networks

or third parties for facilitating and processing transactions.

**Note 16 Structured entities**

Klarna enters into arrangements with structured entities, and consolidates such entities where it has

power over key activities and exposure and ability to influence its own returns, and does not consolidate

such entities where those conditions are not me.

Consolidated structured entities

**Warehouse financing facility**

During 2025 Klarna entered into a warehouse financing facility with an institutional lender, as the

funder, and Klarna Bank AB, a subsidiary of Klarna Group plc, as the borrower, under which the

consolidated SPV issues credit-linked notes ("CLNs") to the funder and advances the proceeds to Klarna,

which in turn pledges specified pools of consumer receivables as collateral, see Note 19. Credit risk for the

Reference Pool is separated into two tranches: a junior tranche retained by Klarna and a senior tranche

transferred to the funder through the consolidated SPV. The CLNs are recognized within Notes Payables

and Other Borrowings, see Note 14, and are classified and measured at amortized cost using the effective

interest method. Interest and senior expenses related to the facility are recognized within funding costs.

**Employee benefit trust**

Klarna has established an employee benefit trust to facilitate and meet obligations to employees in

relation to share-based remuneration arrangements. See Note 22.

Unconsolidated structured entities

**Synthetic securitizations**

Klarna enters into synthetic securitization transactions with unconsolidated SPVs, where it

economically transfers a portion of credit risk for certain pools of consumer receivables (the "referenced

pools") with the primary objective to lower the regulatory capital risk weights of the underlying assets.

Credit risk for each referenced pool is separated into three tranches: junior, mezzanine and senior. The

Company retains the risk for the junior and senior tranches and transfers risk for the mezzanine tranche

to the SPV. The SPV then issues credit-linked notes to investors.

While Klarna pays a fee, recognized as incurred in funding costs, see Note 18, Klarna is not exposed to

variability in the returns of the SPVs involved in the synthetic securitization transactions. The premiums

paid by Klarna are structured to mitigate, rather than introduce, variability of returns within the reference

KLARNA GROUP PLCF-43

portfolio. Furthermore, Klarna is not considered the sponsor of the SPVs, as their management and

operations are exclusively conducted by independent external service providers.

The Company incurred fees of $30.7 million, $32.3 million and $21.9 million for 2025, 2024 and 2023,

respectively, in connection with such transactions. The total consumer receivable pool was $1.3 billion, $2.1

billion and $1.7 billion as of December 31, 2025, 2024 and 2023, respectively.

**Forward flow securitizations**

Klarna entered into forward flow loan sale arrangements with unconsolidated SPVs whereby specified

pools of eligible consumer receivables were transferred to the SPVs. Klarna derecognized these

receivables upon transferring the contractual rights to the cash flows and substantially all associated risks

and rewards.

These agreements are fixed-term in nature, with commitment periods ranging from two to three years,

during which Klarna sells eligible Fair Financing and Pay Later receivables shortly after origination. The

purchasing counterparty is committed to purchase all eligible loans offered up to its commitment amount,

which varies between approximately $750 million and $1 billion measured by the outstanding balance of

purchased receivables.

The following table shows the carrying amount of Klarna's recorded interest in its consolidated

balance sheet as at December 31, 2025 and 2024, and represented the maximum exposure to risk

associated with its interest in the unconsolidated structured entities. The maximum exposure reflects the

total potential loss the Group could incur from its involvement, regardless of the likelihood of that loss

being incurred.

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| Consumer receivables at fair value through OCI ..................................................................... | $386 | $— |
| Consumer receivables at fair value through profit and loss ................................................. | 400 | 2 |
| Pledged assets under forward flow arrangements<sup>1</sup> ................................................................. |  | 2 |
| **Total assets .......................................................................................................................................** | **$786** | **$4** |
| Payable to SPV<sup>2</sup> ............................................................................................................................... | 44 | 15 |
| **Total liabilities ...................................................................................................................................** | **$44** | **$15** |

---

____________

<sup>1</sup>The pledged assets are included within bonds and other interest-bearing securities, see Note 19.

<sup>2</sup>The Company's payable to SPV are included within other liabilities, see Note 15.

The total consumer receivables originated at fair value through profit and loss or at fair value through

OCI during 2025 totaled $18 billion, of which $786 million was unsold as of December 31, 2025. During 2024,

$3.3 billion was originated, of which $2 million was unsold as of December 31, 2024. See Note 20.

Following the transfer of consumer receivables Klarna typically continues to service the sold

receivables on behalf of the SPVs for a servicing fee. The Company earned servicing income of $12.2

million and $1.6 million for 2025 and 2024, respectively, recognized within Transaction and service revenue

related to derecognized receivables. The servicing fees were commensurate with market rates and did not

expose Klarna to credit losses beyond its contractual entitlements. The servicing arrangement did not

constitute a form of retained interest that precluded derecognition.

As of December 31, 2025 and 2024, an aggregated balance of $2.94 billion and $867 million,

respectively, in sold receivables was recognized by the unconsolidated SPVs.

In addition, we may experience a loss due to future repurchase obligations resulting from breaches in

representations and warranties in our securitization and third-party sale agreements. This amount was not

material as of December 31, 2025 and 2024.

KLARNA GROUP PLCF-44

**Note 17 Funding costs**

The Group's funding costs for the years ended December 31, 2025, 2024 and 2023 were as follows:

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| Consumer deposits | $(330) | $(343) | $(190) |
| Fair value adjustment on loans sold and held for sale | (163) | (30) |  |
| Other cost of securitisations | (32) | (34) | (22) |
| Interest-bearing securities  | (30) | (26) | (24) |
| Liabilities to credit institutions | (30) | (17) | (13) |
| Subordinated liabilities | (19) | (17) | (6) |
| Other funding costs | (63) | (36) | (42) |
| **Total** | **$(667)** | **$(503)** | **$(297)** |

---

Fair value adjustment on loans sold and held for sale relates to Pay Later receivables originated within

the business model originate to sell and measured at FVTPL. See Note 16 .

**Note 18 Derivatives**

The Group enters into derivative financial instruments to manage its interest rate and foreign

exchange risk. Derivative instruments are initially and subsequently measured at fair value with changes to

fair value recognized immediately within funding costs in the consolidated statements of profit or loss.

When the fair value of derivative instruments is positive, they are carried as assets and carried as liabilities

when their fair value is negative.

As of December 31, 2025 and 2024, Klarna had entered into derivatives with the gross nominal amount

of $8.3 billion and $7.4 billion, respectively. The Group's derivatives are composed of:

---

| | | | |
|:---|:---|:---|:---|
| **December 31, 2025** | | | |
|  | **Fair value** | **Fair value** | **Nominal** <br>**amount** |
| **Derivatives designated in a hedged relationship** | **Positive** | **Negative** | **Nominal** <br>**amount** |
| Interest rate swaps ........................................................................................... | $2 | $(1) | $2883 |
| **Total .....................................................................................................................** | **$2** | **$(1)** | **$2883** |
|  | **Fair value** | **Fair value** | **Nominal** <br>**amount** |
| **Derivatives not designated in a hedged relationship** | **Positive** | **Negative** | **Nominal** <br>**amount** |
| Currency forwards ............................................................................................ | $20 | $(12) | $5413 |
| **Total .....................................................................................................................** | **$20** | **$(12)** | **$5413** |

---

KLARNA GROUP PLCF-45

---

| | | | |
|:---|:---|:---|:---|
| **December 31, 2024** | | | |
|  | **Fair value** | **Fair value** | **Nominal** <br>**amount** |
| **Derivatives designated in a hedged relationship** | **Positive** | **Negative** | **Nominal** <br>**amount** |
| Interest rate swaps ........................................................................................... | $4 | $(1) | $3805 |
| **Total .....................................................................................................................** | **$4** | **$(1)** | **$3805** |
|  | **Fair value** | **Fair value** | **Nominal** <br>**amount** |
| **Derivatives not designated in a hedged relationship** | **Positive** | **Negative** | **Nominal** <br>**amount** |
| Currency forwards ............................................................................................ | $6 | $(60) | $3588 |
| **Total .....................................................................................................................** | **$6** | **$(60)** | **$3588** |

---

Foreign exchange derivatives

Foreign exchange derivatives are not designated in a hedge accounting relationship and had

contractual maturities within six months of December 31, 2025 and four months of December 31, 2024,

respectively.

Derivatives designated in a hedge relationship

**Fair value hedges**

The Group holds short- and medium-term consumer deposits which are subject to changes in fair

value due to fluctuations in the underlying interest rate benchmark, which is typically the most significant

component of the overall fair value change. The Group uses interest rate swaps as the hedging instrument

to reduce the impact of fair value changes in the consumer deposits (hedged item) due to changes in the

underlying interest rate benchmark.

For hedges of interest rate risk, ineffectiveness can arise due to mismatches of critical terms and/or

the use of different curves to discount the hedged item and instrument, as in, for example, a mismatch

between the reset frequency of the swap and the benchmark frequency.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2025** | | | | | |
| | | **Carrying amount** | **Carrying amount** | **Change in fair** <br>**value used to** <br>**calculate hedge** <br>**ineffectiveness** | **Ineffectiveness** <br>**recognized in** <br>**funding costs** |
| <br>**Fair value hedges:**<br>**Hedging instrument and** <br>**ineffectiveness**<br>| <br>**Nominal** <br>**amount**<br>| **Positive** | **Negative** | **Change in fair** <br>**value used to** <br>**calculate hedge** <br>**ineffectiveness** | **Ineffectiveness** <br>**recognized in** <br>**funding costs** |
| Interest rate risk ......................... | $2883 | $2 | $(1) | $(3) | $— |
| **Total ..............................................** | **$2883** | **$2** | **$(1)** | **$(3)** | **$—** |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **December 31, 2024** | | | | | |
| | | **Carrying amount** | **Carrying amount** | **Change in fair** <br>**value used to** <br>**calculate hedge** <br>**ineffectiveness** | **Ineffectiveness** <br>**recognized in** <br>**funding costs** |
| <br>**Fair value hedges:**<br>**Hedging instrument and** <br>**ineffectiveness**<br>| <br>**Nominal** <br>**amount**<br>| **Positive** | **Negative** | **Change in fair** <br>**value used to** <br>**calculate hedge** <br>**ineffectiveness** | **Ineffectiveness** <br>**recognized in** <br>**funding costs** |
| Interest rate risk ......................... | $3805 | $4 | $(1) | $(5) | $— |
| **Total ..............................................** | **$3805** | **$4** | **$(1)** | **$(5)** | **$—** |

---

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| **Fair value hedges: Designated hedged item** |  |  |
| Consumer deposits ..................................................................................................................... | $2883 | $3805 |
| *Of which: the accumulated amount of fair value adjustment* .......................................... | $(1) | $6 |

---

KLARNA GROUP PLCF-46

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Maturity 2025** | **Maturity 2025** | **Maturity 2025** | **Maturity 2024** | **Maturity 2024** | **Maturity 2024** |
| | **Within 3** <br>**months**<br>| **> 3 months** <br>**and < 12** <br>**months**<br>| **> 12** <br>**months**<br>| **Within 3** <br>**months**<br>| **> 3 months** <br>**and < 12** <br>**months**<br>| **> 12** <br>**months**<br>|
| **Fair value hedges: Maturity of the nominal** <br>**amount of the hedge instrument**<br>|  |  |  |  |  |  |
| Interest rate risk .............................................. | $898 | $1557 | $428 | $833 | $2000 | $972 |
| Average fixed interest rate ........................... | 2.2% | 1.9% | 1.9% | 3.5% | 2.8% | 2.2% |

---

**Note 19 Pledged assets, guarantees and commitments**

Pledged assets

The Group pledges certain assets to be used as collateral to secure specific financial obligations. The

pledged assets include certain consumer receivables, other receivables, treasury bills and other interest-

bearing securities. These assets are subject to claims by creditors in the event of default on the

associated liabilities. The following table provides details of the Group's pledged assets.

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| **Pledged assets** |  |  |
| *Assets pledged for own liabilities* |  |  |
| Pledged consumer receivables .................................................................................................... | $2319 | $— |
| Pledged treasury bills chargeable at central banks, etc., and pledged bonds and <br>other interest-bearing securities .................................................................................................<br>| 2 | 2 |
| Other pledged assets ..................................................................................................................... | 13 | 3 |
| **Total ...................................................................................................................................................** | **$2334** | **$5** |

---

Assets pledged for own liabilities consists of consumer receivables which have been used to secure

the borrowings under the warehouse financing facility.

Commitments and guarantees

---

| | | |
|:---|:---|:---|
| | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| Commitments for loan funding .................................................................................................... | $3963 | $1655 |
| Guarantees ....................................................................................................................................... |  |  |
| **Total ...................................................................................................................................................** | **$3963** | **$1655** |

---

Commitment to fund loans as at December 31, 2025 amounted to USD3,963m (1,655m). The Group's

commitments for loan funding increased in 2025 compared with 2024, reflecting continued growth in the

Norwegian market. In Norway, regulation requires the Group to set and communicate an individual credit

limit to each customer. The undrawn portion of the approved limit constitutes a loan commitment.

The Company's commitments were primarily classified as Stage 1 with immaterial impacts to provisions

as of December 31, 2025 and 2024. Refer to Note 15 for further details on the Company's provisions.

KLARNA GROUP PLCF-47

**Note 20 Fair value measurement of financial assets and liabilities**

The following table shows the Group's financial assets and liabilities measured at fair value on a

recurring basis and identifies which of the three valuation levels the assets and liabilities have been

classified into as of December 31, 2025 and 2024. For description of the fair value levels, see Note 2. No

transfers between levels have been made during 2025 or 2024.

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| **Financial Instruments** | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Assets |  |  |  |  |
| Consumer receivables at fair value through P&L .. |  |  | 400 | 400 |
| Consumer receivables at fair value through OCI .. |  |  | 386 | 386 |
| Derivatives ..................................................................... | $— | $21 | $— | $21 |
| Equity investments ....................................................... | 7 |  | 8 | 15 |
| **Total financial assets .....................................................** | **$7** | **$21** | **$794** | **$822** |
| Liabilities |  |  |  |  |
| Derivatives ..................................................................... | $— | $13 | $— | $13 |
| Convertible notes ......................................................... |  |  |  |  |
| **Total financial liabilities .................................................** | **$—** | **$13** | **$—** | **$13** |

---

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| **Financial Instruments** | **Level 1** | **Level 2** | **Level 3** | **Total** |
| Assets |  |  |  |  |
| Consumer receivables at fair value through OCI .. | $— | $— | $— | $— |
| Consumer receivables at fair value through P&L .. |  |  | 2 | 2 |
| Derivatives ..................................................................... |  | 10 |  | 10 |
| Equity investments ....................................................... | 9 |  | 15 | 24 |
| **Total financial assets .....................................................** | **$9** | **$10** | **$17** | **$36** |
| Liabilities |  |  |  |  |
| Derivatives ..................................................................... | $— | $61 | $— | $61 |
| Convertible notes ......................................................... |  |  |  |  |
| **Total financial liabilities .................................................** | **$—** | **$61** | **$—** | **$61** |

---

The Group's methodology to measure fair value of these financial assets and liabilities is presented

below.

Consumer receivables at fair value through profit and loss or at fair value through other

comprehensive income (OCI)

Consumer receivables at fair value through profit and loss refers to specified pools of eligible

consumer receivables which are managed within a business model whose objective is to originate and

sell, as part of the Company's forward flow transaction. See Note 16 .

Consumer receivables at fair value through other comprehensive income refers to specified pools

of eligible consumer receivables which are managed within a hold-to-collect-and-sell business model,

under which cash flows are realized through both the collection of contractual principal and interest

and the sale of receivables, as part of the Company's forward flow transaction. See Note 16 .

Fair value is determined using a discounted cash flow methodology that projects contractual cash

flows over the remaining life of the instruments. Cash flows are adjusted for unobservable inputs,

including a weighted-average lifetime probability of default, conditional loss given default, and

prepayment rates reflecting an average modeled probability, based on portfolio-level assumptions

KLARNA GROUP PLCF-48

applied at the reporting date are classified within Level 3 of the fair value hierarchy.. This consistent

with the overall policy outlined in Note 2. The cash flows are discounted using observable zero-coupon

rates, plus a portfolio-specific credit spread applied as a margin over the risk-free curve.

Derivatives

Derivatives fair value is estimated using third-party pricing models, which contain input parameters

based on readily observable market data sources when available.

Equity investments

Equity investments comprise investments in listed and unlisted companies. Equity investments fair

value is based on quoted market prices where available or valuation techniques using unobservable

data. Level 3 equity investments represented investment in unlisted shares for which limited

information was available. For these unlisted shares, the fair value is generally estimated using business

enterprise values based on market transactions or by applying market multiples to the projected

financial performance of the investments. The significant inputs to estimate fair value include the

identification of peer groups, discount rates and revenue projections.

Movements in Level 3

The following tables show a reconciliation of the opening and closing balances of Level 3 financial

assets and liabilities which are recorded at fair value.

---

| | | | |
|:---|:---|:---|:---|
|  | **Financial assets** | **Financial assets** | **Financial assets** |
| | **Equity** <br>**investments**<br>| **Consumer** <br>**receivables at** <br>**fair value** <br>**through P&L**<br>| **Consumer** <br>**receivables at** <br>**fair value** <br>**through OCI**<br>|
| **Balance as of January 1, 2024 .....................................................................** | **$26** | **$—** | **$—** |
| Receivables originated to be sold ........................................................... |  | 3261 |  |
| Gain/(loss) in statement of profit or loss (1) .......................................... | (11) | (30) |  |
| of which: unrealized gain/(loss) ............................................................... | (11) |  |  |
| of which: realized gain/(loss) .................................................................... |  | (30) |  |
| Receivables sold to third parties ............................................................. |  | (3229) |  |
| **Balance as of December 31, 2024 ...............................................................** | **$15** | **$2** | **$—** |
| Receivables originated to be sold |  | 17246 | 1147 |
| Receivables sold to third parties ............................................................. |  | (16684) | (465) |
| Consumer receivables repaid .................................................................. |  |  | (333) |
| Gain/(loss) in statement of profit or loss<sup>1</sup> .............................................. | (7) | (164) | 37 |
| of which: unrealized gain/(loss) ............................................................... | (7) |  | 12 |
| of which: realized gain/(loss) .................................................................... |  | (164) | 25 |
| **Balance as of December 31, 2025 ...............................................................** | **$8** | **$400** | **$386** |

---

____________

<sup>1</sup>Fair value gains and losses recognized in the statement of profit or loss are included in other income (loss).

Financial assets and liabilities measured at amortized cost

The following tables show the fair value of financial instruments carried at amortized cost. They do

not include financial assets and financial liabilities not measured at fair value where the carrying

amount approximates fair value, which includes cash and cash equivalents, loans to credit institutions

(included in debt securities), consumer receivables, settlement and trade receivables, payables to

KLARNA GROUP PLCF-49

merchants, repurchase agreement liabilities (included in notes payable and other borrowings) and other

liabilities.

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Financial Instruments** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** | **December 31, 2025** |
| **Assets** | **Carrying** <br>**Amount**<br>| **Level 1** | **Level 2** | **Level 3** | **Balance at Fair** <br>**Value**<br>|
| Treasury bills chargeable at <br>central banks .................................<br>| $1908 | $1909 | $— | $— | $1909 |
| Bonds and other interest <br>bearing securities .........................<br>| 60 | 60 |  |  | 60 |
| **Total financial assets .....................** | **$1968** | **$1969** | **$—** | **$—** | **$1969** |
| Liabilities |  |  |  |  |  |
| Consumer deposits ....................... | $13003 | $— | $13188 | $— | $13188 |
| Subordinated liabilities ................ | 184 |  | 206 |  | 206 |
| Senior unsecured bonds ............. | 326 |  | 327 |  | 327 |
| Commercial papers ...................... | 84 |  | 84 |  | 84 |
| **Total financial liabilities .................** | **$13597** | **$—** | **$13806** | **$—** | **$13805** |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Financial Instruments** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** | **December 31, 2024** |
| **Assets** | **Carrying** <br>**Amount**<br>| **Level 1** | **Level 2** | **Level 3** | **Balance at Fair** <br>**Value**<br>|
| Treasury bills chargeable at <br>central banks ..................................<br>| $673 | $668 | $— | $— | $668 |
| Bonds and other interest <br>bearing securities ..........................<br>| 11 | 11 |  |  | 11 |
| **Total financial assets ......................** | **$684** | **$679** | **$—** | **$—** | **$679** |
| Liabilities |  |  |  |  |  |
| Consumer deposits ........................ | $9510 | $— | $9671 | $— | $9671 |
| Subordinated liabilities ................. | 171 |  | 175 |  | 175 |
| Senior unsecured bonds .............. | 136 |  | 136 |  | 136 |
| Commercial papers ....................... | 13 |  | 14 |  | 14 |
| **Total financial liabilities ..................** | **$9830** | **$—** | **$9996** | **$—** | **$9996** |

---

Treasury bills chargeable at central banks and bonds and other interest-bearing securities, included

within debt securities in the consolidated balance sheet are valued in terms of the active market prices.

The calculation of fair value of consumer deposits is based on Level 2 input using observable

market data. Consumer deposits are grouped into maturity buckets and thereafter the net present

value is calculated based on the remaining maturity and the corresponding interest rate.

The table below represents net results from categories of the following financial instruments for the

years ending December 31, 2025 and 2024.

---

| | | |
|:---|:---|:---|
| | **2025** | **2024** |
| Financial instruments mandatory measured at fair value through profit or loss ....... | $(127) | $(152) |
| Financial assets measured at amortized cost .................................................................... | $2567 | 2091 |
| Financial liabilities measured at amortized cost ............................................................... | $(611) | (527) |
| Currency exchange gains/losses .......................................................................................... | **$(102)** | 78 |
| **Total .............................................................................................................................................** | **$1726** | **$1490** |

---

KLARNA GROUP PLCF-50

**Note 21 Issued capital and reserves**

Share capital

Share capital includes the nominal value of ordinary shares, Class B shares and deferred shares issued

and outstanding. The excess of the consideration received from issuance of shares over their nominal

value is recognized as additional paid in capital.

On May 23, 2024, Klarna Holding AB (publ) completed a reorganization, which resulted in Klarna Group

plc becoming the new ultimate parent company of the Group. Through a series of share for share

exchange steps, the shareholders of Klarna Holding AB (publ) exchanged their shares for an equal number

of shares in Klarna Group plc. As a result of our corporate reorganization, Klarna Group plc became our

ultimate holding company and the parent company of Klarna Holding AB (publ). There was no change in

the legal ownership of any of the assets of Klarna Holding AB (publ), nor any change in the ultimate

controlling ownership of existing shares or securities of Klarna Holding AB (publ) or Klarna Group plc as a

result of the reorganization.

As at December 31, 2025, our issued and outstanding share capital consists of 377,507,910 ordinary

shares and 328,136,589 Class B shares as per below table:

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| <br>**Nominal value** | **Ordinary** <br>**shares**<br>**$0.00010** | **Class B shares**<br>**$0.00010** | **Class C shares**<br>**$0.00010** | **Deferred** <br>**shares**<br>**$0.00073** | **Deferred** <br>**shares**<br>**$11.35013** | **Deferred** <br>**shares**<br>**$0.28000** | **Deferred** <br>**shares**<br>**$0.00010** |
| **As of January 01,** <br>**2024**<br>| **364018908** | **—** | **—** | **364018908** | **—** | **—** | **—** |
| Shares issued | 1277664 |  |  | 1277664 |  | 1 |  |
| **As of December** <br>**31, 2024**<br>| **365296572** | **—** | **—** | **365296572** | **—** | **1** | **—** |
| Shares issued | 12211338 | 369911294 |  | 257772 | 369911294 |  |  |
| Redesignation |  | (41774705) |  |  |  |  | 41774705 |
| Capital <br>reduction<br>|  |  |  | (365554344) | (369911294) | (1) | (41774705) |
| **As of December** <br>**31, 2025**<br>| **377507910** | **328136589** | **—** | **—** | **—** | **—** | **—** |

---

On June 30, 2025, the board of directors of the Company was granted the authority from our

shareholders to allot new ordinary shares and other shares, and to grant rights to subscribe for, or to

convert any security into, new ordinary shares or other shares, up to a maximum aggregate nominal

amount (i.e., par value) of $367,502.51, for a period expiring (unless previously renewed, varied or revoked

by the Company in general meeting) at the conclusion of the Company's annual general meeting to be held

in 2026 (or, if earlier, on June 30, 2026).

The holders of ordinary shares are entitled to one vote per share on all matters to be voted upon by

the shareholders, are entitled to receive ratably such dividends, if any, as may be approved from time to

time by the Board of Directors out of funds legally available for such dividends, and in the event of

liquidation, dissolution or winding-up of Klarna Group plc, the holders of ordinary shares are entitled to

share ratably in all assets remaining after payment of

Each Class B share will be entitled to ten votes per share but will have no dividend or other effective

economic rights. Class B shares are not transferable. Following certain transfers of interests in our

ordinary shares by holders of our Class B shares or their affiliates, a related number of their Class B shares

will automatically convert into deferred shares, which have no voting or effective economic rights.

Additionally, all Class B shares will automatically convert into deferred shares after 20 years from the initial

public offering and in certain other specified circumstances. Class B shares and deferred shares into

which Class B shares may convert will not have any effective economic rights because they will not have a

right to dividends and will participate in our liquidation, dissolution or winding up only after we distributed

KLARNA GROUP PLCF-51

to holders of our share capital $10.0 million for each ordinary share and $5.0 million for each Class C share

they hold, which we do not expect to occur.

In March 2025, Klarna Group plc's board of directors approved a subdivision of ordinary shares of

Klarna Group plc on a 1-to-12 basis, which was effected on March 6, 2025. The subdivision also resulted in

the issuance of 365,445,384 deferred shares with a nominal value per share of $0.0007333. This number

included 148,812 deferred shares in respect of ordinary shares that were issued in January 2025. Such

deferred shares had no voting rights and no effective economic rights, because such shares did not have a

right to dividends and would have only participated in a liquidation, dissolution or winding-up after the

Company distributed to its shareholders $10.0 million for each ordinary share ($5.0 million for each Class

C share) then in issuance, which the Company does not expect to occur.

During 2025, an aggregate of 12,211,338 ordinary shares was issued related to:

• 299,572 ordinary shares granted to employees, including our executive officer;

• 5,000,000 ordinary shares were issued under the initial public offering on September 10, 2025, with

directly attributable transaction costs related to the issuance of new ordinary shares of $8.5 million

deducted from equity. These costs, primarily underwriting fees, were offset against the gross

proceeds, with only the net proceeds recognized in Additional paid in capital;

• 2,563,600 ordinary shares were issued following exchanges of ordinary shares in a subsidiary of Klarna

Group plc pursuant to vesting of the Group's Legacy RSU program;

• 1,948,166 ordinary shares were issued following an exchange of ordinary shares in a subsidiary of

Klarna Group plc pursuant the Group's Employee Equity Program;

• 2,400,000 ordinary shares were issued following exercise of share warrants granted to certain

partners in exchange for services.

Immediately prior to the completion of initial public offering 369,911,294 Class B shares with a nominal

value of $0.0001 and 369,911,294 deferred shares with a nominal value of $11.35013 were issued to holders

of our ordinary shares at that time. These shares were issued by capitalizing the merger reserve,

recognized within additional paid in capital, that arose for statutory purposes under the Companies Act

2006 in connection with the incorporation of Klarna Group plc in 2024.

Upon ordinary shares being sold by selling shareholders in the IPO, including following the exercise of

the over-allotment option by the underwriters to purchase additional ordinary shares from selling

shareholders, and post-IPO transfers, 41,774,705 Class B shares were redesignated into deferred shares

with a nominal value of $0.0001.

In September 2025, Klarna Group plc capitalized the UK statutory merger reserve, reallocating $4.2bn

billion from additional paid-in capital to share capital. Subsequently, in November 2025, Klarna Group plc

completed a capital reduction under the UK Companies Act to create distributable reserves, cancelling the

balance standing to the credit of its share premium account and all of its then-existing deferred shares

resulting in a reallocation within equity with $4.6 billion reallocated from share capital and additional paid

in capital to retained earnings. This transaction resulted in no change to total equity, and had no impact on

profit or loss or cash flows.

Additional paid-in capital

In addition to the excess of the consideration received from issuance of shares over their nominal

value, additional paid-in capital also includes any other contributions made by the shareholders of the

Company, share-based payments and any incremental costs directly attributable to the issuance of shares

shown as a deduction from equity. During 2025, 2024 and 2023, the Company's proceeds related to new

share issuances were recognized net of $8.5m, nil and nil of issuance costs, respectively.

KLARNA GROUP PLCF-52

Reserves

Reserves comprise foreign currency translation differences arising from the translation of the assets

and liabilities of foreign operations, and the cumulative net changes in fair value of debt instruments

classified as financial assets at fair value through other comprehensive income ("FVOCI"), including related

expected credit loss movements. Amounts recognized in other comprehensive income are subsequently

reclassified to profit or loss upon derecognition of the underlying financial assets.

Non-controlling interests

Non-controlling interests primarily consist of Additional Tier 1 ("AT1") securities, issued by subsidiaries

of Klarna Group plc, which are floating rate perpetual subordinated securities with no fixed maturity or

redemption date. The securities rank behind the claims against Klarna's unsubordinated creditors

including any instruments that constitute Tier 2 Notes and are pari passu with the claims of other holders

of AT1 securities issued by the Group in the event of a bankruptcy or liquidation. The securities bear a

variable rate of interest based on the three-month STIBOR rate until the redemption date. Interest on the

securities will be due and payable only at the sole discretion of Klarna, and the Company may at any time

elect to cancel any interest payment (or any part thereof) which would otherwise be payable on any

interest payment date. There are also certain restrictions on the payment of interest as specified in the

terms.

The notes are perpetual and have no fixed date for redemption. The AT1 securities are redeemable at

the option of the Company at any time during the initial call period, which is the fifth anniversary from the

initiation issue date, or at any interest payment date falling after the initial call period. In addition, Klarna

can redeem all outstanding AT1 securities on any interest payment date or vary their terms for certain

regulatory or tax reasons. Any repayments require the prior consent of the Swedish FSA.

If at any time the Group's consolidated Additional Tier 1 ratio should fall below 7%, a write-down is

made as a reduction of the total nominal amount and considered to be an unconditional capital

contribution by the AT1 holders. Following a write-down of the total nominal amount, Klarna, at its

discretion but subject to obtaining relevant approval from its shareholders, can reinstate any portion of

the principal of the AT1 securities. Unless write-up of the principal of the AT1 securities is permitted and

possible in accordance with Central Security Depositories ("CSD") regulations, reinstatement shall be

made by way of issuing new notes that qualify as AT1 capital.

During 2025, 2024 and 2023 the Company issued nil, $142 million and $27 million of AT1 securities,

respectively, and redeemed nil, nil and $24 million of AT1 securities, respectively. Following the Group's

corporate reorganization in May 2024, AT1 securities are considered non-controlling interests as they are

issued by subsidiaries of Klarna Group plc.

Non-controlling interests also include equity interests arising from share-based payment arrangements

under which certain participants were granted ownership interests in subsidiaries of Klarna Group plc.

**Note 22 Share-based payments**

This Note 22 provides an overview of the various share-based payment costs during the periods and

additional information on the different equity-based programs. Certain of the equity-based instruments

described below were issued by our subsidiaries and/or convert into ordinary shares of our subsidiaries.

The increase in share-based payment costs in 2025 compared to prior periods principally reflects the

establishment of the Company's equity compensation programs at the Klarna Group plc level in

connection with the Company's initial public offering, and the grant of share warrants to partners in

exchange for consumer acquisition services. The expense recognized during the year is based on grant-

KLARNA GROUP PLCF-53

date fair values and fair value of services received, in accordance with IFRS 2, for awards that are subject

to multi-year vesting schedules and exercise prices that may significantly exceed the current share price.

The following table presents share-based payment costs, inclusive of social security charges,

recognized in 2025, 2024 and 2023 in the consolidated statements of profit or loss:

---

| | | | |
|:---|:---|:---|:---|
|  | **Year Ended December 31,** | **Year Ended December 31,** | **Year Ended December 31,** |
| | **2025** | **2024** | **2023** |
| Employee restricted share unit program .................................................... | $(75) | $(40) | $(18) |
| Business acquisition-related awards ........................................................... |  | (2) | (4) |
| Share warrants and share options ................................................................ | (72) | (45) | (22) |
| Direct share issuance ...................................................................................... | (10) | (7) |  |
| **Share-based payment costs ............................................................................** | **$(157)** | **$(94)** | **$(44)** |
| less: amounts recognized as reduction of revenue .................................. | $1 | 1 | 1 |
| **Share-based payments expense .....................................................................** | **$(156)** | **$(93)** | **$(43)** |

---

Expense recognized in 2025, 2024 and 2023 was inclusive of social security charges of $9 million, $13

million and $0.3 million respectively. Excluding social security charges, share-based payment costs were

$148 million, $81 million and $44 million for 2025, 2024 and 2023, respectively.

The table below includes additional details regarding RSUs, share warrants and options, issued by

Klarna Group plc as of, and for the year ended, December 31, 2025. The increase in instruments

outstanding during 2025 reflects the establishment of the Company's post-IPO equity incentive framework,

including the Omnibus Incentive Plan, the Klarna Group plc RSU Program, and the C Share Awards Plan,

each as described in Item 6. The Class C share options column relates exclusively to awards granted to Mr.

Siemiatkowski:

KLARNA GROUP PLCF-54

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Klarna Group plc RSU** <br>**program** | **Klarna Group plc RSU** <br>**program** | **Share warrants and options** <br>**issued by Klarna Group plc** | **Share warrants and options** <br>**issued by Klarna Group plc** | **Share options to acquire C** <br>**Class shares issued by Klarna** <br>**Group plc** | **Share options to acquire C** <br>**Class shares issued by Klarna** <br>**Group plc** |
| | **Number** | **Weighted** <br>**average fair** <br>**value at grant**<br>| **Number** | **Weighted** <br>**average** <br>**exercise** <br>**price**<sup>1</sup><br>| **Number**<sup>2</sup> | **Weighted** <br>**average** <br>**exercise** <br>**price**<br>|
| **January 1, 2023 .......................** | **—** | **$—** | **—** | **$—** | **—** | **$—** |
| Granted during the year ...... |  |  |  |  |  |  |
| Exercised during the year ... |  |  |  |  |  |  |
| Forfeited during the year .... |  |  |  |  |  |  |
| **December 31, 2023 .................** | **—** | **$—** | **—** | **$—** | **—** | **$—** |
| Granted during the year ...... |  |  | 6100140 | 46.0 |  |  |
| Exercised during the year ... |  |  |  |  |  |  |
| Forfeited during the year .... |  |  |  |  |  |  |
| **December 31, 2024 .................** | **—** | **$—** | **6100140** | **$46.0** | **—** | **$—** |
| Granted during the year ...... | 1026951 | 34.2 | 24909751 | 57.0 | 17505672 | 45.9 |
| Exercised during the year ... |  |  | (2400000) |  |  |  |
| Amended during the year<sup>3</sup> .. |  |  | (1477164) | 38.2 | 2941236 | 19.1 |
| Forfeited during the year .... | (28044) | 34.0 |  |  |  |  |
| **December 31, 2025 .................** | **998907** | **$34.2** | **27132727** | **$60.6** | **20446908** | **$42.0** |

---

____________

<sup>1</sup>Where share options were granted in SEK, the input has been converted to USD using the average exchange rate for the period

for presentation purposes.

<sup>2</sup>two Class C share options entitle the recipient to acquire, at the recipient's election, either one ordinary share or two Class C

shares on exercise. Weighted average exercise prices for Class C share options are expressed per Class C share; the equivalent

exercise price expressed per ordinary share is double the figures shown. All Class C share options outstanding as of December 31,

2025 were granted exclusively to Mr. Siemiatkowski under the C Share Awards Plan described in Item 6.

<sup>3</sup> In 2025, the terms of 1,477,164 share options originally granted to Mr. Siemiatkowski in the fourth quarter of 2024 were

amended to allow such options to be exercised into 2,941,236 Class C shares (or 1,470,618 ordinary shares), reflecting the conversion

ratio under which two Class C share options correspond to one ordinary share. The amendment did not reduce the exercise price of

the underlying award; the weighted average exercise price of $19.1 per Class C share shown above is equivalent to $38.2 per ordinary

share, consistent with the original grant terms. The modification did not result in an incremental share-based payment charge.

The table below includes additional details regarding RSUs and share warrants, issued by a subsidiary

of Klarna Group plc, as of, and for the year ended, December 31, 2025:

KLARNA GROUP PLCF-55

---

| | | | | |
|:---|:---|:---|:---|:---|
|  | **Legacy RSU program** | **Legacy RSU program** | **Share warrants issued by a** <br>**subsidiary of Klarna Group plc** | **Share warrants issued by a** <br>**subsidiary of Klarna Group plc** |
| | **Number** | **Weighted** <br>**average fair** <br>**value at grant**<sup>1</sup><br>| **Number** | **Weighted** <br>**average** <br>**exercise price**<sup>2</sup><br>|
| **January 1, 2023 ......................................................................** | **7988295** | **$6.0** | **1933083** | **$515.0** |
| Granted during the year ..................................................... | 7081803 | 4.2 | 1102024 | 578.0 |
| Released during the year ................................................... | (2411162) | 6.3 |  |  |
| Exercised during the year .................................................. |  |  | (65346) | 76.0 |
| Forfeited during the year ................................................... | (2450832) | 5.1 | (417518) | 226.0 |
| **December 31, 2023 ...............................................................** | **10208104** | **$4.9** | **2552243** | **$538.0** |
| Granted during the year ..................................................... | 22659832 | 4.4 | 360590 | 515.0 |
| Released during the year ................................................... | (3164977) | 5.3 |  |  |
| Exercised during the year .................................................. |  |  | (126580) | 162.0 |
| Forfeited during the year ................................................... | (3291313) | 4.7 | (278719) | 505.0 |
| **December 31, 2024 ...............................................................** | **26411646** | **$4.5** | **2507534** | **$543.0** |
| Granted during the year ..................................................... | 123335 | 10.1 |  |  |
| Released during the year ................................................... | (8225629) | 5.3 |  |  |
| Exercised during the year .................................................. |  |  | (90000) | 231.0 |
| Repurchased during the year ........................................... |  |  | (105646) | 441.0 |
| Amended during the year .................................................. |  |  |  |  |
| Forfeited during the year ................................................... | (3712137) | 5.0 | (84367) | 631.0 |
| **December 31, 2025 ...............................................................** | **14597215** | **$5.1** | **2227521** | **$605.0** |
| **Equivalent of Klarna Group plc Shares** | **3649304** | **$20.4** | **26730252** | **$50.4** |

---

____________

<sup>1</sup>Legacy RSUs granted in SEK have been converted to USD using the average exchange rate for each period for presentation

purposes.

<sup>2</sup>Where share warrants were granted in SEK, the input has been converted to USD using the average exchange rate for the

period for presentation purposes.

Employee Restricted Share Unit Programs

The Group operates two Restricted Share Unit programs: the Legacy RSU Program and Klarna Group

plc RSU Program.

The Legacy RSU Program was implemented in 2020. It is available to certain employees as well as

certain third-party contributors. Each participant is granted a set number of Legacy RSUs on the grant

date, which generally vest over a four years graded vesting schedule, with 25% of the total shares vesting

each year. Upon vesting, one Legacy RSU entitles the holder to receive one share in a subsidiary, reflected

as non-controlling interest in the consolidated financial statements. If the participant leaves Klarna,

unvested RSUs are forfeited. It is intended that at a future date shareholders will have the opportunity to

exchange their subsidiary company shares for Klarna Group plc shares. The number of Klarna Group plc

shares to be exchanged is dependent upon the value of Klarna Group at the time of the exchange. If an

exchange between subsidiary share and Klarna Group plc share would have taken place as at the end of

2025, 2024 and 2023, the exchange yield would have been 0.25, 0.25 and 0.24 shares of Klarna Group plc

share for one subsidiary share, respectively.

The number of equivalent Klarna Group plc shares is presented as if the Legacy RSUs program issued

by a subsidiary of Klarna Group plc had been exchanged into Klarna Group plc ordinary shares as of the

KLARNA GROUP PLCF-56

reporting date. If exchanged, the number of shares exchanged is dependent on the value of Klarna Group

plc at the time of exchange.

In 2025, a new RSU Program (the "Klarna Group plc RSUs") was established as a separate share-based

payment program. Each participant is granted a set number of Klarna Group RSUs on the grant date, which

generally vest over a four-year staggered vesting schedule, with 25% of the total shares vesting each year.

Upon vesting, one Klarna Group plc RSU entitles the holder to receive one ordinary share in Klarna Group

plc. If the participant leaves Klarna, unvested RSUs are forfeited.

The number of shares distributed to employees under both the Legacy RSU Program and the Klarna

Group plc RSU Program is approved by the board of directors of Klarna, and accounted for as equity-

settled share-based payments. The share-based compensation expense is based on the grant-date fair

value of the awards and recognized over the vesting period, in line with the graded vesting method. The

fair value of both RSU Programs is determined with reference to the Klarna Group plc share price.

Upon vesting, in accordance with certain countries' tax laws, we are required to withhold an amount to

settle the employee's tax associated with a share-based payment and transfer that amount in cash to

taxing authorities on the employee's behalf. Such amounts are withheld from our employees in

accordance with applicable laws, either through deduction of salary or withholding a number of vested

shares.

Share Warrants and Share Options

In certain jurisdictions, the Group offers share warrants and options to certain individual contributors,

including employees as well as executive officers and directors. Prior to 2024, these were awarded in the

form of share warrants issued by a subsidiary of Klarna Group plc. In 2024, the Group also began granting

share options to acquire ordinary shares of Klarna Group plc ("Ordinary share options"). In 2025, the

Remuneration and Nomination Committee also approved the grant of options to acquire Class C shares

("Class C share options") to Mr. Siemiatkowski under the C Share Awards Plan, as described in Item 6.

The warrants and options are subject to graded vesting over a term of typically four to five years. The

awards are accounted for as equity-settled share-based payments, with the fair value determined at the

grant date and expensed over the vesting period, based on the Group's estimate of the number of awards

that will eventually vest.

The Group has issued share warrants and options by both Klarna Group plc and subsidiaries of Klarna

Group plc. Each share warrant issued by a subsidiary of Klarna Group plc entitles the recipient to purchase

one ordinary share in Klarna Holding AB (publ) or a subsidiary at the agreed strike price. We anticipate

periodically facilitating the exchange of subsidiary shares acquired upon exercise of such warrants into

ordinary shares of Klarna Group plc. If exchanged, the number of shares exchanged is dependent on the

value of Klarna Group plc at the time of exchange. If such an exchange would have taken place at the end

of 2025, 2024 and 2023, the exchange yield would have been 12, 12 and 12 shares for one subsidiary share,

respectively. The number of equivalent Klarna Group plc shares is presented as if the share warrants

issued by a subsidiary of Klarna Group plc had been exchanged into Klarna Group plc ordinary shares as of

the reporting date. Each ordinary share option or warrant issued by Klarna Group plc entitles the recipient

to purchase one ordinary share in Klarna Group plc at the agreed strike price. Two Class C share options

entitle the recipient to acquire either one ordinary share or two Class C shares, at the recipient's election.

As described in Item 6, Class C shares carry enhanced voting rights, subject to an annual acquisition limit

and an aggregate voting cap. All Class C share options outstanding were granted exclusively to Mr.

Siemiatkowski.

In 2025, the board of directors of the Company, acting on the recommendation of the Remuneration

and Nomination Committee, approved the grant of options to acquire 8,834,736 ordinary shares to

members of the Company's management team at a weighted average exercise price of $104 per share.

Additionally, the Remuneration and Nomination Committee granted options to acquire 17,505,672 Class C

KLARNA GROUP PLCF-57

shares to Mr. Siemiatkowski at a weighted average exercise price, expressed as the equivalent of one

ordinary share, of $91.8, as further described under "Equity Compensation paid to Mr. Siemiatkowski" in

Item 6. The Committee also amended the terms of options granted to Mr. Siemiatkowski in the fourth

quarter of 2024 to allow for such options to be exercised into 2,941,236 Class C shares (or 1,470,618

ordinary shares); this amendment did not reduce the exercise price of the underlying award. As of the date

of this report, all of these options remain substantially out of the money. Mr. Siemiatkowski may elect to

acquire, in his discretion, either ordinary shares or Class C shares upon the exercise of such Class C

options.

Certain warrants have been acquired by employees in exchange for a cash payment of the fair market

value at grant date. Since preemption rights related to these awards transfer over a specified period they

are accounted for as equity-settled share-based payments; however, no associated expense is

recognized.

Klarna has granted share warrants to selected partners, including merchants and other service

providers, in return for services. In 2025 and 2024, we entered into commercial agreements with certain

partners under which we granted warrants in exchange for consumer acquisition services to expand our

user base, which we determined to be distinct. These arrangements are equity-settled and are accounted

for as equity-settled share-based payments.

In 2025, we entered into commercial agreements with certain partners under which we granted

15,740,059 warrants, each warrant to acquire one ordinary share in Klarna Group plc, in exchange for

consumer acquisition services to expand our user base and brand awareness. We determined the fair

value of such services to be $233 million comprising consumer acquisition of $50 million and brand

awareness of $183 million, using the direct method, and recognized such costs as share-based payments

expense, included in sales and marketing, over the expected performance period within the commercial

agreement. During 2025, 3,910,393 warrants vested, of which 2,400,000 warrants were exercised. The

underlying services are expected to be provided over the five-year term of the agreement. We recognized

an expense of $27 million related to the fair value of the services in 2025, deferring $75 million of expense

to be recognized over the period of the agreement when the services are expected to be provided.

The grant of the warrants gives rise to a tax charge in the year of grant which is recoverable to the

extent warrants are exercised. We recognized a current tax liability of $48 million in connection with the

grant during the first quarter of 2025, with the associated tax charge recognized in equity. Upon exercise

of the 2,400,000 warrants during the second quarter of 2025, the related current tax liability was reduced

by $22 million. The remaining tax expense is expected to be recoverable when the warrants are exercised.

In 2024, 1,299,360 warrants were granted, each warrant to acquire one ordinary share in Klarna Group

plc, under such arrangements, in exchange for consumer acquisition services to expand our user base and

brand awareness. We determined the fair value of the services to be $17.9 million, using the direct

method for customer acquisition costs and this is recognized as share-based payments expense, included

in sales and marketing, over the relevant performance period within the commercial agreement.

We have also granted warrants to certain merchants for non-distinct services and the costs related to

these warrants are recognized as a reduction of revenue.

In 2025, the Company, through its indirectly wholly owned subsidiary, Klarna Bank AB, repurchased an

aggregate of 1,267,752 warrants to acquire Klarna Holding AB's ordinary shares (such warrants, "KHAB

warrants"), which were issued prior to our corporate reorganization at various times under our legacy

equity incentive schemes. The repurchase price for the KHAB warrants was $17.2 million, based on the

initial public offering price of $40.00 per ordinary share, being the fair value of the equity instrument at the

date of repurchase. All KHAB warrants repurchased were fully vested at the repurchase date, except

6,456, for which an accelerated expense of less than $0.1 million was recognized at the repurchase date.

For warrants issued by a subsidiary of Klarna Group plc, the range of exercise prices for warrants

outstanding as of December 31, 2025, 2024, and 2023 is between$0.10 and $1,508. The weighted average

KLARNA GROUP PLCF-58

remaining contractual life is 1.9 years, 2.7 years and 3.5 years as of December 31, 2025, 2024, and 2023

respectively. The number of exercisable warrants was 40,000, and 51,500 as of December 31 2024 and

2023, respectively, and there is no new exercisable warrant of this category in 2025.

For warrants issued by Klarna Group plc, the range of exercise prices for warrants outstanding as of

December 31, 2025 and 2024 is between $34 and $51. The weighted average remaining contractual life is

4.2 years and 3 years as of December 31, 2025 and 2024, respectively. The number of exercisable warrants

and options is 2,145,590 and 1,299,360 as of December 31, 2025 and 2024, respectively.

For options issued by Klarna Group plc, the range of exercise prices for options outstanding as of

December 31, 2025 and 2024 is between $38 and $114. The weighted average remaining contractual life for

share options was 3.4 years and 3.6 years as of December 31, 2025 and 2024, respectively. The number of

exercisable share options was 2,935,177 and 1,460,856 as of December 31, 2025 and 2024, respectively.

For C Class options issued by Klarna Group plc, the range of exercise prices for C Class options

outstanding as of December 31, 2025 is between $19 and $57. The weighted average remaining contractual

life is 3.7 years as of December 31, 2025. The number of exercisable C Class options is 9,523,581 as of

December 31, 2025. There were no C Class options outstanding prior to the year ended December 31,

2025. Klarna uses the Black-Sholes model when calculating the fair value of share warrants and options

granted to individual contributors, as well as certain partners when the fair value of goods and services

cannot be reliably measured. The Company does not anticipate paying any cash dividends in the near

future and, therefore, uses an expected dividend yield of zero in the option valuation model. The expected

volatility is determined taking into consideration the historical volatility of the Company's common share

and the historical volatility of comparable public companies. The risk-free rate for instruments issued by

subsidiary of Klarna Group plc is based on Swedish Central Bank (Sw. Sveriges Riksbank) bonds. The risk

free-rate rate for instruments issued by Klarna Group plc is based on U.S. treasury bonds.. The inputs used

within the model for the share warrants and options granted were:

---

| | | | |
|:---|:---|:---|:---|
|  | **Share warrants and share options** | **Share warrants and share options** | **Share warrants and share options** |
| | **2025** | **2024** | **2023** |
| Expected volatility (%) ....................................................................................... | 37% - 38% | 37% | 35% - 37% |
| Risk-free interest rate (%) ................................................................................ | 3.6% - 4.4% | 2.0% - 2.8% | 2.6% - 3.3% |
| Expected term (years) ....................................................................................... | 4.5 - 5.5 | 2.9 - 4.5 | 2.8 - 5.3 |
| Weighted average share price for instruments issued by subsidiary of <br>Klarna Group plc (in USD)<sup>1</sup> ................................................................................<br>| N/A | 337 | 216 |
| Weighted average share price for instruments issued by Klarna <br>Group plc (in USD) ..............................................................................................<br>| 40 | 34 | N/A |

---

____________

<sup>1</sup>Where share warrants in 2025, 2024 and 2023 were granted in SEK, the input has been converted to USD using the average

exchange rate for the year for presentation purposes.

The weighted average fair value of warrants issued by a subsidiary of Klarna Group plc granted during

2024 and 2023 was $17 and $16. The weighted average fair value of options issued by Klarna Group plc

granted during 2025 and 2024 was $53 and $9. The weighted average fair value of C Class Options issued

by Klarna Group plc granted during 2025 was $29.

Equity-Related Instruments Granted in Connection with Business Acquisitions

The Group issued equity in Klarna Holding AB (publ) to acquired employees in relation to several

business acquisitions in 2020, 2021 and 2022. The equity grant included a four-year vesting period and is

accounted for as equity-settled share-based compensation and recognized as a post-business

combination expense. When employees exited the Company during the periods, the future personnel

costs associated with the unvested equity were expensed in the statement of profit or loss on the last day

KLARNA GROUP PLCF-59

of employment. The instruments have been measured based on the fair market value of the underlying

ordinary shares at the date of grant.

In connection with the reorganization completed in May 2024, pursuant to which Klarna Group plc

became the ultimate parent company of the Group, all remaining unvested equity-related instruments

under this program were accelerated and expensed, resulting in the release of 329,484 shares during

2024 at a weighted-average grant-date fair value of $51 per share. As of December 31, 2024, there were no

shares outstanding under this program.

Employee Equity Program

The Group had a restricted share award program in which some employees acquired restricted shares

in a group subsidiary entity that retains an ownership interest in Klarna Bank AB (publ), which became fully

vested in 2023. The restricted share awards were accounted for as an equity-settled share-based

payment. The restricted shares were acquired by employees in exchange for a cash payment at fair

market value, measured at the grant date, and therefore no associated expense was recognized. Upon

vesting, participants retained ordinary shares in one of our subsidiaries holding an ownership interest in

Klarna Bank AB (publ), reflected as non-controlling interest in the consolidated financial statements. The

number of ordinary shares held in the group subsidiary entity as of December 31, 2024 and 2023 was

28,762 and 31,122, respectively. In 2024 and 2023, 2,347 and 10,693 shares held by former employees were

exchanged for shares in Klarna Holding AB (publ), respectively. In April 2025, the 28,762 shares held by

participants were exchanged for the issuance of 1,948,166 ordinary shares in Klarna Group plc.

Direct Share Issuance

During 2025 and 2024, the Group granted 150,760 and 216,468 ordinary shares in Klarna Group plc,

respectively, to certain employees, including executive officers and Board of Directors. The shares were

accounted for as equity-settled share-based payments. There were no vesting conditions or restrictions

placed on the awards and, accordingly, the related share-based compensation expense, based on the

grant-date fair value of the awards, was recognized immediately. The weighted average fair values of the

ordinary shares granted were $34 and $34, in 2025 and 2024, respectively.

**Note 23 Information on related parties**

**Milkywire**

In 2021, following a competitive selection process, Klarna engaged Milkywire AB ("Milkywire") to provide

sustainability related services, including the sourcing, vetting and monitoring of climate and nature

initiatives, as well as the facilitation of carbon credit purchases from third-party providers on Klarna's

behalf. Milkywire was founded in 2018 by Nina Siemiatkowski, who is the spouse of Sebastian

Siemiatkowski, our Co-Founder and Chief Executive Officer. Mrs. Siemiatkowski remains the chief

executive officer and majority owner of Milkywire.

Klarna paid Milkywire $0.9 million in 2025, $0.7 million in 2024 and $0.9 million in 2023 for

sustainability related services. Separately, Klarna transferred to Milkywire an additional $0.5 million in

2025 and $1.0 million in 2024 for the purchase of carbon credits on Klarna's behalf; these amounts were

paid in full by Milkywire to the third-party providers of the carbon credits and Milkywire did not retain any

margin on these transactions.

The engagement of Milkywire, including the fees paid, was approved by the board of directors with Mr.

Siemiatkowski recusing himself from the related deliberations and approval, in accordance with the

Company's conflicts of interest policies. The board believes the fees paid to Milkywire reflect competitive

rates for the services provided..

KLARNA GROUP PLCF-60

**WRLD Foundation**

The Company made charitable contributions of $2.3 million in 2025, $3.8 million in 2024 and $5.5

million in 2023 to the WRLD Foundation, a registered nonprofit organization in the United States and

Sweden. Nina Siemiatkowski is a board member of the WRLD Foundation. The WRLD Foundation

distributes all contributions received from Klarna to underlying recipient organizations that have been

sourced and vetted by Milkywire as part of Klarna's planet health initiative; the identity of all recipient

organizations has been reported to Klarna. These contributions were approved by the board of directors,

with Mr. Siemiatkowski recusing himself from the related deliberations and approval.

**Compensation to the board of directors and senior management** 

The table below summarizes the compensation paid or payable to the board of directors and senior

management. The increase in total compensation from $14 million in 2023 to $99 million in 2025 principally

reflects the introduction of equity-based compensation programs at the Klarna Group plc level in

connection with the Company's initial public offering. The amounts reported for fixed and variable equity-

based compensation represent grant-date fair values calculated in accordance with IFRS 2 and do not

represent cash compensation paid to, or value currently received by, the recipients. A significant portion

of the equity-based compensation reported in 2025 relates to awards with exercise prices substantially

above the current share price, as further described in Note 22 and in Item 6:

---

| | | | |
|:---|:---|:---|:---|
| **Salaries and other remuneration to the board and senior management** | **2025** | **2024** | **2023** |
| Basic salary/fee ................................................................................................ | $13 | $13 | $10 |
| Fixed equity-based compensation ............................................................... | 36 | 32 |  |
| Variable equity-based compensation .......................................................... | 48 | 18 | 1 |
| Other variable-based compensation ............................................................ | 1 | 1 | 2 |
| Other benefits ................................................................................................... | 1 | 1 |  |
| Pension expenses ............................................................................................. | 1 | 1 | 1 |
| **Total .....................................................................................................................** | **$99** | **$65** | **$14** |

---

In December 2024, the Group granted 216,468 ordinary shares and 400,065 share options to certain

members of senior management. The shares were granted by the board of directors of Klarna Group plc

and were accounted for as equity-settled share-based payments.

During 2025, the Group granted 108,960 ordinary shares and 8,834,736 share options at a weighted

average exercise price of $104 to certain members of senior management. Additionally, the board of

directors, acting on the recommendation of the Remuneration and Nomination Committee, granted options

to acquire 17,505,672 Class C shares to Mr. Siemiatkowski, and amended the terms of options previously

granted to Mr. Siemiatkowski in the fourth quarter of 2024 to allow for such options to be exercised into

2,941,236 Class C shares (or 1,470,618 ordinary shares); this amendment did not reduce the exercise price

of the underlying award. Two Class C share options entitle the recipient to either one ordinary share or two

Class C shares, at Mr. Siemiatkowski's election. The weighted average exercise price, expressed as the

equivalent of one ordinary share, is $91.8, representing a significant premium to the initial public offering

price of $40.00. As of the date of this report, the share options granted to both senior management and

Mr. Siemiatkowski remain substantially out of the money. The options vest over a four-year period.

The shares and options described above were granted by the board of directors of Klarna Group plc,

acting on the recommendation of the Remuneration and Nomination Committee, and were accounted for

as equity-settled share-based payments, with the related expense recognized over the applicable vesting

periods in accordance with IFRS 2 based on grant-date fair values.

During 2025, the Company, through its indirectly wholly owned subsidiary, Klarna Bank AB,

repurchased an aggregate of 1,267,752 warrants as detailed in Note 22 – Share-Based Payments. Of the

total repurchased warrants, 17,500 were held by members of the Company's management team.

KLARNA GROUP PLCF-61

**Note 24 Income taxes**

The table below represents income tax (expense) benefit, effective tax rate, deferred tax assets and

deferred tax liabilities for the years ending December 31, 2025, 2024 and 2023:

---

| | | | |
|:---|:---|:---|:---|
| **Income tax (expense) benefit** | **2025** | **2024** | **2023** |
| **Current tax** |  |  |  |
| Tax expense for the year ................................................................................ | $(25) | $(20) | $(16) |
| Adjustment of tax attributable to previous years ...................................... | (1) |  | 3 |
| **Total .....................................................................................................................** | **$(26)** | **$(20)** | **$(13)** |
| **Deferred tax** |  |  |  |
| Deferred tax ....................................................................................................... | $(6) | $8 | $73 |
| **Total .....................................................................................................................** | **$(6)** | **$8** | **$73** |
| **Income tax (expense) benefit ...........................................................................** | **$(32)** | **$(12)** | **$60** |

---

---

| | | | |
|:---|:---|:---|:---|
| **Effective tax rate** | **2025** | **2024** | **2023** |
| Profit (loss) before taxes ................................................................................. | $(241) | $33 | $(304) |
| Income tax calculated in accordance with national tax rates <br>applicable in each country .............................................................................<br>| (21) | (7) | 60 |
| Non-taxable revenues ..................................................................................... | 27 | 3 | 2 |
| Non-deductible expenses ............................................................................... | (15) | (37) | (39) |
| Taxable income not booked in profit or loss .............................................. | (6) | (2) | (7) |
| Deductible expenses not booked in profit or loss .................................... | 7 | 11 | 4 |
| Unrecognized taxable losses ......................................................................... | (26) | 12 | (34) |
| Effect of change in tax rate ............................................................................ | 1 | 2 |  |
| Losses carried forward recognized .............................................................. | 5 | 6 | 72 |
| Adjustments of tax attributable to previous years .................................... | (4) |  | 2 |
| **Tax (expense) benefit ........................................................................................** | **$(32)** | **$(12)** | **$60** |
| **Effective tax rate ................................................................................................** | **13.4%** | **(36.7)%** | **(19.7)%** |

---

---

| | | |
|:---|:---|:---|
| **Deferred taxes** | **December 31,** <br>**2025**<br>| **December 31,** <br>**2024**<br>|
| Deferred tax asset .......................................................................................................................... | $36 | $33 |
| Deferred tax liability ....................................................................................................................... | (2) | (1) |
| **Total ...................................................................................................................................................** | **$34** | **$32** |
| *Comprising:* ...................................................................................................................................... |  |  |
| Losses carried forward ................................................................................................................. | 71 | 55 |
| Allowance for credit losses .......................................................................................................... | 12 | 19 |
| Intangible assets ............................................................................................................................. | (78) | (57) |
| Other .................................................................................................................................................. | 30 | 15 |
| **Total ...................................................................................................................................................** | **$34** | **$32** |

---

KLARNA GROUP PLCF-62

Deferred tax assets attributable to carryforward of unused tax losses or other deductible temporary

differences are recognized only to the extent that it is probable that future taxable profits will be available

against which the unused tax losses and unused tax credits can be utilized.

During 2025, 2024 and 2023, deferred tax assets and liabilities have been recognized resulting in a $6

million, $8 million and $73 million benefit in the consolidated statements of profit or loss, respectively.

Deferred tax assets have been recognized where the recognition criteria are met, of which $5 million,

$6 million and $72 million are in respect of tax losses for 2025, 2024 and 2023, respectively. The gross

deferred tax assets and liabilities have been set off on the balance sheet to the extent the requirements

for netting are met.

Tax losses carried forward in the Group for which tax assets are not recognized in the balance sheet

amount to $2.1 billion and $1.4 billion gross for the years ending December 31, 2025 and 2024, respectively.

These carry forward tax losses primarily originated in Sweden and Germany, and there are no time

restrictions on the use of these losses. Other deductible temporary differences which have not been

recognized amount to $163 million and $0 million gross for the years ending December 31, 2025 and 2024,

respectively. Deferred tax assets have not been recognized in respect of these temporary differences as

they have not been assessed as likely to offset taxable profits elsewhere in the Group under the IAS 12

recognition criteria.

The Group has applied the exception, mandated by an amendment to IAS 12, to recognizing and

disclosing information about deferred tax assets and liabilities related to Pillar Two income taxes.

**Note 25 Net profit (loss) per share**

Basic loss per share is calculated by dividing the loss attributable to shareholders of Klarna Group plc

by the weighted average number of ordinary shares outstanding during the period. Diluted profit (loss) per

share is calculated similarly but includes the effect of potential ordinary shares using the treasury stock

method, to the extent that the inclusion of these shares is dilutive. Potential ordinary shares consist of

incremental shares issuable in connection with warrants and share options. The Group has also granted

RSUs, restricted share awards and certain warrants in subsidiaries which are exercisable or convertible in

subsidiary company shares and are not considered potential ordinary shares in Klarna Group plc. However,

such instruments, which are potential ordinary shares in subsidiaries, may affect net profit (loss) per share

due to their impact on non-controlling interest for Klarna Group plc.

Due to the net loss and the resulting anti-dilutive effect in 2025 and 2023, all potential ordinary shares

are excluded from the diluted loss per share calculation, and diluted loss per share equals basic loss per

share for these periods. Potential ordinary shares in subsidiaries have an insignificant impact on non-

controlling interest for purposes of the diluted profit per share for the year ended December 31, 2025.

The computation of loss per share for the respective periods is as follows:

KLARNA GROUP PLCF-63

---

| | | | |
|:---|:---|:---|:---|
| | **2025** | **2024** | **2023** |
| **Numerator:** |  |  |  |
| Net profit (loss) attributable to shareholders of Klarna Group plc ........ | $(294) | $3 | $(249) |
| **Denominator:** |  |  |  |
| Weighted average number of ordinary shares - basic ............................. | 370654083 | 363993690 | 362090644 |
| Dilutive potential ordinary shares ................................................................. |  | 418379 |  |
| Weighted average number of ordinary shares - diluted .......................... | 370654083 | 364412068 | 362090644 |
| **Net profit (loss) per share attributable to shareholders of Klarna Group** <br>**plc:**<br>|  |  |  |
| Basic .................................................................................................................... | $(0.79) | $0.01 | $(0.69) |
| Diluted ................................................................................................................. | $(0.79) | $0.01 | $(0.69) |

---

**Note 26 Significant events after the end of the reporting period** 

The Group has evaluated all events that have occurred subsequent to December 31, 2025, through the

date that the consolidated financial statements were approved on February 26, 2026 by the Board of

Directors. No significant events have occurred during the subsequent period.

## Exhibit 2.1

![](exhibit21-descriptionofs001.jpg)

Exhibit 2.1 Description of the registrant's securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 The following description of our share capital is a summary and does not purport to be complete. It is subject to and qualified in its entirety by reference to our articles of association, which are filed as an exhibit to the annual report on Form 20-F of which this exhibit is a part. We encourage you to read our articles of association for additional information. General We are a public company with limited liability incorporated pursuant to the laws of England and Wales on November 7, 2022 as Klarna UK II PLC and renamed as Klarna Group plc on December 13, 2023. We are registered with the Registrar of Companies in England and Wales under number 14467769, and our registered office is at 10 York Road, London SE1 7ND, United Kingdom. We were incorporated for the purposes of becoming the ultimate holding company of Klarna Holding AB (publ) and its subsidiaries and consummating the corporate reorganization described herein. Klarna Holding AB (publ) was formed in January 2005 as a private limited liability company and subsequently converted into a public limited liability company, in each case under the laws of Sweden. Klarna Group Midco Ltd (our wholly owned subsidiary) and Klarna Group Holdco Ltd (a wholly owned subsidiary of Klarna Group Midco Ltd) were incorporated in November 2022 as Jersey limited companies (originally under the names Runway I Limited and Runway II Limited, respectively). They were formed to become the indirect and direct holding companies, respectively, of Klarna Holding AB (publ). Prior to our IPO, neither entity conducted any operations other than activities related to their formation, the corporate reorganization and the IPO. Pursuant to the terms of our corporate reorganization, and in each case with the exception of certain de minimis amounts, (i) all of the issued share capital in Klarna Holding AB (publ) was exchanged for the same number of ordinary shares in Klarna Group Holdco Ltd, (ii) all of the issued share capital in Klarna Group Holdco Ltd was exchanged for the same number of ordinary shares in Klarna Group Midco Ltd and (iii) all of the issued share capital in Klarna Group Midco Ltd was exchanged for the same number of ordinary shares in Klarna Group plc, and, as a result, Klarna Group plc became the ultimate indirect parent company of Klarna Holding AB (publ). Our ordinary shares are listed on the NYSE under the symbol "KLAR." The following is a summary of the material provisions of our share capital and our articles of association. A. Share Capital We have two classes of voting shares issued and outstanding: ordinary shares and Class B shares. Each ordinary share has one vote per share and each Class B share has ten votes per share. The ordinary shares and Class B shares vote together as a single class on all matters submitted to a vote of shareholders, except as otherwise required by applicable law. As of the date of this annual report, we have no deferred shares in issue. Where we do have deferred shares in issue, they shall not entitle the holder to voting rights, do not have any rights to participate in our profits or to receive dividends or other distributions and only participate in any liquidation, dissolution or our winding up only after we have paid (i) to holders of our ordinary shares and Class C shares: (a) the nominal capital paid up on all such shares, plus (b) $10,000,000 on each ordinary share and $5,000,000 on each Class C share; and (ii) to holders of our Class B shares: the nominal capital paid up on all such Class B shares, which we do not expect to occur. In addition, during a period of five years from the completion of our IPO, we may from time to time issue Class C shares. As of the date of this annual report, our issued and outstanding share capital consists of 378,110,466 ordinary shares of $0.0001 nominal value each and 328,136,589 Class B shares of $0.0001 nominal value each. We have no deferred shares in issue.

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![](exhibit21-descriptionofs002.jpg)

2 In addition to the authority previously granted from our shareholders, our board of directors was, on June 30, 2025, granted the authority from our shareholders to allot new ordinary shares and other shares, and to grant rights to subscribe for, or to convert any security into, new ordinary shares or other shares, up to a maximum aggregate nominal amount (i.e., par value) of $367,502.51, for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the conclusion of the Company's annual general meeting to be held in 2026 (or, if earlier, on June 30, 2026). B. Memorandum and Articles of Association When we refer to our articles of association in this Form 20-F, we refer to our articles of association conditionally adopted on March 3, 2025 and in effect from September 9, 2025. Capital Structure Ordinary shares Voting rights. The holders of our ordinary shares are entitled to one vote per ordinary share on all matters to be voted upon by the shareholders other than with respect to matters that require a separate class vote in accordance with applicable law. Dividend rights. The holders of our ordinary shares are entitled to receive ratably such dividends or other distributions, if any, as may be approved from time to time by the board of directors out of funds legally available for such dividends and otherwise to participate in our profits; provided that each ordinary share shall participate to the extent of twice the amount of each Class C share (on a per share basis). Rights upon liquidation. In the event of liquidation, dissolution or winding up of Klarna Group plc, the holders of ordinary shares are entitled to share ratably in all assets remaining after payment of liabilities; provided that each ordinary share shall participate to the extent of twice the amount of each Class C share (on a per share basis). Class B shares Voting rights. The holders of our Class B shares are entitled to ten votes per share on all matters to be voted other than with respect to matters that require a separate class vote in accordance with applicable law. The voting rights attached to each Class B share may only be exercised by their original holder, as reflected in our register of members. Dividend rights. The holders of our Class B shares do not have any rights to participate in our profits and do not have any right to receive dividends or other distributions. Rights upon liquidation. The holders of our Class B shares only have limited rights to receive a distribution equal to the nominal value paid-up or credited as paid-up on such Class B shares upon our liquidation, dissolution or winding up (excluding any reorganization of our assets and liabilities on an intra-group and solvent basis), following the prior payment of the nominal capital paid up or credited as paid up on each ordinary share and Class C share, as well as an amount of $10.0 million on each ordinary share and $5.0 million on each Class C share upon such liquidation, dissolution or winding up. Redesignation. The Class B shares will be redesignated (i.e., converted) by us into deferred shares in connection with certain events, in accordance with our articles of association, including certain disposals of interests in ordinary shares by holders of our Class B shares or their affiliates. Issue and transfer. The Class B shares were issued prior to our IPO and cannot be transferred to any person. Class C shares Voting rights. The holders of our Class C shares are entitled to ten votes per share on all matters to be voted upon by the shareholders other than with respect to matters that require a separate class vote in accordance with applicable law.

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![](exhibit21-descriptionofs003.jpg)

3 Dividend rights. The holders of our Class C shares are entitled to receive ratably such dividends or other distributions, if any, as may be approved from time to time by our board of directors out of funds legally available for such dividends, and otherwise to participate in our profits; provided that each Class C share shall participate to the extent of half the amount of each ordinary share (on a per share basis). Rights upon liquidation. In the event of our liquidation, dissolution or winding up, the holders of Class C shares are entitled to share ratably in all assets remaining after payment of liabilities; provided that each Class C share shall participate to the extent of half the amount of each ordinary share (on a per share basis). Redesignation. The Class C shares will be redesignated by us into ordinary shares and deferred shares: (i) at the election of the holder; (ii) if they are transferred (other than in permitted circumstances); (iii) if Sebastian Siemiatkowski and his related or affiliated persons cease to beneficially own the relevant Class C shares; (iv) if Mr. Siemiatkowski ceases to provide services to us; and (v) in other specified circumstances. For every two Class C shares to be redesignated, one Class C share will be redesignated into one ordinary share and one Class C share will be redesignated into one deferred share; provided that, if at any time the number of Class C shares to be redesignated is an odd number, the one remaining Class C share will be redesignated into one deferred share. Issue and transfer. The Class C shares can only be issued to Mr. Siemiatkowski and certain of his related and affiliated persons, their respective nominees and a depositary service prior to the fifth anniversary of our IPO; provided that the maximum number of Class C shares that may be issued is that number which would result in the aggregate number of votes that are eligible to be cast by the Class C shares at our general meeting being equal to 15% of the aggregate number of votes that would have been eligible to be cast by the shares at our general meeting immediately prior to our IPO. We have granted to Mr. Siemiatkowski Class C options pursuant to which he can elect to acquire, in his discretion, either ordinary shares or Class C shares upon the exercise of such Class C options. Mr. Siemiatkowski's acquisition of Class C shares pursuant to Class C options in any year is subject to a limit of 1.5% of the number of issued and outstanding ordinary shares on the last day of the fiscal year preceding such acquisition. The Class C shares cannot be transferred, other than to certain related and affiliated persons of Mr. Siemiatkowski, their respective nominees and a depositary service. Deferred shares Voting rights. The holders of our deferred shares are not entitled in their capacity as holders of deferred shares to receive notice of any general meeting or to attend, speak or vote at any such meeting. The holders of our deferred shares do not have any rights to participate in our profits and do not have any right to receive dividends or other distributions. Rights upon liquidation. The holders of deferred shares only have limited rights to receive a distribution equal to the nominal value paid-up or credited as paid-up on such deferred shares upon our liquidation, dissolution or winding up (excluding any reorganization of our assets and liabilities on an intra-group and solvent basis), and only after we have first paid: (i) to holders of our ordinary shares and Class C shares: (a) the nominal capital paid up on all such shares, plus (b) $10,000,000 on each ordinary share and $5,000,000 on each Class C share; and (ii) to holders of our Class B shares: the nominal capital paid up on all such Class B shares. Deferred shares typically arise as a result of amendments to share capital (for example, upon redesignation of our Class B shares) or as an alternative to cancelling shares pursuant to a court approved reduction of capital procedure. As of the date of this annual report, we have no deferred shares in issue. Dividends Under English law, we may only pay dividends out of profits available for that purpose. Profits available for distribution are our accumulated, realized profits, to the extent that they have not been previously utilized by distribution or capitalization, less our accumulated, realized losses, to the extent that they have not been previously written off in a reduction or reorganization of capital duly made. The amount of our distributable reserves is a

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![](exhibit21-descriptionofs004.jpg)

4 cumulative calculation. We may be profitable in a single financial year but unable to pay a dividend if the profits of that year do not offset all previous years' accumulated, realized losses. Additionally, we may only make a distribution if the amount of our net assets is not less than the aggregate of our called-up share capital and undistributable reserves, and if, and to the extent that, the distribution does not reduce the amount of those assets to less than that aggregate. Our articles of association authorize our board of directors to approve interim dividends without shareholder approval to the extent that the approval of such dividends appears justified by profits. Our board of directors may also recommend a final dividend to be approved and declared by the shareholders at an annual general meeting and may direct that the payment be made by distribution of assets, shares or cash. No dividend may exceed the amount recommended by the board of directors. Our articles of association also permit a scrip dividend scheme under which our board of directors may offer any holders of shares entitled to receive dividends the right to elect to receive ordinary shares, credited as fully paid, instead of cash in respect of the whole (or some part determined by our board of directors) of a dividend subject to certain terms and conditions set out in our articles of association. The right to receive a dividend lapses if unclaimed for 12 years. Quorum for General Meetings Our articles of association provide that no business shall be transacted at any general meeting unless a quorum is present. The necessary quorum for a general meeting is two qualifying persons, unless each is a representative of a corporation or each is appointed as proxy of a member and they are representatives of the same corporation or are proxies of the same member, except where we only have one member, that shareholder present at the meeting and entitled to vote is a quorum. Voting Rights Under our articles of association, each holder of ordinary shares is entitled to one vote for each ordinary share that they hold as of the record date for the meeting and each holder of Class B shares or Class C shares, as applicable, is entitled to ten votes for each Class B share or Class C share that they hold as of the record date for the meeting. Neither English law nor any of our constituent documents place limitations on the right of nonresident or foreign owners to vote or hold ordinary shares. The voting at a general meeting must be taken by poll. Subject to any relevant special rights or restrictions attached to any shares, on a poll taken at a general meeting, each qualifying shareholder present in person or by proxy (or, in the case of a corporation, a corporate representative) and entitled to vote on the resolution has one vote for every ordinary share held by such shareholder and ten votes for every Class B share or Class C share held by such shareholder. An ordinary resolution must be approved by a simple majority, and a special resolution approved by at least 75%, of shareholders attending and voting, whether in person or by proxy. Amendment to Our Articles of Association Under English law, shareholders may amend the articles of association of a company by special resolution. However, for so long as any of our shares are held in a settlement system operated by DTC or any affiliate or nominee therefor, including Cede & Co. and any successors thereto, the article in our articles of association which requires voting at a general meeting to be taken on a poll may only be removed, amended or varied by resolution of the shareholders passed unanimously. General Meetings and Notices

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![](exhibit21-descriptionofs005.jpg)

5 An annual general meeting must be called by not less than 21 clear days' notice (i.e., excluding the date of receipt or deemed receipt of the notice and the date of the meeting itself). The notice of a general meeting must be given to the shareholders (other than any who, under the provisions of our articles of association or the terms of allotment or issue of shares, are not entitled to receive notice), to the board of directors and to the auditors. Under English law, we are required to hold an annual general meeting of our shareholders within six months from the day following the end of our financial year. Subject to the foregoing, a general meeting may be held at a time and place determined by the board of directors. The rules governing notice of adjourned meetings depend on the reason for adjournment. Where the chair adjourns a meeting in exercise of its general power of adjournment, no notice of the adjourned meeting is required unless the adjournment is for 30 days or more, or is to no fixed date, in which case at least 14 clear days' notice must be given in the same manner as for the original meeting. Where a meeting is adjourned specifically due to the absence of a quorum, the adjourned meeting must be held not less than 14 days and not more than 28 days after the original meeting, and at least seven clear days' notice of the adjourned meeting must be given. Under English law, our board of directors must convene such a meeting once it has received requests to do so from shareholders representing at least 5% of our paid-up share capital carrying voting rights at general meetings (excluding any paid-up capital held as treasury shares). Winding Up In the event of a voluntary winding up of the Company, the liquidator may, with the sanction of a special resolution of the Company and any other sanction required by law, subject to the U.K. Insolvency Act of 1986, after effectively applying the Company's property to satisfy the Company's liabilities, divide among our members the whole or any part of the assets of the Company, whether they consist of property of the same kind or not, and vest the whole or any part of the assets in trustees upon such trusts for the benefit of the holders of ordinary shares of the Company as the liquidator, with such sanction, may determine. No shareholder of the Company shall be compelled to accept any assets upon which there is a liability. On a return of capital on a liquidation, reduction of capital or otherwise, the surplus assets of the Company available for distribution among the holders of ordinary shares shall be applied pro rata (rounded to the nearest whole number). Rights of Preemption on New Issues of Shares Under the Companies Act, the allotment of "equity securities" (except pursuant to an employees' share scheme and as bonus shares) that are to be paid for wholly in cash must be offered first to the existing holders of equity securities in proportion to the respective nominal amounts (i.e., par values) of their holdings on the same or more favorable terms, unless a special resolution to the contrary has been passed or the articles of association otherwise provide disapplication from this requirement (which disapplication can be for a maximum of five years after which shareholders' approval would be required to renew the disapplication). "Equity securities" means ordinary shares or rights to subscribe for, or convert securities into, ordinary shares where ordinary shares means shares other than shares that, with respect to dividends and capital, carry a right to participate only up to a specified amount in a distribution. In relation to the Company, "equity securities" will therefore include the ordinary shares, and all rights to subscribe for or convert securities into such shares. In addition to the authority previously granted from our shareholders, our board of directors was, on June 30, 2025, granted the authority from our shareholders to allot new ordinary shares and other shares, and to grant rights to subscribe for, or to convert any security into, new ordinary shares or other shares, up to a maximum aggregate nominal amount (i.e., par value) of $367,502.51, for a period expiring (unless previously renewed, varied or revoked by the Company in general meeting) at the conclusion of the Company's annual general meeting to be held in 2026 (or, if earlier, on June 30, 2026). Disclosure of Ownership Interests in Shares

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![](exhibit21-descriptionofs006.jpg)

6 Section 793 of the Companies Act gives us the power to require persons whom we know have, or whom we have reasonable cause to believe have, or within the previous three years have had, an interest in any shares of the Company to disclose specified information regarding those shares. Failure to provide the information requested within the prescribed period (or knowingly or recklessly providing false information after the date the notice is sent) can result in criminal or civil sanctions being imposed against the person in default. Under our articles of association, if any of our shareholders, or any other person appearing to be interested in the shares of the Company held by such shareholder, has been duly served with a notice under section 793 and fails to give us the information required by such notice or has made a statement which is false or inadequate in a material particular, then our board of directors may, in its absolute discretion at any time by notice, withdraw voting rights and place restrictions on the rights to receive dividends and refuse to register a transfer of such shares. Alteration of Share Capital; Share Repurchases Subject to the provisions of the Companies Act, and without prejudice to any relevant special rights attached to any class of shares, we may, from time to time, among other things: • increase our share capital by allotting and issuing new shares in accordance with our articles of association and any relevant shareholder resolution; • consolidate all or any of our share capital into shares of a larger nominal amount (i.e., par value) than the existing shares; • subdivide any of our shares into shares of a smaller nominal amount (i.e., par value) than the existing shares; or • redenominate our share capital or any class of share capital. We may not redenominate, consolidate, divide or subdivide any class of voting shares without redenominating, consolidating, dividing or subdividing (as the case may be) the other classes of our voting shares. English law prohibits us from purchasing our own shares unless such purchase has been approved by our shareholders. Shareholders may approve two different types of such share purchases: "on-market" share purchases or "off-market" share purchases. "On-market" purchases may only be made on a "recognized investment exchange," which does not include the NYSE, which is the only exchange on which the Company's shares are be traded. In order to purchase our own shares, as a company listed on the NYSE, we must therefore obtain the approval of our shareholders for an "off-market purchase" (on the basis of a specific purchase agreement with a financial intermediary) to acquire shares that are traded on the NYSE. This requires our shareholders to pass an ordinary resolution approving an "off-market purchase," where such approval may be for a maximum period of five years. In relation to an "off-market purchase," we may not acquire our own shares until the terms of the contract pursuant to which the purchase(s) are to be made have been authorized by our shareholders. Our shareholders have passed a resolution to approve certain contracts pursuant to which we will be able to make "off-market" purchases from selected investment banks. This resolution may be renewed prior to its expiration (i.e., within five years), and renewal of such authorization may be sought at least once every five years, and possibly more frequently. Transfer and Registration of Shares Our articles of association allow shareholders to transfer all or any of their shares by instrument of transfer in writing in any usual form or in any other form which our board of directors may approve. The instrument of transfer must be executed by or on behalf of the transferor and (in the case of a transfer of a share that is not fully paid) by or on behalf of the transferee. Our articles of association also permit transfer of shares in uncertificated form by means of a relevant electronic system. We may not charge a fee for registering the transfer of a share. Our board of directors may, in its absolute discretion, refuse to register a transfer of shares in certificated form if, among other things, it is not fully paid (provided that the refusal does not prevent dealings in the shares from taking place on an open and proper basis), is with respect to a share on which we have a lien and sums in respect of which the lien exists are payable and are not paid within 14 clear days after due notice has been sent or if such

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7 transfer may violate any law or regulation applicable to us, the shares, the holder, the member or proposed transferee or breach of any contractual obligation whether or not we are a party to, or a beneficiary of, such contract. If our board of directors refuses to register a transfer of a share, it shall notify the transferor of the refusal and the reasons for it as soon as practicable and in any event within two months after the date on which the instrument of transfer was lodged with us (in the case of a transfer of a share in certificated form) or the instructions to the relevant system were received. Any instrument of transfer which our board of directors refuses to register shall (except in the case of fraud) be returned to the person lodging it when notice of the refusal is sent. Computershare Trust Company, N.A. will act as our transfer agent and registrar. The share register reflects only registered owners of our ordinary shares, Class B shares, Class C shares and deferred shares. Registration in the Company's share register will be determinative of ownership of shares of the Company. A shareholder who holds shares beneficially will not be the holder of record of such shares. Instead, the clearance service or depositary (for example, Cede & Co., as nominee for DTC, or GTU Ops, Inc., as nominee for Computershare Trust Company, N.A.) or other nominee will be the holder of record of those shares. Accordingly, a transfer of shares from a person who holds such shares beneficially to a person who holds such shares beneficially through a clearance service or depositary or other nominee will not be registered in the Company's official share register, as the depositary or other nominee will remain the record holder of any such shares. In the event that the Company notifies one or both of the parties to a share transfer that it believes stamp duty or SDRT is required to be paid in connection with a transfer of shares of the Company, if the parties to the transfer have an instrument of transfer duly stamped to the extent required and then provide such instrument of transfer to the Company's share registrar, the buyer will be registered as the legal owner of the relevant shares on the official share register, subject to our rights with respect to the disclosure of interests in our shares. Annual Accounts and Independent Auditor Under English law, a "quoted company," which includes a company whose equity share capital is admitted to dealing on the NYSE, must deliver to the Registrar of Companies a copy of: • the company's annual accounts; • the directors' remuneration report; • the directors' report; • a strategic report; and • the auditor's report on those accounts, on the auditable part of the directors' remuneration report, on the directors' report and on the strategic report. The annual accounts and reports must be presented to the shareholders at a general meeting (although a vote is not mandatory in respect of such documents). Our individual accounts must be prepared in accordance with the U.K. GAAP or IFRS as adopted by the United Kingdom. Our consolidated group accounts must be prepared in accordance with the U.K. GAAP, IFRS as adopted by the United Kingdom, or U.S. GAAP for a period expiring at the end of the fourth financial year from our incorporation. In addition, for public reporting purposes we will prepare consolidated financial statements in accordance with IFRS. Under our articles of association, copies of the annual accounts and reports for that financial year must be sent to every shareholder, every debenture holder and every person entitled to receive notice of general meetings at least 21 clear days before the date of the meeting at which copies of the documents are to be presented. Our articles of association provide that any documents to our shareholders may be distributed in electronic form or by making them available on a website, as long as shareholders have agreed that such documents may be sent or supplied in that form. As an English company with no applicable exemptions from the audit requirements under the Companies Act and applicable law, we must appoint an independent auditor to audit the annual accounts of the Company. The auditor of a public company may be appointed by ordinary resolution at the general meeting of the company at which the company's annual accounts are laid. Directors can also appoint auditors at any time before the company's first accounts meeting, after a period of exemption or to fill a casual vacancy. The remuneration of an auditor is fixed by our shareholders by ordinary resolution or in a manner that our shareholders by ordinary resolution determine.

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8 Board of Directors The number of directors shall not be less than two (unless otherwise determined by ordinary resolution) and not more than eleven. Subject to our articles of association and the Companies Act, we may by ordinary resolution elect a person who is willing to act to be a director and the board of directors shall have power to appoint any person who is willing to act to be a director, either to fill a vacancy or as an additional director. In accordance with the Companies Act and our articles of association, our directors may be removed from office before the expiration of his or her term by an ordinary resolution of shareholders. Except as otherwise determined by a majority of directors, our board of directors shall be divided into three classes (Class A, Class B and Class C) that consist, as nearly as possible, of a number of directors equal to one-third of the total number of directors. Each class of directors is elected for a three-year term of office, but the terms are staggered so that the term of only one class of directors expires at each annual general meeting. At each succeeding annual general meeting, directors shall be appointed to succeed and/or be re-appointed to continue, as the directors of the class whose term expires at such annual general meeting, for a term ending upon the conclusion of the third annual general meeting following their appointment or re-appointment. Our directors are divided among the three classes as follows: • the Class A directors are Andrew Reed, Niclas Neglén, Markus Villig and Mateusz Staniszewski, and their terms will expire at the first annual meeting of our shareholders following our IPO; • the Class B directors are Lise Kaae, Omid R. Kordestani and Roger W. Ferguson, Jr., and their terms will expire at the second annual meeting of our shareholders following our IPO; and • the Class C directors will be Sebastian Siemiatkowski, Michael J. Moritz and Sarah Smith, and their terms will expire at the third annual meeting of our shareholders following our IPO. Subject to the provisions of our articles of association, the board of directors may meet for the despatch of business, adjourn and otherwise regulate its meetings as it thinks fit. The quorum for a meeting of the board of directors may be fixed by the board, but it must never be less than half of the total number of directors, from time to time, and, unless so fixed at any other number, shall be such number as is nearest to but not less than half of the total number of directors, from time to time. Questions arising at any board meeting shall be determined by a majority of votes of the directors present and entitled to vote at such meeting. Subject to our articles of association, each director participating in a board meeting has one vote and, in the case of an equality of votes, the chair shall have a second or casting vote, unless he or she is not entitled to vote on the resolution in question. Directors shall be entitled to such remuneration as we may determine by ordinary resolution for their services to us as directors and for any other service which they undertake for us. Subject to and in default of such determination, each such director shall be paid a fee for their services at such rate as may from time to time be determined by our board of directors; provided that the agreement or payment of any such fee would not result in non-compliance with any relevant exchange listing or other requirements. Any director who is not an executive officer and who performs special services which, in the opinion of the board of directors, are outside the scope of the ordinary duties of a director, may be paid such extra remuneration as the board may determine; provided that the payment of any such extra remuneration would not result in non-compliance with any relevant exchange listing or other requirements. We may pay our directors for all traveling, hotel and other expenses properly incurred by them in and about the discharge of their duties, including their expenses of traveling to and from board meetings, committee meetings, general meetings or separate meetings of the holders of any class of shares or our other securities, or otherwise. Subject to any guidelines and procedures established from time to time by our board of directors, we may also pay a director for all expenses incurred by them in obtaining professional advice in connection with our affairs or the discharge of their duties as a director. Our board of directors may also, in accordance with the requirements set out in our articles of association, authorize any matter or situation proposed to them by any director, which would, if not authorized, involve a

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9 director breaching his or her duty to avoid conflicts of interests. A director seeking authorization in respect of such conflict shall declare to the other directors the nature and extent of their interest in a conflict as soon as is reasonably practicable. Any such authorization by the board of directors will be effective only if: • the proposal to be authorized is made by a director in writing and delivered to the other directors or made orally at a meeting of the board, in each case setting out particulars of the conflict; • any requirements as to the quorum for consideration of the relevant matter is met without counting the conflicted director and any other conflicted director; and • the matter was agreed to without the conflicted director voting or would have been agreed to if the conflicted director's vote had not been counted. Liability of Directors and Officers Subject to the provisions of English law and our articles of association, our relevant officers are entitled to be indemnified against all costs, charges, losses, expenses and liabilities incurred by them as a relevant officer in the actual or purported execution and/or discharge of their duties. Under English law, any provision that purports to exempt a director of a company (to any extent) from any liability that would otherwise attach to him or her in connection with any negligence, default, breach of duty or breach of trust in relation to the company is void. Insofar as indemnification of liabilities arising under the Securities Act may be permitted to our directors or officers, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. Anti-Takeover Provisions Share issues in the context of an acquisition Our articles of association provide our board of directors with the power to establish a rights plan and to grant rights to subscribe for our shares pursuant to a rights plan, including, without limitation, where, in the opinion of our directors, acting in good faith and on such grounds as our board of directors shall consider reasonable, in the context of an acquisition or potential acquisition of 15% or more of our issued voting shares, to do so would improve the likelihood that: • an acquisition process is conducted in an orderly manner; • all our shareholders are treated equally and fairly and in a similar manner; • an optimum price is achieved for our ordinary shares; • our success would be promoted for the benefit of our shareholders as a whole; • our long-term interests and those of our employees, our shareholders and business would be safeguarded; • we would not suffer serious economic harm; and/or • the board of directors would have time to gather relevant information and pursue appropriate strategies. Our articles of association further provide that our board of directors may, in accordance with the terms of a rights plan, determine to (i) allot shares pursuant to the exercise of rights or (ii) exchange rights for our shares, including (without limitation) where, in the opinion of our board of directors acting in good faith and on such grounds as it shall consider reasonable, in the context of an acquisition or potential acquisition of 15% or more of our issued voting shares, to do so would approve the likelihood that: • the use of abusive tactics by any person in connection with such acquisition would be prevented; • unequal treatment of shareholders would be prevented; • an acquisition which would undervalue us would be prevented; • harm to the prospects of our success for the benefit of our shareholders as a whole would be prevented; • our long-term interests and those of our employees, our shareholders and our business would be safeguarded; and/or • we would not suffer serious economic harm.

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10 Under the Takeover Code, the board of directors of a public company incorporated under the laws of England and Wales is constrained from implementing such defensive measures. However, as discussed above, these measures are included in our articles of association, the Takeover Code is not expected to apply to us and these measures are included commonly in the constitutive documents of U.S. companies. These provisions will apply for so long as we are not subject to the Takeover Code. Multi-class share capital structure Since each holder of Class B shares and Class C shares is entitled to ten votes per share and each holder of ordinary shares is entitled to one vote per share, holders of our Class B shares and Class C shares may be able to significantly influence the outcome of matters requiring shareholder approval. In addition, our Class B shares will be redesignated into deferred shares in connection with certain events in accordance with our articles of association, including in connection with certain transfers of interests in our ordinary shares. Redesignation of these Class B shares could result in the remaining holders of our Class B shares and holders of our Class C shares being able to significantly influence the outcome of matters requiring shareholder approval. Our Class C shares can only be issued to Sebastian Siemiatkowski and certain of his affiliated and related parties, their respective nominees and a depositary service. Classified board of directors In accordance with the terms of our articles of association, our board of directors is divided into three classes (Class A, Class B and Class C), with members of each class serving staggered three-year terms. Each class shall consist, as nearly as possible, of a number of directors equal to one-third of the total number of directors. Our classified board of directors could have the effect of delaying or discouraging an acquisition of us or a change in our management. Other Relevant English Law Considerations Takeover Code Until 11.59 p.m. on February 2, 2027 (the "Transition Period"), the Takeover Code applies, among other things, to an offer for a public company during the Transition Period with a registered office in the U.K. (or the Channel Islands or the Isle of Man) which securities are not admitted to trading on a regulated market in the U.K. (or the Channel Islands or the Isle of Man) if the company is considered by the Panel on Takeovers and Mergers (the "Takeover Panel") to have its place of central management and control in the United Kingdom (or the Channel Islands or the Isle of Man). This is known as the "residency test." The test for central management and control under the Takeover Code is different from that used by the U.K. tax authorities. Under the Takeover Code, the Takeover Panel will determine whether we have our place of central management and control in the U.K. by looking at various factors, including the structure of our board of directors, the functions of the directors and where they are resident. During the Transition Period, if at the time of a takeover offer the Takeover Panel determines that we have our place of central management and control in the U.K., we would be subject to a number of rules and restrictions, including, but not limited to, the following: (i) our ability to enter into deal protection arrangements with a bidder would be extremely limited; (ii) we might not, without the approval of our shareholders, be able to perform certain actions that could have the effect of frustrating an offer, such as issuing shares or carrying out acquisitions or disposals; and (iii) we would be obliged to provide equality of information to all bona fide competing bidders. Given that our current intention is not to have central management and control situated within the U.K. (or the Channel Islands or the Isle of Man), we do not currently expect that the Takeover Code will apply to an offer for Klarna. At the same time, under English law, and whether or not a company is subject to the Takeover Code, an offeror for the company that has acquired (i) 90% in value of that company, and (ii) 90% of the voting rights carried by the shares to which the offer relates may exercise statutory squeeze-out rights to compulsorily acquire the shares of the non-assenting minority, as further discussed below. However, if an offer for the company is conducted by way of a scheme of arrangement, the threshold for the offeror obtaining 100% of its shares has two components: (i) the approval by a majority in number of each class of the company's shareholders present and voting at the shareholder

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11 meeting; and (ii) the approval of the company's shareholders representing 75% or more in value of each class of its shareholders present and voting at that meeting. Mandatory Bid Under the Takeover Code, where: any person acquires, whether by a series of transactions over a period of time or not, an interest in shares which (taken together with shares in which they are already interested, and in which persons acting in concert with them are interested) carry 30% or more of the voting rights of a company; or any person who, together with persons acting in concert with them, is interested in shares which in the aggregate carry not less than 30% of the voting rights of a company but does not hold shares carrying more than 50% of such voting rights and such person, or any person acting in concert with them, acquires an interest in any other shares which increases the percentage of shares carrying voting rights in which he is interested, such person shall, except in limited circumstances, be obliged to extend offers, on the basis set out in Rules 9.3, 9.4 and 9.5 of the Takeover Code, to the holders of any class of equity share capital, whether voting or non-voting, and also to the holders of any other class of transferable securities carrying voting rights. Offers for different classes of equity share capital must be comparable. The Takeover Panel should be consulted in advance in such cases. An offer under Rule 9 of the Takeover Code must be in cash and at the highest price paid for any interest in the shares by the person required to make an offer or any person acting in concert with them during the twelve months prior to the announcement of the offer. Under the Takeover Code, a "concert party" arises where persons acting together pursuant to an agreement or understanding (whether formal or informal and whether or not in writing) cooperate to obtain or consolidate control of a company. "Control" means holding, or aggregate holdings, of an interest in shares carrying 30% or more of the voting rights of the company, irrespective of whether the holding or holdings give de facto control. Squeeze-out Under sections 979 to 982 of the Companies Act, if an offeror were to acquire, or unconditionally contract to acquire, not less than 90% in value of the ordinary shares of the company and 90% of the voting rights carried by the ordinary shares of the company, it could then compulsorily acquire the remaining 10%. It would do so by sending a notice to outstanding shareholders telling them that it will compulsorily acquire their shares, provided that no such notice may be served after the end of: (i) the period of three months beginning with the day after the last day on which the offer can be accepted; or (ii) if earlier, and the offer is not one to which section 943(1) of the Companies Act applies, the period of six months beginning with the date of the offer. Six weeks following service of the notice, the offeror must send a copy of it to the company together with the consideration for the ordinary shares to which the notice relates, and an instrument of transfer executed on behalf of the outstanding shareholder(s) by a person appointed by the offeror. The company will hold the consideration on trust for the outstanding shareholders. The consideration offered to the ordinary shareholders whose shares are compulsorily acquired under the Companies Act must, in general, be the same as the consideration that was available under the takeover offer. A dissenting shareholder may object to the transfer on the basis that the offeror is not entitled and bound to acquire shares or to specify terms of acquisition different from those in the offer by applying to court within six weeks of the date on which notice of the transfer was given. Sell-out Sections 983 to 985 of the Companies Act also give minority shareholders in the company a right to be bought out in certain circumstances by an offeror who has made a takeover offer. If at any time before the end of the period within which the offer could be accepted the offeror held or had agreed to acquire not less than 90% of the ordinary shares, any holder of shares to which the offer related who had not accepted the offer could by a written communication to the offeror require it to acquire those shares. The offeror is required to give any shareholder

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12 notice of their right to be bought out within one month of that right arising. The offeror may impose a time limit on the rights of minority shareholders to be bought out, but that period cannot end less than three months after the end of the acceptance period, or, if longer, a period of three months from the date of the notice. If a shareholder exercises their rights, the offeror is bound to acquire those shares on the terms of the offer or on such other terms as may be agreed. Corporate Governance Our articles of association allocate authority over the day-to-day management of us to our board of directors. Our board of directors may then delegate any of its powers, authorities and discretions (with power to subdelegate) to any committee, consisting of such person or persons (whether directors or not) as it thinks fit, but regardless, our board of directors will remain responsible, as a matter of English law, for the proper management of our affairs. Committees may meet and adjourn as they determine proper. Unless otherwise determined by the board of directors, the quorum necessary for the transaction of business at any committee meeting shall be a majority of the members of such committee then in office unless the committee shall consist of one or two members, in which case one member shall constitute a quorum.

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## Exhibit 8.1

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&nbsp;&nbsp;&nbsp;&nbsp;Exhibit 8.1 List of Subsidiaries of Klarna Group plc Entity Name Jurisdiction of Incorporation or Organization flexEngage LLC US Klarna Australia Holding Pty Ltd Australia Klarna Australia Pty Ltd Australia Klarna Austria GmbH Austria Klarna B.V. Netherlands Klarna Bank AB – Czech PE Czech Republic Klarna Bank AB – French Branch France Klarna Bank AB – German Branch Germany Klarna Bank AB – Irish Branch Ireland Klarna Bank AB – Norwegian Branch Norway Klarna Bank AB – Romanian PE Romania Klarna Bank AB – Swiss Representative Office Switzerland Klarna Bank AB – UK Branch UK Klarna Bank AB (publ) Sweden Klarna Bank, filial Af Klarna Bank AB (publ) (Branch) Denmark Klarna Belgium N.V. Belgium Klarna Canada Limited Canada Klarna Commercial Consulting (Shanghai) Co., Ltd. China Klarna Commercial Consulting (Shanghai) Co., Ltd. Shanghai Klarna Financial Services UK Limited UK Klarna Germany Holding GmbH Germany Klarna Glazing II LLC US Klarna Group Holdco Ltd Jersey Klarna Group Midco Ltd Jersey Klarna Group Plc UK Klarna Holding AB (publ) Sweden Klarna Inc US Klarna Italy Srl Italy Klarna Japan KK Japan

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Klarna MAS AB Sweden Klarna Midco AB (publ) Sweden Klarna New Zealand Ltd New Zealand Klarna Norge AS Norway Klarna Oy Finland Klarna Payments, S.A. de C.V. Mexico Klarna Poland sp. z o.o. Poland Klarna Premium Services Ltd. UK Klarna Spain SL Spain Klarna Technologies AB Sweden Klarna Technologies ApS Denmark Klarna Technologies Group AB (incl. subs) Sweden Klarna Technologies Holding AB Sweden Klarna Technologies Inc US Klarna Technologies Ltd UK Klarna Technologies Sweden AB Sweden Larkan AB (publ) Sweden Larkan Holding AB (publ) Sweden Larkan III AB (publ) Sweden Larkan IV AB (publ) Sweden Larkan IX AB Sweden Larkan V AB (publ) Sweden Larkan VI AB Sweden Larkan VII AB Sweden Larkan VIII AB Sweden Larkan X AB Sweden Larkan XI AB Sweden PriceRunner GmbH Germany PriceRunner Technology Co., Ltd China Prisguiden AS Norway Stocard GmbH Germany Stocard Pty Ltd Australia

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## Exhibit 10.6

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Exhibit 10.6 Certain confidential information contained in this document, marked by [\*\*\*], has been omitted pursuant to Regulation S-K, Item 601(b) because the registrant has determined that the omitted information (i) is not material and (ii) is the type that the registrant treats as private or confidential. REGISTRATION RIGHTS AGREEMENT

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**TABLE OF CONTENTS** PAGE ARTICLE 1 DEFINITIONS Section 1.01 Defined Terms ............................................................................................................................................... 1 Section 1.02 General Interpretive Principles ............................................................................................................................................... 4 ARTICLE 2 REGISTRATION RIGHTS Section 2.01 Demand Registrations ............................................................................................................................................... 4 Section 2.02 Piggyback Registrations ............................................................................................................................................... 7 Section 2.03 Selection of Underwriter(s) ............................................................................................................................................... 8 Section 2.04 Registration Procedures ............................................................................................................................................... 8 Section 2.05 Holdback Agreements ............................................................................................................................................... 12 Section 2.06 Underwriting Agreement in Underwritten Offerings ............................................................................................................................................... 13 Section 2.07 Registration Expenses Paid By Company ............................................................................................................................................... 13 Section 2.08 Indemnification ............................................................................................................................................... 13 Section 2.09 Reporting Requirements; Rule 144 ............................................................................................................................................... 15 ARTICLE 3 MISCELLANEOUS Section 3.01 Term ............................................................................................................................................... 16 Section 3.02 Notices ............................................................................................................................................... 16 Section 3.03 Successors, Assigns and Transferees ............................................................................................................................................... 16 Section 3.04 Governing Law; No Jury Trial ............................................................................................................................................... 17 Section 3.05 Specific Performance ............................................................................................................................................... 17 Section 3.06 Headings ............................................................................................................................................... 17 Section 3.07 Severability ............................................................................................................................................... 17 Section 3.08 Amendment; Waiver ............................................................................................................................................... 18 Section 3.09 Further Assurances ............................................................................................................................................... 18 Section 3.10 Counterparts and Electronic Signatures ............................................................................................................................................... 18

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![](exhibit106-registrationr003.jpg)

1 REGISTRATION RIGHTS AGREEMENT This REGISTRATION RIGHTS AGREEMENT, dated as of September 11, 2025 (this "Agreement"), is by and among Klarna Group plc, a public limited company incorporated under the laws of England and Wales (the "Company") and certain shareholders of the Company identified on the signature page hereto (each, a "Holder" and collectively, the "Holders"). W I T N E S S E T H: WHEREAS, the Company is currently contemplating an underwritten initial public offering ("IPO") of its Ordinary Shares (as defined below); and WHEREAS, the Company desires to grant registration rights to the Holders on the terms and conditions set out in this Agreement; NOW, THEREFORE, in consideration of the covenants and agreements contained herein and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: ARTICLE 1 DEFINITIONS Section 1.01. Defined Terms. As used in this Agreement, the following terms shall have the following meanings: "Action" means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by or before any Governmental Authority or any federal, state, local, foreign or international arbitration or mediation tribunal. "Affiliate" in respect of a Person, means any other Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person, and (i) in the case of a natural person, shall include, without limitation, such person's spouse, parents, children, siblings, mother-in-law and father-in-law and brothers and sisters-in-law, whether by blood, marriage or adoption or anyone residing in such person's home, a trust for the benefit of any of the foregoing, a company, partnership or any natural person or entity wholly or jointly owned by any of the foregoing, and (ii) in the case of an entity, shall include a partnership, a corporation or any natural person or entity which directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such entity; provided that the Company and its subsidiaries shall not be considered Affiliates of any Holder for the purpose of this Agreement. As used herein, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through ownership of voting securities or other interests, by contract or otherwise. "Agreement" has the meaning set forth in the preamble to this Agreement. "Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions are authorized or obligated by law to be closed in New York, New York, or London, United Kingdom. "Company Notice" has the meaning set forth in Section 2.01(a).

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2 "Demand Registration" has the meaning set forth in Section 2.01(a). "EDGAR" means the Electronic Data Gathering, Analysis and Retrieval System administered by the SEC or any successor electronic filing system for such purposes. "Eligible Holders" has the meaning set forth in Section 2.01(a). "Exchange Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder. "FINRA" means the Financial Industry Regulatory Authority and any successor thereto. "Governmental Authority" means any nation or government, any state, municipality or other political subdivision thereof, and any entity, body, agency, commission, department, board, bureau, court, tribunal or other instrumentality, whether federal, state, local, domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory, administrative or other similar functions of, or pertaining to, government and any executive official thereof. "Holder" has the meaning set forth in the preamble to this Agreement and shall include their successors, by merger, acquisition, reorganization or otherwise, any other person who joins this Agreement or is otherwise a permitted transferee pursuant to Section 3.03, and any of their Affiliates, so long as such Person holds any Registrable Securities. "Initiating Holder" has the meaning set forth in Section 2.01(a). "IPO" has the meaning set forth in the recitals to this Agreement. "Loss" or "Losses" has the meaning set forth in Section 2.08(a). "Ordinary Shares" means the ordinary shares, par value $0.0001 per share, of the Company and any shares into which such ordinary shares may thereafter be converted or changed (including, without limitation, by way of a dividend or distribution or share split or in connection with a combination of shares, recapitalization, merger, consolidation, exchange or other reorganization or similar change in the capital structure of the Company involving such ordinary shares). "Person" means an individual, a general or limited partnership, a corporation, a trust, a joint venture, an unincorporated organization, a limited liability entity, any other entity and any Governmental Authority. "Piggyback Registration" has the meaning set forth in Section 2.02(a). "Prospectus" means the prospectus included in any Registration Statement, all amendments and supplements to such prospectus, including post-effective amendments, and all other material incorporated by reference in such prospectus. "Registrable Securities" means any Shares and any securities issued or issuable directly or indirectly with respect to, in exchange for, upon the conversion of or in replacement of the Shares, whether by way of a dividend or distribution or share split or in connection with a combination of shares, recapitalization, merger, consolidation, exchange or other reorganization; provided that any such Shares shall cease to be Registrable Securities if (i) they

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3 have been registered and sold pursuant to an effective Registration Statement, (ii) they have been transferred by a Holder in a transaction in which the Holder's rights under this Agreement are not, or cannot be, assigned, (iii) they may be sold pursuant to Rule 144 under the Securities Act without limitation thereunder with respect to holding period requirements, volume or manner of sale and the Holder of such securities does not beneficially own more than 1% of outstanding Ordinary Shares, or (iv) they have ceased to be outstanding. "Registration" means a registration with the SEC of the offer and sale to the public of Ordinary Shares under a Registration Statement. The terms "Register," "Registered" and "Registering" shall have a correlative meaning. "Registration Expenses" shall mean all reasonable expenses incident to a Registration and any related offer and sale pursuant to the terms of this Agreement, including all (i) registration, qualification and filing fees; (ii) expenses incurred in connection with the preparation, printing and filing under the Securities Act of the Registration Statement, any Prospectus and any issuer free writing prospectus and the distribution thereof; (iii) the fees and expenses of the Company's counsel, independent accountants and any experts, any other accounting fees, charges and expenses incurred by the Company (including any expenses arising from any comfort letters or any special audits incident to or required by any registration or qualification), and fees and expenses of one counsel to all Holders, as well one additional counsel in each jurisdiction where a Holder is organized; (iv) the fees and expenses incurred in connection with the registration or qualification and determination of eligibility for investment of the Shares under the state or foreign securities or blue sky laws and the preparation, printing and distribution of a blue sky or legal investment memorandum (including the related fees and expenses of counsel); (v) the costs and charges of any transfer agent and any registrar; (vii) all expenses and application fees incurred in connection with any filing with, and clearance of an offering by, FINRA; (vii) expenses incurred in connection with any "road show" presentation to potential investors; (viii) printing expenses, messenger, telephone and delivery expenses; (ix) internal expenses of the Company (including all salaries and expenses of employees of the Company performing legal or accounting duties); and (x) fees and expenses of listing any Registrable Securities on any securities exchange on which Ordinary Shares are then listed; but excluding any Selling Expenses payable by the Holders. "Registration Period" has the meaning set forth in Section 2.01(c). "Registration Rights" shall mean the rights of the Holders to cause the Company to Register Registrable Securities pursuant to this Agreement. "Registration Statement" means any registration statement of the Company filed with, or to be filed with, the SEC under the rules and regulations promulgated under the Securities Act, including the related Prospectus, amendments and supplements to such registration statement, including post-effective amendments, and all exhibits and all material incorporated by reference in such registration statement. "SEC" means the U.S. Securities and Exchange Commission. "Securities Act" means the U.S. Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder. "Selling Expenses" means all underwriting discounts, selling commissions and transfer taxes not customarily paid by the issuer of securities in an offering and that would be applicable to the sale of Registrable Securities hereunder, which for any Registration shall be borne and paid by the Holders in proportion to the number of Registrable Securities registered by or on behalf of each such Holder.

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![](exhibit106-registrationr006.jpg)

4 "Shares" means all Ordinary Shares that are beneficially owned by the Holders or any of their Affiliates or any permitted transferee of rights under Section 3.03 from time to time, whether or not held immediately following the IPO. "Shelf Registration" means a Registration Statement of the Company for an offering to be made on a delayed or continuous basis of Ordinary Shares pursuant to Rule 415 under the Securities Act (or similar provisions then in effect). "Subsidiary" means, when used with respect to any Person, (a) a corporation in which such Person or one or more Subsidiaries of such Person, directly or indirectly, owns capital stock having a majority of the total voting power in the election of directors of all outstanding shares of all classes and series of capital stock of such corporation entitled generally to vote in such election; and (b) any other Person (other than a corporation) in which such Person or one or more Subsidiaries of such Person, directly or indirectly, has (i) a majority ownership interest or (ii) the power to elect or direct the election of a majority of the members of the governing body of such first- named Person. "Underwritten Offering" means a Registration in which securities of the Company are sold to an underwriter or underwriters on a firm commitment basis for reoffering to the public. Section 1.02. General Interpretive Principles. Whenever used in this Agreement, except as otherwise expressly provided or unless the context otherwise requires, any noun or pronoun shall be deemed to include the plural as well as the singular and to cover all genders. Whenever the words "include," "includes" or "including" are used in this Agreement, they shall be deemed to be followed by the words "without limitation." Unless otherwise specified, the terms "hereof," "herein," "hereunder" and similar terms refer to this Agreement as a whole (including the exhibits hereto), and references herein to Articles and Sections refer to Articles and Sections of this Agreement. Except as otherwise indicated, all periods of time referred to herein shall include all Saturdays, Sundays and holidays; provided, however, that if the date to perform the act or give any notice with respect to this Agreement shall fall on a day other than a Business Day, such act or notice may be performed or given timely if performed or given on the next succeeding Business Day. References to a Person are also to its permitted successors and assigns. The parties have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement. ARTICLE 2 REGISTRATION RIGHTS Section 2.01. Demand Registrations. (a) Request. Each Holder shall have the right to request that the Company file a Registration Statement with the SEC on the appropriate registration form for all or part of the Registrable Securities held by such Holder once such Holder is no longer subject to the lock-up applicable to it entered into in connection with the IPO (which may be due to the expiration or waiver of such lock-up with respect to such Registrable Securities) by delivering a written request to the Company specifying the kind and number of shares of Registrable Securities such Holder wishes to Register and the intended method of distribution thereof (a "Demand Registration" and the Holder submitting such Demand Registration, the "Initiating Holder"). The Company shall within 10 Business Days of the receipt of such request, give written notice of such Demand Registration (the "Company Notice") to all Holders other than the relevant Initiating Holder (the "Eligible Holders"), and such other Eligible Holders may, upon

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5 written request given no later than 10 Business Days following their receipt of the Company Notice, request that the Company also effect the Registration of all or part of each Eligible Holder's Registrable Securities. Thereafter, the Company shall (i) use its reasonable best efforts to file a Registration Statement in respect of such Demand Registration for all Registrable Securities that the Initiating Holder and Eligible Holders have requested to be included within 45 days of receipt of the Initiating Holder's request, and (ii) use its reasonable best efforts to cause such Registration Statement to become effective as soon as reasonably practicable thereafter. (b) Limitations of Demand Registrations. There shall be no limitation on the number of Demand Registrations pursuant to Section 2.01(a); provided, however, that, except as set forth in Section 2.01(f), the Holders shall not require the Company to take any action to effect any Demand Registration (i) within six (6) months after a Demand Registration pursuant to this Section 2.01 that has been declared or ordered effective, (ii) during the period starting with the date of filing of, and ending on a date 180 days after the effective date of a Company-initiated registration (other than a registration related solely to the sale of securities to employees of the Company pursuant to an equity incentive plan, share purchase or similar plan or to a Rule 145 transaction); provided that the Company is actively employing in good faith any reasonable efforts to cause such registration statement to become effective. In the event that any Person shall have received rights to Demand Registrations pursuant to Section 3.03, and such Person shall have made a Demand Registration request, such request shall be treated as having been made by the Holder who transferred such rights to such Person. The Registrable Securities requested to be Registered pursuant to Section 2.01(a) (including, for the avoidance of doubt, the Registrable Securities of Eligible Holders requested to be registered) must represent (i) an aggregate offering price of Registrable Securities (before deduction of underwriters' discounts and commissions) that is reasonably expected to equal at least $100,000,000 or (ii) all of the remaining Registrable Securities owned by the Initiating Holder and its Affiliates. (c) Effective Registration. The Company shall be deemed to have effected a Registration for purposes of Section 2.01(b) if the Registration Statement is declared effective by the SEC or becomes effective upon filing with the SEC, and remains effective until the earlier of (i) the date when all Registrable Securities thereunder have been sold and (ii) 60 days from the effective date of the Registration Statement (the "Registration Period"). No Registration shall be deemed to have been effective if the conditions to closing specified in the underwriting agreement, if any, entered into in connection with such Registration are not satisfied by the Company or the number of Registrable Securities included in any such Registration Statement is reduced in accordance with Section 2.01(e) such that less than 25% of the aggregate number of Registrable Securities requested to be Registered pursuant to Section 2.01(a) are included. If, during the Registration Period, such Registration is interfered with by any stop order, injunction or other order or requirement of the SEC or other Governmental Authority, the Registration Period shall be extended on a day-for-day basis for any period the Holder is unable to complete an offering as a result of such stop order, injunction or other order or requirement of the SEC or other Governmental Authority. (d) Underwritten Offering. If the Initiating Holder so indicates at the time of its request pursuant to Section 2.01(a), such offering of Registrable Securities shall be in the form of an Underwritten Offering and the Company shall include such information in the Company Notice. In the event that the Initiating Holder intends to distribute the Registrable Securities by means of an Underwritten Offering, no Holder may include Registrable Securities in such Registration unless such Holder, subject to the limitations set forth in Section 2.06, (i) agrees to sell its Registrable Securities on the basis provided in the applicable underwriting arrangements; (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements in customary form; and (iii) cooperates with the Company's reasonable requests in connection with such Registration (it being understood that the Company's failure to perform its obligations hereunder, which failure is caused by such Holder's failure to cooperate, will not constitute a breach by the Company of this Agreement).

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![](exhibit106-registrationr008.jpg)

6 (e) Priority of Securities in an Underwritten Offering. If the Company, after consultation with the managing underwriter or underwriters of a proposed Underwritten Offering, pursuant to this Section 2.01, determines in good faith that the number of securities requested to be included in such Underwritten Offering exceeds the number that can be sold in such Underwritten Offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, then the number of securities to be included in such Underwritten Offering shall be reduced in the following order of priority: first, there shall be excluded from the Underwritten Offering any securities to be sold for the account of any selling securityholder other than the Initiating Holder and the Eligible Holders; second, there shall be excluded from the Underwritten Offering any securities to be sold for the account of the Company; and third, there shall be excluded from the Underwritten Offering any securities to be sold for the account of the Initiating Holder and the Eligible Holders and their respective Affiliates that have been requested to be included therein, pro rata among such Holders based on the number of Registrable Securities so requested to be included in such Registration by each such Holder, in each case to the extent necessary to reduce the total number of securities to be included in such offering to the number recommended by the Company after consultation with the managing underwriter or underwriters. (f) Shelf Registration. (i) At any time when the Company is eligible to use Form F-3, any Holder may request the Company to effect a Shelf Registration; provided that if the Company is not eligible to use Form F-3 following twelve (12) full calendar months after the IPO, the Company shall effect a Shelf Registration on a Form F-1 upon the request of any Holder. The Company shall use its reasonable best efforts to file a Registration Statement in respect of such Shelf Registration within 45 days of receipt of the request, and use its reasonable best efforts to cause such Registration Statement to become effective as soon as reasonably practicable thereafter. The Company shall use its reasonable best efforts to cause such Registration Statement to remain effective under the Securities Act until the earlier of the date (i) all Registrable Securities covered by such Registration Statement have been sold or (ii) all Registrable Securities covered by such Shelf Registration otherwise cease to be Registrable Securities. The Company shall promptly, and within two (2) Business Days after the Company confirms effectiveness of the Registration Statement in respect of such Shelf Registration with the SEC, notify the requesting Holder(s) of the effectiveness of the Registration Statement in respect of such Shelf Registration; provided, however, this requirement shall be satisfied if a notice of effectiveness of the above-referenced Registration Statement has been filed by the SEC on EDGAR by such deadline; provided, further, that notwithstanding the second sentence of this Section 2.01(f), the Company shall (i) use its reasonable best efforts to effectuate any Underwritten Offering from such Shelf Registration (an "Underwritten Shelf Takedown") requested by an Initiating Holder as soon as practicable after receipt of such request and (ii) only be required to effectuate one (1) Underwritten Shelf Takedown from such Shelf Registration within any three-month period. The provisions of Section 2.01(a)-(e) and (g)-(h) shall apply mutatis mutandis to such Underwritten Shelf Takedown, with references to "file a Registration Statement" or "become effective" being deemed references to filing of a prospectus or supplement for such Underwritten Shelf Takedown and references to "Registration" being deemed references to the Underwritten Shelf Takedown; provided that Eligible Holders shall only include Holders whose Registrable Securities are included in such Shelf Registration or may be included therein without the need for an amendment to such Shelf Registration (other than an automatically effective

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7 amendment). So long as the Shelf Registration is effective, the Initiating Holder may not request any Demand Registration pursuant to Section 2.01(a) with respect to Registrable Shares that are Registered on such Shelf Registration; provided that, for the avoidance of doubt, any Holder whose Registrable Securities are included in such Shelf Registration (including such Initiating Holder) may request Underwritten Shelf Takedowns in accordance with this Section 2.01(f). If the Company shall receive a request from the Initiating Holder that the Company effect a Shelf Registration (including an Underwritten Shelf Takedown), then the Company shall promptly give the Company Notice at least 10 Business Days prior to the anticipated filing date of the registration statement relating to such Shelf Registration or the anticipated pricing of such Underwritten Shelf Takedown, as the case may be, to all Holders other than the Initiating Holder and thereupon shall use its reasonable best efforts to effect, as expeditiously as possible, the Registration or offering of: (1) all Registrable Securities for which the Initiating Holder has requested Registration or inclusion in an Underwritten Shelf Takedown under this section, and (2) all other Registrable Securities of the same class as those requested to be Registered by the Initiating Holder that any Eligible Holders have requested the Company to Register in a Shelf Registration or include in an Underwritten Shelf Takedown, in each case, by request received by the Company within 10 Business Days after such Holders receive the Company Notice, all to the extent necessary to permit the Registration of the Registrable Securities so to be Registered on such Shelf Registration or inclusion of Registrable Securities in such Underwritten Shelf Takedown, as applicable. (ii) At any time prior to the effective date of such Shelf Registration, the Initiating Holder may revoke such request, without liability to any of the other Eligible Holders, by providing a notice to the Company revoking such request. For the avoidance of doubt, such request, if revoked pursuant to this paragraph, shall not constitute a Demand Registration; provided that such Initiating Holder reimburses the Company for all reasonable documented out-of-pocket expenses incurred by the Company in preparation for the inclusion of such Initiating Holder's Registrable Shares in such Shelf Registration; and the Company shall continue all efforts to secure effectiveness of the applicable Shelf Registration Statement with respect to any other Registrable Securities requested to be included by each of the Holders that has not withdrawn its Registrable Securities. (iii) The Company shall be liable for and pay all Registration Expenses in connection with any Shelf Registration. (iv) For the avoidance of doubt, upon notice to the Initiating Holder and any other participating Eligible Holder, the Company may postpone effecting a Shelf Registration pursuant to Section 2.01(g). (g) Postponement. Upon notice to, in the case of a Demand Registration, the Initiating Holder for such Demand Registration and any other Eligible Holders or, in the case of filing a Shelf Registration or Underwritten Shelf Takedown, the Initiating Holder or Holders requesting such Underwritten Shelf Takedown and any other Holders to which a Company Notice has been delivered with respect to such Underwritten Shelf Takedown, the Company may postpone effecting a Registration or Underwritten Shelf Takedown, as applicable, pursuant to this Section 2.01 on two (2) occasions during any period of twelve (12) consecutive months for a reasonable time specified in the notice but not exceeding 90 days (which period may not be extended or renewed), if (i) the Company reasonably determines in good faith that effecting the Registration or Underwritten Shelf Takedown, as applicable, would materially and adversely affect a proposal or plan by the Company to engage in (directly or

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8 indirectly through any of its Subsidiaries): (x) a material acquisition or divestiture of assets; (y) a merger, consolidation, tender offer, reorganization, primary offering of the Company's securities subject to the ability of Holders to piggyback pursuant to Section 2.02 or similar material transaction; or (z) a material financing or any other material business transaction with a third party or (ii) the Company is in possession of material non-public information the disclosure of which during the period specified in such notice the Company reasonably believes would not be in the best interests of the Company. (h) Right to Withdraw. Unless otherwise agreed, each Holder shall have the right to withdraw such Holder's request for inclusion of its Registrable Securities in any Underwritten Offering pursuant to this Section 2.01 at any time prior to the execution of an underwriting agreement with respect thereto by giving written notice to the Company of such Holder's request to withdraw and, subject to the preceding clause, each Holder shall be permitted to withdraw, without liability to the Company or any other Eligible Holders, all or part of such Holder's Registrable Securities from a Registration at any time prior to the effective date thereof. Section 2.02. Piggyback Registrations. (a) Participation. If the Company proposes to file a Registration Statement under the Securities Act with respect to any offering of Ordinary Shares or otherwise conduct an offering of Ordinary Shares pursuant to an effective Registration Statement, in each case, for its own account and/or for the account of any other Persons (other than a Registration (i) under Section 2.01 hereof, (ii) pursuant to a Registration Statement on Form S-8 (or other registration solely relating to an offering or sale to employees or directors of the Company pursuant to any employee stock plan or other employee benefit arrangement) or Form F-4 or similar form that relates to a transaction subject to Rule 145 under the Securities Act, (iii) in connection with any dividend reinvestment or similar plan, or (iv) for the sole purpose of offering securities to another entity or its security holders in connection with the acquisition of assets or securities of such entity or any similar transaction solely for the purpose of effecting an acquisition of assets or securities of another entity), then, as soon as practicable (but in no event less than five (5) Business Days prior to the proposed date of filing such Registration Statement or the launch of such offering pursuant to an effective Registration Statement, as applicable), the Company shall give written notice of such proposed filing to each Holder, and such notice shall offer such Holders the opportunity to Register under such Registration Statement or otherwise sell in such offering such number of Registrable Securities as each such Holder may request in writing (a "Piggyback Registration"). Subject to Section 2.02(b) and Section 2.02(c), the Company shall include in such Registration Statement or other offering all such Registrable Securities that are requested to be included therein within four (4) Business Days after the receipt of any such notice; provided, however, that if, at any time after giving written notice of its intention to Register or otherwise offer any securities pursuant to this Section 2.02(a) and prior to the effective date of the Registration Statement filed in connection with such Registration or launch of such offering, the Company shall determine for any reason not to Register or to delay Registration or offering of such securities, the Company may, at its election, give prompt written notice of such determination to each such Holder and, thereupon, (i) in the case of a determination not to Register or otherwise offer securities, shall be relieved of its obligation to Register any Registrable Securities in connection with such Registration and shall have no liability to any Holder in connection with such termination, and (ii) in the case of a determination to delay Registration or other offer of securities, shall be permitted to delay Registering any Registrable Securities for the same period as the delay in Registering such other Ordinary Shares, in each case without prejudice, however, to the rights of any Holder to request that such Registration be effected as a Demand Registration under Section 2.01. For the avoidance of doubt, no Registration or other offering effected under this Section 2.02 shall relieve the Company of its obligation to effect any Demand Registration under Section 2.01. If the offering pursuant to a Registration Statement pursuant to this Section 2.02 is to be an Underwritten Offering, then each Holder making a request for a Piggyback Registration pursuant to this Section 2.02(a) shall, and the Company shall use reasonable best efforts to coordinate arrangements

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9 with the underwriters so that each such Holder may, participate in such Underwritten Offering. If the offering pursuant to such Registration Statement is to be on any other basis, then each Holder making a request for a Piggyback Registration pursuant to this Section 2.02(a) shall, and the Company shall use reasonable best efforts to coordinate arrangements so that each such Holder may, participate in such offering on such basis. If the Company files a Shelf Registration for its own account and/or for the account of any other Persons, the Company agrees that it shall use its reasonable best efforts to include in such Registration Statement such disclosures as may be required by Rule 430B under the Securities Act in order to ensure that the Holders may be added to such Shelf Registration at a later time through the filing of a Prospectus supplement rather than a post-effective amendment. (b) Right to Withdraw. Unless otherwise agreed, each Holder shall have the right to withdraw such Holder's request for inclusion of its Registrable Securities in any Underwritten Offering pursuant to this Section 2.02 at any time prior to the execution of an underwriting agreement with respect thereto by giving written notice to the Company of such Holder's request to withdraw and, subject to the preceding clause, each Holder shall be permitted to withdraw all or part of such Holder's Registrable Securities from a Piggyback Registration at any time prior to the effective date thereof. (c) Priority of Piggyback Registration. If the Company, after consultation with the managing underwriter or underwriters of a proposed Underwritten Offering, determines in good faith that the number of securities requested to be included in such Underwritten Offering exceeds the number which can be sold in such Underwritten Offering without being likely to have a significant adverse effect on the price, timing or distribution of the securities offered or the market for the securities offered, then the securities to be included in such Underwritten Offering shall be reduced in the following order of priority: first, there shall be excluded from the Underwritten Offering any securities to be sold for the account of any selling securityholder other than the Holders, second, there shall be excluded from the Underwritten Offering any securities to be sold for the account of Holders and their Affiliates that have been requested to be included therein, pro rata among such Holders based on the number of Registrable Securities so requested to be included in such Registration by each such Holder; third, there shall be excluded from the Underwritten Offering any securities to be sold for the account of the Company, in each case to the extent necessary to reduce the total number of securities to be included in such offering to the number recommended by the Company after consultation with the managing underwriter or underwriters. Section 2.03. Selection of Underwriter(s). In any Underwritten Offering pursuant to Section 2.01, the Initiating Holder shall select the underwriter(s), provided that such selection is acceptable to the Company, acting in good faith. Section 2.04. Registration Procedures. (a) In connection with the Registration and/or sale of Registrable Securities pursuant to this Agreement, through an Underwritten Offering or otherwise, the Company shall use reasonable best efforts to effect or cause the

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![](exhibit106-registrationr012.jpg)

10 Registration and the sale of such Registrable Securities as quickly as commercially practicable in accordance with the intended methods of disposition thereof and: (i) prepare and file the required Registration Statement, including all exhibits and financial statements required under the Securities Act to be filed therewith, and before filing with the SEC a Registration Statement or Prospectus, or any amendments or supplements thereto, (A) furnish to the underwriters, if any, the Holders participating in such Registration and their respective counsel, copies of all documents prepared to be filed, which documents will be subject to the review of such underwriters, the Holders and their respective counsel, with an adequate and appropriate opportunity for review and comment, and (B) consider in good faith any comments of the underwriters and such Holders and their respective counsel on such documents; (ii) prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective in accordance with the terms of this Agreement and to comply with the provisions of the Securities Act with respect to the disposition of all of the Shares Registered thereon; (iii) in the case of a Shelf Registration, prepare and file with the SEC such amendments and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and to comply with the provisions of the Securities Act with respect to the disposition of all Shares subject thereto for a period ending on the later of (i) the 3rd anniversary after the effective date of such Registration Statement or (ii) the date on which all Shares Registered thereon have been sold; (iv) notify the participating Holders and the managing underwriter or underwriters, if any, and (if requested) confirm such advice in writing and provide copies of the relevant documents, as soon as reasonably practicable after notice thereof is received by the Company (A) when the applicable Registration Statement or any amendment thereto has been filed or becomes effective, or when the applicable Prospectus or any amendment or supplement to such Prospectus has been filed, (B) of any written comments by the SEC or any request by the SEC or any other Governmental Authority for amendments or supplements to such Registration Statement or such Prospectus or for additional information, (C) of the issuance by the SEC of any stop order suspending the effectiveness of such Registration Statement or any order preventing or suspending the use of any preliminary or final Prospectus or the initiation or threatening of any proceedings for such purposes, (D) if, at any time, the representations and warranties of the Company in any applicable underwriting agreement cease to be true and correct in any material respect, and (E) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for offering or sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; (v) promptly notify each selling Holder and the managing underwriter or underwriters, if any, when the Company becomes aware of the occurrence of any event as a result of which the applicable Registration Statement or the Prospectus included in such Registration Statement (as then in effect) contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements therein (in the case of such Prospectus and any preliminary Prospectus, in light of the circumstances under which they were made) not misleading or, if for any other reason it shall be necessary during such time period to amend or supplement such Registration Statement or Prospectus in order to comply with the Securities Act and, in either case as promptly as reasonably practicable thereafter, prepare

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![](exhibit106-registrationr013.jpg)

11 and file with the SEC, and furnish without charge to the selling Holder and the managing underwriter or underwriters, if any, an amendment or supplement to such Registration Statement or Prospectus which will correct such statement or omission or effect such compliance; (vi) use its reasonable best efforts to prevent or obtain the withdrawal of any stop order or other order suspending the use of any preliminary or final Prospectus; (vii) promptly incorporate in a Prospectus supplement or post-effective amendment such information as the managing underwriters, if any, and the selling Holders may reasonably request to be included therein in order to permit the intended method of distribution of the Registrable Securities; and make all required filings of such Prospectus supplement or post-effective amendment as soon as reasonably practicable after being notified of the matters to be incorporated in such Prospectus supplement or post- effective amendment; (viii) furnish to each selling Holder and each underwriter, if any, without charge, as many conformed copies as such Holder or underwriter may reasonably request of the applicable Registration Statement and any amendment or post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (ix) deliver to each selling Holder and each underwriter, if any, without charge, as many copies of the applicable Prospectus (including each preliminary Prospectus) and any amendment or supplement thereto as such Holder or underwriter may reasonably request (it being understood that the Company consents to the use of such Prospectus or any amendment or supplement thereto by each selling Holder and the underwriters, if any, in connection with the offering and sale of the Registrable Securities covered by such Prospectus or any amendment or supplement thereto) and such other documents as such selling Holder or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities by such Holder or underwriter; (x) on or prior to the date on which the applicable Registration Statement is declared effective or becomes effective, use its reasonable best efforts to register or qualify, and cooperate with each selling Holder, the managing underwriter or underwriters, if any, and their respective counsel, in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of each state and other jurisdiction of the United States as any selling Holder or managing underwriter or underwriters, if any, or their respective counsel reasonably request in writing and do any and all other acts or things reasonably necessary or advisable to keep such registration or qualification in effect for so long as such Registration Statement remains in effect and so as to permit the continuance of sales and dealings in such jurisdictions of the United States for so long as may be necessary to complete the distribution of the Registrable Securities covered by the Registration Statement; provided that the Company will not be required to qualify generally to do business in any jurisdiction where it is not then so qualified or to take any action which would subject it to taxation or general service of process in any such jurisdiction where it is not then so subject; (xi) in connection with any sale of Registrable Securities that will result in such securities no longer being Registrable Securities, cooperate with each selling Holder, the managing underwriter or underwriters, if any, and the transfer agent to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive Securities Act legends and the

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![](exhibit106-registrationr014.jpg)

12 delivery of any required legal opinions in connection therewith; and to register such Registrable Securities in such denominations and such names as such selling Holder or the underwriter(s), if any, may request at least two (2) Business Days prior to such sale of Registrable Securities; provided that the Company may satisfy its obligations hereunder without issuing physical stock certificates through the use of The Depository Trust Company's ("DTC") Direct Registration System; (xii) cooperate and assist in any filings required to be made with the FINRA and each securities exchange, if any, on which any of the Company's securities are then listed or quoted and on each inter-dealer quotation system on which any of the Company's securities are then quoted, and in the performance of any due diligence investigation by any underwriter (including any "qualified independent underwriter") that is required to be retained in accordance with the rules and regulations of each such exchange, and use its reasonable best efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof or the underwriter or underwriters, if any, to consummate the disposition of such Registrable Securities; (xiii) not later than the effective date of the applicable Registration Statement, provide a CUSIP number for all Registrable Securities and provide the applicable transfer agent with printed certificates for the Registrable Securities which are in a form eligible for deposit with DTC; provided that the Company may satisfy its obligations hereunder without issuing physical stock certificates through the use of DTC's Direct Registration System; (xiv) in the case of an Underwritten Offering, obtain for delivery to and addressed to the selling Holders and the underwriter or underwriters, an opinion and negative assurance letter from the Company's outside counsel in customary form and content for the type of Underwritten Offering, dated the date of the closing under the underwriting agreement and any customary certificates executed by authorized officers of the Company as may be requested by any Holder or any underwriter of such Registrable Securities; (xv) in the case of an Underwritten Offering, obtain for delivery to and addressed to the underwriter or underwriters and, to the extent agreed by the Company's independent certified public accountants, each selling Holder, a comfort letter from the Company's independent certified public accountants (and the independent certified public accountants with respect to any acquired company financial statements) in customary form and content for the type of Underwritten Offering, including with comfort letters customarily delivered in connection with quarterly period financial statements if applicable, dated the date of execution of the underwriting agreement and brought down to the closing under the underwriting agreement; (xvi) enter into such customary agreements (including underwriting and indemnification agreements), make such representations and warranties and take all such other actions as any participating Holder or the managing underwriter or underwriters, if any, reasonably request in order to expedite or facilitate the Registration and disposition of such Registrable Securities in form, substance and scope as are customarily made by issuers in public offerings similar to the offering then being undertaken for the Registrable Securities; (xvii) use its reasonable best efforts to comply with all applicable rules and regulations of the SEC and make generally available to its security holders, as soon as reasonably practicable, but no later than 90

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![](exhibit106-registrationr015.jpg)

13 days after the end of the 12-month period beginning with the first day of the Company's first quarter commencing after the effective date of the applicable Registration Statement, an earning statement satisfying the provisions of Section 11(a) of the Securities Act and the rules and regulations promulgated thereunder and covering the period of at least 12 months, but not more than 18 months, beginning with the first month after the effective date of the Registration Statement; (xviii) provide and cause to be maintained a transfer agent and registrar for all Registrable Securities covered by the applicable Registration Statement from and after a date not later than the effective date of such Registration Statement; (xix) cause all Registrable Securities covered by the applicable Registration Statement to be listed on each securities exchange on which any of the Company's Ordinary Shares are then listed or quoted and on each inter-dealer quotation system on which any of the Company's Ordinary Shares are then quoted, including the filing of any required supplemental listing application; (xx) in the case of an Underwritten Offering, provide (A) each Holder participating in the Registration, (B) the underwriters (which term, for purposes of this Agreement, shall include a Person deemed to be an underwriter within the meaning of Section 2(11) of the Securities Act) of the Registrable Securities to be Registered, (C) the sale or placement agent therefor, if any, (D) counsel for such underwriters or agent, and (E) any attorney, accountant or other agent or representative retained by such Holder or any such underwriter, as selected by such Holder, the opportunity to participate in the preparation of such Registration Statement, each Prospectus included therein or filed with the SEC, and each amendment or supplement thereto, and to require the insertion therein of material, furnished to the Company in writing, which in the reasonable judgment of such Holder(s) and their counsel should be included; and for a reasonable period prior to the filing of such Registration Statement, make available upon reasonable notice at reasonable times and for reasonable periods for inspection by the parties referred to in (A) through (E) above, all pertinent financial and other records, pertinent corporate documents and properties of the Company that are available to the Company, and cause the Company's officers, employees and the independent public accountants who have certified its financial statements to make themselves available at reasonable times and for reasonable periods, to discuss the business of the Company and to supply all information available to the Company reasonably requested by any such Person in connection with such Registration Statement as shall be necessary to enable them to exercise their due diligence responsibility, subject to the foregoing; provided that any such Person gaining access to information or personnel pursuant to this Section 2.04(a)(xx) shall agree to use best efforts to protect the confidentiality of any information regarding the Company which the Company determines in good faith to be confidential, and of which determination such Person is notified, unless (w) the release of such information is required by law or regulation or is requested or required by deposition, interrogatory, requests for information or documents by a governmental entity, subpoena or similar process, (x) such information is or becomes publicly known without a breach of this Agreement, (y) such information is or becomes available to such Person on a non-confidential basis from a source other than the Company or (z) such information is independently developed by such Person; (xxi) in the case of an Underwritten Offering, to cause the executive officers of the Company to participate in the customary "road show" presentations that may be reasonably requested by the managing underwriter or underwriters in any Underwritten Offering and otherwise to facilitate, cooperate with, and participate in each proposed offering contemplated herein and customary selling efforts related thereto; and

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![](exhibit106-registrationr016.jpg)

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15 effect such transfer, (iii) such matters pertaining to such Holder's compliance with securities laws, and (iv) such Holder's intended method of distribution, in each case as may reasonably be requested) or to undertake any indemnification obligations to the Company with respect thereto, except as otherwise provided in Section 2.08 hereof. Section 2.07. Registration Expenses Paid By Company. In the case of any Registration of Registrable Securities required pursuant to this Agreement (including any Registration that is delayed or withdrawn) or proposed Underwritten Offering pursuant to this Agreement, the Company shall pay all Registration Expenses regardless of whether the Registration Statement becomes effective or the Underwritten Offering is completed. The Company shall have no obligation to pay any Selling Expenses for Registrable Securities offered by any Holders, however for the avoidance of doubt, the Company shall be required to pay any selling expenses in relation to any offering of Ordinary Shares for its own account pursuant to any Registration Statement that may also relate to any Registrable Securities offered by any Holders pursuant to this Agreement. Section 2.08. Indemnification. (a) Indemnification by the Company. The Company agrees to indemnify and hold harmless, to the fullest extent permitted by law, each Holder and such Holder's officers, directors, employees, advisors, Affiliates and agents and each Person who controls (within the meaning of the Securities Act or the Exchange Act) such Holder from and against any and all losses, claims, damages, liabilities (or actions in respect thereof, whether or not such indemnified party is a party thereto) and expenses, joint or several (including reasonable and documented costs of investigation and legal expenses) (each, a "Loss" and collectively "Losses") arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was Registered under the Securities Act (including any final or preliminary Prospectus contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein), any such statement made in any free writing prospectus (as defined in Rule 405 under the Securities Act) that the Company has filed or is required to file pursuant to Rule 433(d) of the Securities Act, any other document produced by or on behalf of the Company or any of its subsidiaries that is filed under the Exchange Act, or any testing-the-waters materials, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, preliminary Prospectus, free writing prospectus or testing-the-waters materials, in light of the circumstances under which they were made) not misleading; provided, however, that the Company shall not be liable to any particular indemnified party in any such case to the extent that any such Loss arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in any such Registration Statement in reliance upon and in conformity with written information furnished to the Company by such indemnified party expressly for use in the preparation thereof and such untrue statement or omission was not subsequently corrected in writing by such indemnified party to the indemnifying party prior to the sale of any such Registrable Securities. This indemnity shall be in addition to any liability the Company may otherwise have. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Holder or any indemnified party and shall survive the transfer of such securities by such Holder. (b) Indemnification by the Selling Holder. Each selling Holder agrees (severally and not jointly) to indemnify and hold harmless, to the full extent permitted by law, the Company and the Company's directors, officers, employees, advisors, Affiliates and agents and each Person who controls the Company (within the meaning of the Securities Act and the Exchange Act) from and against any Losses arising out of or based upon (i) any untrue or alleged untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was Registered under the Securities Act (including any final or preliminary Prospectus

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![](exhibit106-registrationr018.jpg)

16 contained therein or any amendment thereof or supplement thereto or any documents incorporated by reference therein), or any such statement made in any free writing prospectus that the Company has filed or is required to file pursuant to Rule 433(d) of the Securities Act or testing-the-waters materials, or (ii) any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of a Prospectus, preliminary Prospectus, free writing prospectus or testing-the-waters materials, in light of the circumstances under which they were made) not misleading but only to the extent, in each of cases (i) or (ii), that such untrue statement or omission is contained in any information furnished in writing by such selling Holder to the Company expressly for inclusion in such Registration Statement, Prospectus, preliminary Prospectus, free writing prospectus or testing-the-waters materials and such untrue statement or omission was not subsequently corrected in writing by such Selling Holder to the Company prior to the sale of any such Registrable Securities. In no event shall the liability of any selling Holder hereunder be greater in amount than the dollar amount of the net proceeds (after deducting underwriters' discounts and commissions) received by such Holder under the sale of the Registrable Securities giving rise to such indemnification obligation. This indemnity shall be in addition to any liability the selling Holder may otherwise have. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Company or any indemnified party. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder will (i) give prompt (but in any event within 30 days after such Person has actual knowledge of the facts constituting the basis for indemnification) written notice to the indemnifying party of any claim with respect to which it seeks indemnification (provided that any delay or failure to so notify the indemnifying party shall not relieve the indemnifying party of its obligations hereunder except to the extent that it is materially prejudiced by reason of such delay or failure) and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any Person entitled to indemnification hereunder shall have the right to select and employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (a) the indemnifying party has agreed in writing to pay such fees or expenses, (b) the indemnifying party shall have failed to assume the defense of such claim within a reasonable time after receipt of notice of such claim from the Person entitled to indemnification hereunder, (c) the named parties to any proceeding include both such indemnified and the indemnifying party and the indemnified party has reasonably concluded (based on written advice of counsel) that there may be legal defenses available to it or other indemnified parties that are different from or in addition to those available to the indemnifying party, or (d) in the reasonable judgment of any such Person, based upon written advice of its counsel, a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not have the right to assume the defense of such claim on behalf of such Person). If such defense is not assumed by the indemnifying party, the indemnifying party will not be subject to any liability for any settlement made without its consent, but such consent may not be unreasonably withheld. If the indemnifying party assumes the defense, the indemnifying party shall not have the right to settle such action without the consent of the indemnified party, which consent may not be unreasonably withheld. No indemnifying party shall consent to entry of any judgment or enter into any settlement without the consent of the indemnified party which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of an unconditional release from all liability in respect to such claim or litigation, but if settled with the consent of the indemnifying party or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. It is understood that the indemnifying party or parties shall not, in connection with any proceeding or related proceedings in the same jurisdiction, arising out of the same general allegations or circumstances, be liable for the fees and expenses of more than one separate firm (in addition to any appropriate local counsel) at any one time from all such indemnified party

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17 or parties unless (x) the employment of more than one counsel has been authorized in writing by the indemnifying party or parties, (y) an indemnified party has reasonably concluded (based on written advice of counsel) that there may be legal defenses available to it that are different from or in addition to those available to the other indemnified parties or (z) a conflict or potential conflict exists or in the reasonable judgment of such indemnified party may exist (based on advice of counsel to an indemnified party) between such indemnified party or parties and the other indemnified parties, in each of which cases the indemnifying party shall be obligated to pay the reasonable fees and expenses of such additional counsel. (d) Contribution. If for any reason the indemnification provided for in Section 2.08(a) or Section 2.08(b) is unavailable to an indemnified party or insufficient to hold it harmless as contemplated by Section 2.08(a) or Section 2.08(b), then the indemnifying party shall, to the fullest extent permitted by law, in lieu of indemnifying such indemnified party thereunder, contribute to the amount paid or payable by the indemnified party as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and the indemnified party on the other hand in connection with the statements or omissions which resulted in such Loss as well as any other relevant equitable considerations. The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the indemnifying party or the indemnified party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties hereto agree that it would not be just and equitable if contribution pursuant to this Section 2.08(d) were determined by pro rata allocation or by any other method of allocation that does not take account of the equitable considerations referred to in this Section 2.08(d). No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. The amount paid or payable by an indemnified party hereunder shall be deemed to include, for purposes of this Section 2.08(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating, preparing to defend or defending against or appearing as a third party witness in respect of, or otherwise incurred in connection with, any such loss, claim, damage, expense, liability, action, investigation or proceeding. If indemnification is available under this Section 2.08, the indemnifying parties shall indemnify each indemnified party to the full extent provided in Section 2.08(a) and Section 2.08(b) hereof without regard to the relative fault of said indemnifying parties or indemnified party. Notwithstanding anything in this Section 2.08(d) to the contrary, no indemnifying party (other than the Company) shall be required pursuant to this Section 2.08(d) to contribute any amount in excess of the amount by which the net proceeds (after deducting the underwriters' discounts and commissions) received by such indemnifying party from the sale of Registrable Securities in the offering to which the Losses of the indemnified parties relate (before deducting expenses, if any) exceeds the amount of any damages which such indemnifying party has otherwise been required to pay by reason of such untrue statement or omission (which may include, but is not limited to, any amounts paid pursuant to Section 2.08(b) or paid as a result of liabilities incurred under the underwriting agreement, if any, related to such sale of Registrable Securities in the offering to which the Losses of the indemnified parties relate). Section 2.09. Reporting Requirements; Rule 144. Following the IPO, the Company shall use its reasonable best efforts to be and remain in compliance with the periodic filing requirements imposed under the SEC's rules and regulations, including the Exchange Act, and thereafter shall timely file such information, documents and reports as the SEC may require or prescribe under Section 13 or 15(d) (whichever is applicable) of the Exchange Act. If the Company is not required to file such reports during such period, it will, upon the request of any Holder, make publicly available such necessary information for so long as necessary to permit sales pursuant to Rule 144 or Regulation S under the Securities Act, and it will take such further action as any Holder may reasonably request, all to the extent required from time to time to enable such Holder to sell or distribute Registrable Securities without

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18 Registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 (including in- kind distributions exempt from the requirements of Rule 144) or Regulation S under the Securities Act, as such Rules may be amended from time to time, or (b) any rule or regulation hereafter adopted by the SEC. From and after the date hereof through the date upon which no Holder owns any Registrable Securities, the Company shall forthwith upon request furnish any Holder (i) a written statement by the Company as to whether it has complied with such requirements and, if not, the specifics thereof, (ii) a copy of the most recent annual or quarterly report of the Company, and (iii) such other reports and documents filed by the Company with the SEC as such Holder may reasonably request in availing itself of an exemption for the sale of Registrable Securities without registration under the Securities Act. ARTICLE 3 MISCELLANEOUS Section 3.01. Term. This Agreement may be terminated by written agreement among the parties, and shall terminate on the date on which there are no remaining Registrable Securities held by the Holders; and in respect of any individual Holder, shall cease to apply to such Holder at such time as it holds no Registrable Securities, except for the provisions of Section 2.07 and Section 2.08 and all of this Article 3, which shall survive any such termination. Section 3.02. Notices. All notices or other communications under this Agreement shall be in writing and shall be deemed to be duly given when (a) delivered in person, (b) deposited in the United States mail or private express mail, postage prepaid, addressed as follows or (c) when sent by email upon confirmation or acknowledgment of receipt thereof: If to a Holder, to its address as set forth opposite its name on Schedule 1 hereto. If to the Company to: Klarna Group plc 10 York Road London SE1 7ND United Kingdom Attention: Niclas Neglén Email: [\*\*\*] with a copy (which shall not constitute notice) to: Davis Polk & Wardwell LLP 450 Lexington Avenue New York, New York 10017 Attention: Byron B. Rooney, Daniel P. Gibbons Email: byron.rooney@davispolk.com; dan.gibbons@davispolk.com Any party may, by notice to the other party, change the address to which such notices are to be given. Section 3.03. (a) Successors, Assigns and Transferees. This Agreement and all provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. The Company may assign this Agreement at any time in connection with a sale or acquisition of the Company,

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19 whether by merger, consolidation, a sale of all or substantially all of the Company's assets, or a similar transaction, without the consent of the Holders; provided that the successor or acquiring Person agrees in writing to assume all of the Company's rights and obligations under this Agreement. A Holder may assign its rights and obligations under this Agreement to any transferee that (i) is an Affiliate of a Holder, (ii) is a Holder's or an Affiliate of a Holder's family member or trust for the benefit of an individual or such person's family member, or (iii) acquires from such Holder in a private placement a number of Ordinary Shares equal to at least 5% of the aggregate number of outstanding Ordinary Shares; and, in each case, executes a joinder agreement in the form attached hereto as Exhibit A. In addition, any Holder may assign its rights and obligations under this Agreement to any Affiliate of such Holder that directly holds Shares that executes a joinder in the form attached hereto as Exhibit A. Notwithstanding the foregoing, if such transfer is subject to covenants, agreements or other undertakings restricting transferability thereof, the Registration Rights shall not be transferred in connection with such transfer unless such transferee complies with all such covenants, agreements and other undertakings. Except as set forth in this Section 3.03, the Holders may not assign their rights and obligations hereunder. (b) Joinder. The Company shall be permitted to join shareholders of the Company as parties to this Agreement by having such shareholders execute a joinder agreement in the form attached hereto as Exhibit A. (c) Limitation on Subsequent Rights. Notwithstanding Section 3.03(b), the Company shall not, without the prior written consent of the Holders, enter into any agreement with any holder or prospective holder of any securities of the Company that would provide to such holder the right to include any of such securities in any registration filed under Section 2.01 hereof on other than a pro rata basis or a subordinate basis with respect to the Registrable Securities. Section 3.04. Governing Law; No Jury Trial. (a) This Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, without regard to the conflict of laws principles thereof that would result in the application of any law other than the laws of the State of New York. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE. (b) With respect to any Action relating to or arising out of this Agreement, each party to this Agreement irrevocably (i) consents and submits to the exclusive jurisdiction of the courts of the State of New York and any court of the United States located in the Borough of Manhattan in New York City; (ii) waives any objection which such party may have at any time to the laying of venue of any Action brought in any such court, waives any claim that such Action has been brought in an inconvenient forum and further waives the right to object, with respect to such Action, that such court does not have jurisdiction over such party; and (iii) consents to the service of process at the address set forth for notices in Section 3.02 herein; provided, however, that such manner of service of process shall not preclude the service of process in any other manner permitted under applicable law.

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20 Section 3.05. Specific Performance. In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the party or parties who are or are to be thereby aggrieved shall have the right to seek specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. Section 3.06. Headings. The article, section and paragraph headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Section 3.07. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination, the parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the parties. Section 3.08. Amendment; Waiver. (a) This Agreement may not be amended or modified and waivers and consents to departures from the provisions hereof may not be given, except by an instrument or instruments in writing making specific reference to this Agreement and signed by the Company and Holders of a majority of the Registrable Securities as of such time; provided, however, that any amendment, modification or waiver that results in a non-pro rata adverse effect on the rights of a Holder under this Agreement will require the written consent of such Holder. (b) Waiver by any party of any default by the other party of any provision of this Agreement shall not be deemed a waiver by the waiving party of any subsequent or other default, nor shall it prejudice the rights of the other party or parties. Section 3.09. Further Assurances. Each of the parties hereto shall execute and deliver all additional documents, agreements and instruments and shall do any and all acts and things reasonably requested by the other party hereto in connection with the performance of its obligations undertaken in this Agreement. Section 3.10. Counterparts and Electronic Signatures. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same Agreement. This Agreement may be delivered via facsimile, electronic mail or other electronic format (including, but not limited to, "pdf," "tif," "jpg" or any other electronic imaged signature, including, without limitation, signature complying with the U.S. federal ESIGN Act of 2000, e.g., www.docusign.com or "AdobeSign") or other transmission method, and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes. The words "execution," "signed," "signature," "delivery," and words of like import in or relating to this Agreement or any document to be signed in connection with this Agreement shall be deemed to include electronic signatures, deliveries or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature, physical delivery thereof or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the U.S. federal Electronic Signatures in Global and

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21 National Commerce (ESIGN) Act of 2000, the New York State Electronic Signatures and Records Act or any other similar state laws based on the Uniform Electronic Transactions Act. [Remainder of the Page Intentionally Left Blank; Signature Pages Follow]

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[Signature Page to the Registration Rights Agreement] IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first written above. Klarna Group plc By: /s/ Niclas Neglén Name: Niclas Neglén Title: Chief Financial Officer

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[Signature Page to the Registration Rights Agreement] Aktieselskabet af 20.3.2020 By: /s/ Lise Kaae Name: Lise Kaae Title: Chairperson Ant International Technologies (Singapore) Holding Pte. Ltd. By: /s/ Richard Chih-Chiu LIN Name: Richard Chih-Chiu LIN Title: Head of Investment Legal Chrysalis Investments Limited By: /s/ Richard Watts Name: Richard Watts Title: Managing Partner, Chrysalis Investment Partners LLP, acting on behalf of Chrysalis Investments Limited Commonwealth Bank of Australia By: /s/ Stuart Munro Name: Stuart Munro Title: Group Executive, Group Strategy CPP Investment Board Private Holdings (4) Inc. By: /s/ Dushy Sivanithy / Paul McCracken Name: Dushy Sivanithy / Paul McCracken Title: Authorized Signatory Double Sunday AB By: /s/ Sebastian Siemiatkowski Name: Sebastian Siemiatkowski Title: Director

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[Signature Page to the Registration Rights Agreement] Flat Capital AB By: /s/ Hanna Andreen Name: Hanna Andreen Title: CEO Harvest Claro LLC By: /s/ Eric Garcia Name: Eric Garcia Title: Managing Partner Harvest Growth Capital II LLC By: /s/ Eric Garcia Name: Eric Garcia Title: Managing Partner Harvest Panorama A LLC By: /s/ Eric Garcia Name: Eric Garcia Title: Co-Manager Harvest Panorama A-1, LLC By: /s/ Eric Garcia Name: Eric Garcia Title: Co-Manager

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[Signature Page to the Registration Rights Agreement] HMI Capital Partners, L.P. By: /s/ Jonathan Wu Name: Jonathan Wu Title: Partner and CFO of HMI Capital Management, L.P., investment adviser to HMI Capital Partners, L.P. Ithan Creek Master Investors (Cayman) L.P. By: Wellington Management Company LLP, its investment adviser By: /s/ Jennifer C. Boylan Name: Jennifer C. Boylan Title: Managing Director & Counsel Kaleidoscope DF Holdings, LP By: /s/ Michael Dimitruk Name: Michael Dimitruk Title: Authorized Signatory Klatch DF Holdings, LP By: /s/ Michael Dimitruk Name: Michael Dimitruk Title: Authorized Signatory MC Tech III (Co-Invest), LP By: /s/ Rodney Cannon Name: Rodney Cannon Title: Authorized Signatory

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![](exhibit106-registrationr028.jpg)

[Signature Page to the Registration Rights Agreement] Merckx Capital Partners, L.P. By: /s/ Jonathan Wu Name: Jonathan Wu Title: Partner and CFO of HMI Capital Management, L.P., investment adviser to Merckx Capital Partners, L.P. MIC Capital Management 38 RSC Ltd By: /s/ Matthew Ryan Name: Matthew Ryan Title: Authorised Signatory SCGE Fund, L.P. By: /s/ Kimberly Summe Name: Kimberly Summe Title: COO & GC Sequoia Capital GFIV Sweden L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory Sequoia Capital Global Growth Fund II, L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory

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![](exhibit106-registrationr029.jpg)

[Signature Page to the Registration Rights Agreement] Sequoia Capital Global Growth Fund III – Endurance Partners, L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory Sequoia Capital Global Growth Fund, L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory Sequoia Capital Global Growth II Principals Fund, L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory Sequoia Capital Global Growth Principals Fund, L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory Sequoia Capital U.S. Growth Fund IV, L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory Sequoia Capital US/E Expansion Fund I, L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory

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[Signature Page to the Registration Rights Agreement] Sequoia Grove II, LLC By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory Sequoia Grove UK, L.P. By: /s/ Andrew Reed Name: Andrew Reed Title: Authorized Signatory SLP Karat Holdings S.à.r.l. By: /s/ Alexandra von Neuhoff von der Ley Name: Alexandra von Neuhoff von der Ley Title: Manager SVF II Kudu (DE) LLC By: /s/ Jonathan Duckles Name: Jonathan Duckles Title: Director The Wellcome Trust Limited, as trustee of the Wellcome Trust By: /s/ Geoffrey Love Name: Geoffrey Love Title: Principal Wellington Hadley Harbor Aggregator IV, L.P. By: /s/ Jennifer C. Boylan Name: Jennifer C. Boylan Title: Managing Director & Counsel

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EXHIBIT A Form of Joinder Agreement [Date] Reference is hereby made to the Registration Rights Agreement, dated September 11, 2025 (the "RRA"), by and between Klarna Group plc, a public limited company incorporated under the laws of England and Wales (the "Company"), and the Holders named therein. Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the RRA. Pursuant to Section 3.03 of the RRA, each of the undersigned hereby acknowledges, agrees and confirms that, by its execution of this Joinder Agreement, it shall be deemed to be a party to the RRA as if it were an original signatory thereto and hereby expressly assumes, and agrees to perform and discharge, all of the obligations and liabilities of a party thereto as the case may be, under the RRA. All references in the RRA to the "Holders" shall hereafter include each of the undersigned and their respective successors, as applicable. Each of the undersigned hereby agrees to promptly execute and deliver any and all further documents and take such further action as the Company, the Holders or any undersigned party may reasonably require to effect the purpose of this Joinder Agreement. This Joinder Agreement shall be governed by and construed and interpreted in accordance with the laws of the State of New York, without regard to the conflict of laws provisions thereof that would result in the application of any law other than the laws of the State of New York. EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY COURT PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF AND PERMITTED UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE. With respect to any Action relating to or arising out of this Joinder Agreement, each party to this Joinder Agreement irrevocably (i) consents and submits to the exclusive jurisdiction of the courts of the State of New York and any court of the United States located in the Borough of Manhattan in New York City; (ii) waives any objection which such party may have at any time to the laying of venue of any Action brought in any such court, waives any claim that such Action has been brought in an inconvenient forum and further waives the right to object, with respect to such Action, that such court does not have jurisdiction over such party; and (iii) consents to the service of process at the address set forth for notices in Section 3.02 in the RRA; provided, however, that such manner of service of process shall not preclude the service of process in any other manner permitted under applicable law. [Signature Pages Follow]

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IN WITNESS WHEREOF, the parties hereto have executed this Joinder Agreement as of the date herein above set forth. Company: Klarna Group plc By: Title: [Assignee]: By: Title: SCHEDULE 1 Addresses for Notice for Holder Parties to Registration Rights Agreement

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Holder's Name Address for Notice Aktieselskabet af 20.3.2020 [\*\*\*] Ant International Technologies (Singapore) Holding Pte. Ltd. [\*\*\*] Chrysalis Investments Limited, acting by its investment adviser, Chrysalis Investment Partners LLP [\*\*\*] Commonwealth Bank of Australia [\*\*\*] CPP Investment Board Private Holdings (4) Inc. [\*\*\*] Double Sunday AB [\*\*\*] Double Sunday II AB [\*\*\*] Double Sunday VI AB [\*\*\*] Double Sunday VII AB [\*\*\*] Double Sunday VIII AB [\*\*\*] Flat Capital AB (Publ) [\*\*\*] Harvest Claro LLC [\*\*\*] Harvest Growth Capital II LLC [\*\*\*] Harvest Panorama A, LLC [\*\*\*] Harvest Panorama A-1, LLC [\*\*\*] HMI Capital Partners, L.P. [\*\*\*] Ithan Creek Master Investors (Cayman) L.P. [\*\*\*] Kaleidoscope DF Holdings, LP [\*\*\*] Klatch DF Holdings, LP [\*\*\*] K Friends Partners 2022 AB [\*\*\*] Mc Tech III Co-Invest LP [\*\*\*]

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![](exhibit106-registrationr034.jpg)

Merckx Capital Partners, L.P. [\*\*\*] Musiara AB [\*\*\*] Ninety Fourth Investment Company LLC [\*\*\*] SCGE Fund, L.P. [\*\*\*] Sequoia Capital GFIV Sweden, L.P. [\*\*\*] Sequoia Capital Global Growth Fund II, L.P. [\*\*\*] Sequoia Capital Global Growth Fund LP [\*\*\*] Sequoia Capital Global Growth Fund III - Endurance Partners, L.P. [\*\*\*] Sequoia Capital Global Growth II Principals Fund, L.P. [\*\*\*] Sequoia Capital Global Growth Principals Fund L.P. [\*\*\*] Sequoia Capital US/E Expansion Fund I, LP [\*\*\*] Sequoia Capital U.S. Growth Fund IV, L.P. [\*\*\*] Sequoia Grove UK, L.P. [\*\*\*] Sequoia Grove II, LLC [\*\*\*] SLP Karat Holdings S.à.r.l. [\*\*\*] SVF II Kudu (DE) LLC [\*\*\*] The Wellcome Trust Limited as trustee of the Wellcome Trust [\*\*\*] Wellington Hadley Harbor Aggregator IV, L.P. [\*\*\*]

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## Exhibit 11.1

![](exhibit111-insidertradin001.jpg)

Insider trading policy Owner Investor Relations and Acceleration (Org Unit) Approver Board Of Directors Last approved date 2025-08-29 Next revision date

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Table of contents 1 Scope 1.1 Referencing documents 2 Purpose and objectives 3 Roles and responsibilities 3.1 Insider trading 3.1.1 What is insider trading 3.1.2 What information is relevant 3.1.3 Who is an Insider 3.1.4 What instruments are covered by this Policy 3.1.5 Trading, Trading Windows and Blackout Periods 3.1.6 When can Insiders Trade in other companies' securities 3.1.7 When can Insiders gift Klarna securities 3.1.8 Can Insiders pledge Klarna securities 3.1.9 Who can use trading plans under Rule 10b5-1 3.1.10 Tipping, spreading rumors and market manipulation are prohibited 3.1.11 Avoid speculation and short selling 3.1.12 Requirements regarding Klarna's own Trading activities 3.2 Additional rules for trading in Klarna's bonds 3.2.1 Extension of Blackout Period for bonds 3.2.2 No trading plans for bonds 3.2.3 Pre-clearance for trading in bonds 3.3 PDMRs in Klarna 3.3.1 Who is a PDMR 3.3.2 PDMR reporting obligations 3.3.3 When and how to report 3.3.4 Notification by Klarna to PDMRs about their reporting obligations 3.3.5 Notification by PDMRs to their closely associated persons 3.3.6 PDMR's need pre-clearance for trading in bonds 4 Appendix 1 - List of Legislations

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1. Scope Klarna has listed shares on a U.S. stock exchange and listed bonds at Nasdaq Stockholm and Euronext Dublin. Both U.S. and EU rules prohibit insider trading, which is when persons who have access to certain key information that is not public knowledge trade in shares or bonds. In Klarna you are only allowed to buy and sell Klarna shares and bonds during defined periods called Trading Windows. The time between Trading Windows is called a Blackout Period and no trading of Klarna shares and bonds is allowed during a Blackout Period. If you have access to certain non-public information you may be prohibited from trading even during a Trading Window. This policy should be read alongside the Insider and Disclosure Policy which includes further details on what information constitutes inside information. The restrictions under the Insider Trading Policy do not only include limitations on trading but also tipping off others and spreading rumours. Breaching rules on insider trading is a crime and consequences for individuals doing it are severe and include monetary fines and imprisonment. You may also face consequences in your Klarna employment, such as being dismissed from work. A summary overview of this policy can be found in the Overview of Insider Trading Policy. 1.1. Referencing documents Insider and disclosure policy Rule 10b5-1 Trading Plan Guidelines 2. Purpose and objectives The purpose of this policy is to ensure that neither Klarna as organization nor individual contributors are involved in illegal insider trading of Klarna securities. 3. Roles and responsibilities Contributor Roles and responsibilities Klarna Contributor Follow this policy and all legislation in relation to insider trading. CFO Responsible for authoring relevant contributors to set up a trading plan and pre-approving trades in Klarna's bonds for persons that qualify as PDMRs (as defined below). Chief Legal Officer Responsible for shortening or canceling Trading Windows where relevant, as well as approving Klarna's own trading activities. Also responsible to provide guidance on how Klarna Contributors should act when in possession of MNPI (as defined below) about Klarna partners. 3.1. Insider trading 3.1.1. What is insider trading Insider trading is when people who have material information about a listed company that is not known to the general public trade in the shares of that company. Insider trading is unfair as the market has not had the chance to digest the information and make any adjustments to the price of a stock. Insiders may have information that will allow them to sell shares before the price falls, or buy before the price goes up. 3.1.2. What information is relevant This Insider Trading Policy applies to trading in Klarna's shares or bonds, or derivative instruments, when you have access to material non-public information ("MNPI") or inside information under the European Market Abuse Regulation ("MAR Information"). These concepts are defined in the Insider and Disclosure Policy. Generally, both MNPI and MAR Information concern material information related to Klarna which has not been publicly disclosed and that may have an impact on the price of securities, or which investors may otherwise deem important when making a decision whether or not to invest in Klarna securities. 3.1.3. Who is an Insider This Insider Trading Policy applies to all 'Insiders'. At Klarna, everyone is treated as an Insider for us to be able to have open sharing of information. In other words, you do not need to actually have MNPI or MAR Information to be subject to the restrictions set out in this Policy. What constitutes MNPI and MAR Information is set out in the Insider and Disclosure Policy. The following persons are defined as Insiders: All Klarna Contributors, Close family members of Klarna Contributors, meaning spouses, domestic partners, and children below the age of 19 (even if financially independent), and any person that is financially dependent on a person or his or her spouse or domestic partner Other persons who have gained access to MNPI and/or MAR Information Entities, share accounts and other investment portfolios and investment accounts where a Klarna Contributor can make investments decisions or influence investment decisions of; and any account established or maintained by Klarna Contributors or their close immediate family members with their consent or knowledge and in which such Klarna Contributors or their close immediate family members have a direct or indirect financial interest. In this Insider Trading Policy, "Klarna Contributor" refers to all employees, employees of record, directors, officers and line consultants of the Klarna Group.

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This Insider Trading Policy applies also to Klarna Contributors after their employment, directorship or similar with the Klarna Group has ended. For CXOs, directors and officers the Insider Trading Policy applies for 90 days after the employment or directorship has ended. For all other Klarna Contributors, the Insider Trading Policy applies for a period of 30 days after the employment, consultancy or similar relationship with Klarna has ended. Employees and employees of record who are on a long term leave continue to be bound by this Insider Trading Policy. This Insider Trading Policy does not apply to any entity that invests in securities in the ordinary course of its business (e.g., a venture or other investment fund) provided that such entity has established its own insider trading controls and procedures in compliance with applicable securities laws with respect to trading in Klarna's securities. 3.1.4. What instruments are covered by this Policy This Insider Trading Policy applies to all transactions in Klarna Group plc securities, or securities in any other company in the Klarna Group (including debt instruments, whether they are convertible or not). This includes shares in Klarna Group plc, warrants (regardless of which Klarna company that has issued them), restricted stock units (RSUs) and bonds. This Insider Trading Policy does not apply to the vesting of RSUs nor to a cash exercise of vested warrants granted by Klarna even during a Blackout Period (as defined below), since the purchase price for such stock warrants is fixed. However, the shares you receive when vesting of RSUs or exercising of your warrants are covered by this Insider Trading Policy. This means that even if the vesting of RSUs and exercise of warrants as such can be made, the shares you get for doing so are subject to the Policy and can only be sold as set out in the Policy. As an example, it may not be possible to sell shares to finance the tax and/or strike price (this is often referred to as sell to cover). 3.1.5. Trading, Trading Windows and Blackout Periods Insiders may only trade (i) during a Trading Window and (ii) if they are not in possession of any MNPI or MAR Information. In this Insider Trading Policy, "Trading" means placing a purchase or sale order, or recommending that another person place a purchase or sale order, in Klarna's securities. This includes orders for purchases and sales of stock, convertible securities and other securities (e.g., bonds) and includes increasing or decreasing investment in Klarna securities through a retirement account. Trading also includes modifying or withdrawing existing orders. A "Trading Window" runs from the second trading day following an earnings release through and including the 14th day of the last month of the fiscal quarter following such earnings release. The periods between Trading Windows are referred to as "Blackout Periods". Insiders are prohibited from any Trading activities during Blackout Periods regardless of whether in possession of MNPI or MAR. The table is illustrative to show below sets out dates for earnings releases, trading windows and blackout periods for the coming years. What Start date (New York time) End date (New York time) Earnings release 2025 Trading window September 10 September 30 IPO September 11 Blackout period October 1 November 19 Trading window November 20 December 14 November 18 Blackout period December 15 December 31 2026 Blackout period January 1 February 22 First trading window February 23 March 14 February 19 Blackout period March 15 May 18 Second trading window May 19 June 14 May 15 Blackout period June 15 August 17 Third trading window August 18 September 14 August 14 Blackout period September 15 November 16 Fourth trading window November 17 December 14 November 13 Blackout period December 15 December 31 2027 Blackout period January 1 March 1 First trading window March 2 March 14 February 26 Blackout period March 15 May 17 Second trading window May 18 June 14 May 14 Blackout period June 15 August 16 Third trading window August 17 September 14 August 13 Blackout period September 15 November 15 Fourth trading window November 16 December 14 December 12 Blackout period December 15 December 31 These dates are preliminary and may be changed. Trading windows and blackout periods will be announced on through Slack in #announcements.

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The Chief Legal Officer may shorten or cancel any Trading Window without giving a reason for doing so. If that happens, the window for permitted Trading is adjusted accordingly. Insiders are advised to bear in mind that this may happen and that you may be unable to carry out a contemplated trade. If there is a public disclosure of MNPI or MAR Information during a Trading Window (meaning that the information ceases to be MNPI or MAR Information), Insiders who were unable to Trade due to being aware of such information may Trade once a full trading day has passed following the disclosure thereof (subject always to a Trading Window being open at such time). For instance, if the disclosure is made on a Tuesday, the earliest possible trading day will be the immediately following Thursday. 3.1.6. When can Insiders Trade in other companies' securities If an Insider has become aware of MNPI or MAR Information about, or which may affect the price of the securities of, another company (such as one of Klarna's partners, suppliers or competitors) through his or her position at Klarna, he or she cannot Trade in, nor recommend or induce another person to trade in, such other company's securities. He or she should seek guidance from the Chief Legal Officer on how to act when having received such information. If there is a public disclosure of the MNPI or MAR Information in the other company, Insiders who were aware of such information may Trade once a full trading day has passed since disclosure. For instance, if the disclosure is made on a Tuesday, the earliest possible trading day will be the immediately following Thursday. Companies whose only or primary assets (at least 10%) are made up of Klarna stock or derivatives will have their pricing to a large extent dependent on the value of the Klarna stock. Trading in instruments in such companies should be assessed using the same rules as for Klarna stock directly. Trading is therefore only allowed if it would be allowed in Klarna stock. 3.1.7. When can Insiders gift Klarna securities Giving Klarna securities as a gift or a donation is equivalent to selling such securities. For this reason, Insiders may only gift Klarna securities if the criteria for Trading in Klarna securities are met. For instance, no gifts of Klarna securities can be made during Blackout Periods. 3.1.8. Can Insiders pledge Klarna securities No Insider may pledge their Klarna securities without prior written approval by the Chief Financial Officer. The reason is that if the Insider is unable to meet a margin call, the pledgor can sell the securities without the pledgor's consent. This could mean that an Insider's shares are sold to meet a margin call due to a drop in valuation, even though the Insider is in possession of MNPI or MAR Information at the time. This prohibition also includes buying Klarna securities on margin (i.e. using money you have borrowed from the broker). 3.1.9. Who can use trading plans under Rule 10b5-1 Some Klarna Contributors are likely to have permanent access to MNPI and therefore risk never being able to trade during a Trading Window. For certain Contributions, such as board members and CXOs, the market may also interpret divestments as something having a negative signal value. The CFO may authorize such employees to set up trading plans, to be able to Trade in Klarna stock regardless of MNPI. This can be achieved under SEC Rule 10b5-1(c), which allows Insiders to set up a trading plan, under which trading occurs automatically according to predetermined criteria (set by the Insider). Trades made under such a trading plan do not fall within the scope of this Policy. Trading plans may only be adopted during Trading Periods and when you do not have MNPI. Because the criteria for trading are set beforehand, trades under an approved trading plan may be executed even if the Insider is in possession of MNPI at the time of trade. The trading plan may only be set up during a Trading Window and provided that the Insider is not in possession of any MNPI at the time. Since trading is automatic, it may not be changed during a Blackout Period or when the Insider is in possession of MNPI. There may be costs involved in setting up a trading plan. Any such costs are to be borne by the person setting up the plan. Any trading plan needs to follow Klarna's Rule 10b5-1 Trading Plan Guidelines. 3.1.10. Tipping, spreading rumors and market manipulation are prohibited It is illegal for any Insider in possession of MNPI or MAR Information to provide other people with such information or to recommend or influence that they buy or sell the securities (this is called "tipping"). The same goes for recommending or influencing any person to modify or withdraw an existing order. In that case, they may both be held liable. Any confidential information within the Klarna Group is the property of the Klarna Group. Klarna Contributors are not allowed to share such information with others (except with other Klarna Contributors and professional advisers under confidentiality undertakings whose positions require them to know it or for internal documentation purposes), whether or not they have access to MNPI or MAR Information, and whether or not it is made to induce another person to transact in Klarna securities. No Insider should discuss MNPI or MAR Information in public places or in common areas on Klarna property. MNPI or MAR Information should also not be discussed in open Slack channels. Insiders may not engage in spreading, discussing or otherwise encouraging rumors about Klarna that may affect the price of any Klarna security (though this does not preclude Insiders from reporting under Klarna's Whistleblowing Policy. It is also not allowed for Insiders to engage in, or attempt to engage in, market manipulation. 3.1.11. Avoid speculation and short selling Investing in Klarna securities provides an opportunity to share in the future growth of Klarna. But investment in the Company and sharing in the growth of Klarna does not mean short range speculation based on fluctuations in the market. Such activities may put the personal gain of the Insider in conflict with the best interests of Klarna and its stockholders. Although this Trading Policy does not mean that Insiders may never sell shares, Klarna encourages Insiders to avoid frequent Trading in Klarna stock. Speculating in Klarna stock is not part of the culture of Klarna.

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![](exhibit111-insidertradin006.jpg)

Klarna Contributors should avoid short selling of Klarna securities, as this may be seen as not believing in the future growth of Klarna. Speculating in Klarna stock is not part of the culture of Klarna. 3.1.12. Requirements regarding Klarna's own Trading activities Klarna itself must comply with EU MAR and U.S. securities laws applicable to its own securities Trading activities, and will not effect transactions in respect of its securities, or adopt any securities repurchase plans, when it is in possession of MNPI or MAR Information concerning the Klarna Group, other than in compliance with applicable law, subject to the policies and procedures adopted by the Company and attached as Exhibit A hereto, and the prior approval of the Chief Legal Officer as set out therein. 3.2. Additional rules for trading in Klarna's bonds There are additional restrictions for trading in Klarna's bonds that are subject to EU MAR. 3.2.1. Extension of Blackout Period for bonds For bonds covered by EU MAR, the Blackout Period shall always be extended to include the period of 30 calendar days before any planned earnings release. 3.2.2. No trading plans for bonds Trading plans under 10b5-1 does not have any effect under EU MAR. It is therefore not possible to set a plan to be able to trade in Klarna's listed debt instruments when you are in possession of MAR Information. If you have adopted a trading plan for Klarna stock, it is not valid for Klarna's bonds. 3.2.3. Pre-clearance for trading in bonds As set detailed below, PDMRs (currently including only board members and CXOs) require pre-clearance for trading in listed bonds (but not for shares listed on the U.S. stock exchange). 3.3. PDMRs in Klarna 3.3.1. Who is a PDMR "PDMR" is a concept under EU MAR that stands for person discharging managerial responsibilities. PDMRs are subject to additional requirements and restrictions under EU MAR but in relation to equity securities listed on the U.S. stock exchange. The following positions currently qualify as persons discharging managerial responsibilities (PDMRs): 1. Board members of Klarna Bank AB (publ) and Klarna Holding AB (publ); and 2. Management team of Klarna Bank AB (publ) and Klarna Holding AB (publ), currently corresponding to the CXO team. In addition, other senior executives that have regular access to MAR Information and who have power to take managerial decisions affecting the future developments and business prospects of Klarna Bank AB (publ) and Klarna Holding AB (publ) shall also be declared PDMRs by the Chief Legal Officer. 3.3.2. PDMR reporting obligations PDMRs at Klarna and persons closely associated with them must report in writing their transactions in listed bonds related to Klarna and related derivative instruments, both to Klarna and to the SFSA. All transactions need to be reported, including pledges, securities borrowing and transactions within the scope of an endowment policy. 3.3.3. When and how to report Reporting shall take place as soon as an aggregate threshold of EUR 5,000 per calendar year has been reached and not later than three business days after the date of the transaction (i.e., after an agreement regarding purchase or sale has been entered into). PDMRs shall report any transaction to Klarna at cosec@klarna.com. Klarna will then assist the PDMR in making electronic submission to the SFSA website. 3.3.4. Notification by Klarna to PDMRs about their reporting obligations Klarna shall notify all PDMRs in writing of their reporting obligation under EU MAR. Klarna shall also keep a list of all PDMRs and persons closely associated with them. A copy of notices sent and received by Klarna pursuant to this section shall be retained electronically. 3.3.5. Notification by PDMRs to their closely associated persons The PDMR shall notify in writing persons closely associated with him/her regarding their reporting obligation under EU MAR, substantially in accordance with a format to be provided by Klarna. If the person closely associated is a minor, the PDMR shall instead notify the (other) guardian of the minor substantially in accordance with a format to be provided by Klarna. The following persons are deemed to be closely associated with a PDMR: 1. a spouse, or a partner considered to be equivalent to a spouse in accordance with national law; 2. a dependent child, in accordance with national law; 3. a relative who has shared the same household for at least one year on the date of the transaction concerned; or 4. a legal person, trust or partnership, the managerial responsibilities of which are discharged by a PDMR or by a person referred to in item (a), (b) or (c), or which is directly or indirectly controlled by such person, or which is set up for the benefit of such person, or the economic interests of which are substantially equivalent to those of such a person. The PDMR shall keep a copy of such notifications and also send a copy to Klarna by email at cosec@klarna.com. The PDMR shall notify Klarna regarding who is closely associated with him/her by sending a list of these persons by email to cosec@klarna.com. The PDMR shall keep Klarna updated of any changes to the list. 3.3.6. PDMR's need pre-clearance for trading in bonds PDMRs may not acquire or sell listed bonds issued by Klarna and covered by EU MAR, or derivatives or other financial instruments linked thereto, without first having obtained written approval from Klarna's CFO. The approval is valid only on the day of the current and next trading day. In individual cases, Klarna's CFO may decide on a shorter or longer validity period. If the CFO is looking to trade in bonds, approval shall be given by the CEO based on a recommendation by the Chief Legal Officer.

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![](exhibit111-insidertradin007.jpg)

The requirement to obtain pre-clearance also applies during Trading Windows. 4. Appendix 1 - List of Legislations The Policy shall cover relevant external rules including, for instance: Market Abuse Regulation (Regulation (EU) No. 596/2014 The Market Abuse (Amendment) (EU Exit) Regulations 2019 Securities Exchange Act of 1934 (15 U.S.C. § 78j) SEC Rule 10b-5 (17 C.F.R. § 240.10b-5) Insider Trading Sanctions Act of 1984 (ITSA) Insider Trading and Securities Fraud Enforcement Act of 1988 (ITSFEA) Legislation Jurisdictions Source Websites No data available in table

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## Exhibit 12.1

![](exhibit121-certification001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICERS PURSUANT TO RULE 13a-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Sebastian Siemiatkowski ,Chief Executive Officer, of Klarna Group plc (the "Company"), certify that: 1. I have reviewed this annual report on Form 20-F of Klarna Group plc; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the

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![](exhibit121-certification002.jpg)

Company's auditors and the Company's audit committee of the board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. KLARNA GROUP PLC Date: February 26, 2026 By: /s/ Sebastian Siemiatkowski Name: Sebastian Siemiatkowski Title: Chief Executive Officer

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## Exhibit 12.2

![](exhibit122-certification001.jpg)

CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a), AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Niclas Neglen, Chief Financial Officer of Klarna Group plc (the "Company"), certify that: 1. I have reviewed this annual report on Form 20-F of Klarna Group plc; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report; 4. The Company's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; (b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (d) Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and 5. The Company's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company's auditors and the Company's audit committee of the board of directors (or persons performing the equivalent functions):

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![](exhibit122-certification002.jpg)

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting. KLARNA GROUP PLC Date: February 26, 2026 By: /s/ Niclas Neglen Name: Niclas Neglen Title: Chief Financial Officer

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## Exhibit 12.3

![](exhibit123-certification001.jpg)

CERTIFICATION BY THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) The certification set forth below is being submitted in connection with the Annual Report on Form 20-F of Klarna Group plc (the "Company") for the fiscal year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"). I, Sebastian Siemiatkowski ,Chief Executive Officer, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Date: February 26, 2026 By: /s/ Sebastian Siemiatkowski Name: Sebastian Siemiatkowski Title: Chief Executive Officer

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## Exhibit 12.4

![](exhibit124-certification001.jpg)

CERTIFICATION BY THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 (18 U.S.C. SECTION 1350) The certification set forth below is being submitted in connection with the Annual Report on Form 20-F of Klarna Group plc (the "Company") for the fiscal year ended December 31, 2025, as filed with the Securities and Exchange Commission on the date hereof (the "Report"). I, Niclas Neglen ,Chief Financial Officer, of the Company, certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Date: February 26, 2026 By: /s/ Niclas Neglen Name: Niclas Neglen Title: Chief Financial Officer

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## Exhibit 23.1

![](exhitit231-consentoferns001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-290150) pertaining to the 2025 Omnibus Incentive Plan, the Restricted Share Unit Program, the Individual Contributor Share Warrant, Agreements Series L3 to L7, L10 and L11, the Individual Contributor Option Agreements for Ordinary Shares, and the Individual Contributor Option Agreements for C Shares of Klarna Group plc of our report dated February 26, 2026, with respect to the consolidated financial statements of Klarna Group plc incorporated by reference in this Annual Report (Form 20-F) for the year ended December 31, 2025. /s/ Ernst & Young AB Stockholm, Sweden February 26, 2026

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## Exhibit 97.1

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COMPENSATION RECOUPMENT POLICY This Klarna Group plc Compensation Recoupment Policy (the "Policy") has been duly adopted by Klarna Group plc (the "Company") on [29 August 2025]. This Policy provides for the recoupment of certain executive compensation in the event of an accounting restatement resulting from material noncompliance with financial reporting requirements under U.S. federal securities laws in accordance with the terms and conditions set forth herein. This Policy is intended to comply with the requirements of Section 10D of the Exchange Act (as defined below) and Section 303A.14 of the NYSE Listed Company Manual (the "Listing Rule"). 1. Definitions. For the purposes of this Policy, the following terms shall have the meanings set forth below. a. "Committee" means the Remuneration, Nomination and Governance Committee of the Board of Directors of the Company (the "Board") or any successor committee thereof. If there is no Remuneration, Nomination and Governance Committee of the Board or if the Remuneration, Nomination and Governance Committee is not comprised solely of independent directors, references herein to the Committee shall refer to the Company's committee of independent directors that is responsible for executive compensation decisions, or in the absence of such a committee, the independent members of the Board. b. "Covered Compensation" means any Incentive-based Compensation "received" by a Covered Executive during the applicable Recoupment Period; provided that: i. such Incentive-based Compensation was received by such Covered Executive (A) on or after the Effective Date, (B) after he or she commenced service as an Executive Officer and (C) while the Company had a class of securities publicly listed on a United States national securities exchange; and ii. such Covered Executive served as an Executive Officer at any time during the performance period applicable to such Incentive-based Compensation (whether or not such Covered Executive is serving in such capacity at the time any Covered Compensation is received or is required to be repaid to the Company). For purposes of this Policy, Incentive-based Compensation is "received" by a Covered Executive during the fiscal period in which the Financial Reporting Measure applicable to such Incentive-based Compensation (or portion thereof) is attained, even if the payment or grant of such Incentive-based Compensation is made thereafter. c. "Covered Executive" means any current or former Executive Officer. d. "Effective Date" means the date on which the Company is listed on NYSE. e. "Exchange Act" means the U.S. Securities Exchange Act of 1934, as amended.

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![](exhibit971-compensationr002.jpg)

f. "Executive Officer" means, with respect to the Company, (i) its president, (ii) its principal financial officer, (iii) its principal accounting officer (or if there is no such accounting officer, its controller), (iv) any vice-president in charge of a principal business unit, division or function (such as sales, administration or finance), (v) any other officer who performs a policy-making function for the Company (including any officer of the Company's parent(s) or subsidiaries if they perform policy-making functions for the Company) and (vi) any other person who performs similar policy-making functions for the Company. Policy-making function is not intended to include policy-making functions that are not significant. The determination as to an individual's status as an Executive Officer shall be made by the Committee and such determination shall be final, conclusive and binding on such individual and all other interested persons. g. "Financial Reporting Measure" means any (i) measure that is determined and presented in accordance with the accounting principles used in preparing the Company's financial statements, (ii) stock price measure or (iii) total shareholder return measure (and any measures that are derived wholly or in part from any measure referenced in clause (i), (ii) or (iii) above). For the avoidance of doubt, any such measure does not need to be presented within the Company's financial statements or included in a filing with the U.S. Securities and Exchange Commission to constitute a Financial Reporting Measure. h. "Financial Restatement" means a restatement of the Company's financial statements due to the Company's material noncompliance with any financial reporting requirement under U.S. federal securities laws that is required in order to correct: i. an error in previously issued financial statements that is material to the previously issued financial statements; or ii. an error that would result in a material misstatement if the error were (A) corrected in the current period or (B) left uncorrected in the current period. For purposes of this Policy, a Financial Restatement shall not be deemed to occur in the event of a revision of the Company's financial statements due to an out-of-period adjustment (i.e., when the error is immaterial to the previously issued financial statements and the correction of the error is also immaterial to the current period) or a retrospective (1) application of a change in accounting principles; (2) revision to reportable segment information due to a change in the structure of the Company's internal organization; (3) reclassification due to a discontinued operation; (4) application of a change in reporting entity, such as from a reorganization of entities under common control; (5) revision for share subdivision, share consolidation, share dividends or other changes in capital structure; or (6) adjustment to provisional amounts in connection with a prior business combination. i. "Incentive-based Compensation" means any compensation (including, for the avoidance of doubt, any cash or equity or equity-based compensation, whether deferred or current) that is granted, earned and/or vested based wholly or in part upon the achievement of a Financial Reporting Measure. Incentive-based

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![](exhibit971-compensationr003.jpg)

Compensation shall be deemed "received" in the Company's fiscal period during which the Financial Reporting Measure specified in the Incentive-based Compensation award is attained, even if the payment, vesting, settlement or grant of the Incentive-based Compensation occurs after the end of that period. For purposes of this Policy, "Incentive-based Compensation" shall also be deemed to include any amounts which were determined based on (or were otherwise calculated by reference to) Incentive-based Compensation (including, without limitation, any amounts under any long-term disability, life insurance or supplemental retirement or severance plan or agreement or any notional account that is based on Incentive-based Compensation, as well as any earnings accrued thereon). j. "NYSE" means the New York Stock Exchange, or any successor thereof. k. "Recoupment Period" means the three fiscal years completed immediately preceding the date of any applicable Recoupment Trigger Date. Notwithstanding the foregoing, the Recoupment Period additionally includes any transition period (that results from a change in the Company's fiscal year) within or immediately following those three completed fiscal years, provided that a transition period between the last day of the Company's previous fiscal year end and the first day of its new fiscal year that comprises a period of nine (9) to twelve (12) months would be deemed a completed fiscal year. l. "Recoupment Trigger Date" means the earlier of (i) the date that the Board (or a committee thereof or the officer(s) of the Company authorized to take such action if Board action is not required) concludes, or reasonably should have concluded, that the Company is required to prepare a Financial Restatement, and (ii) the date on which a court, regulator or other legally authorized body directs the Company to prepare a Financial Restatement. 2. Recoupment of Erroneously Awarded Compensation. a. In the event of a Financial Restatement, if the amount of any Covered Compensation received by a Covered Executive (the "Awarded Compensation") exceeds the amount of such Covered Compensation that would have otherwise been received by such Covered Executive if calculated based on the Financial Restatement (the "Adjusted Compensation"), the Company shall reasonably promptly recover from such Covered Executive an amount equal to the excess of the Awarded Compensation over the Adjusted Compensation, each calculated on a pre-tax basis (such excess amount, the "Erroneously Awarded Compensation"). b. If (i) the Financial Reporting Measure applicable to the relevant Covered Compensation is stock price or total shareholder return (or any measure derived wholly or in part from either of such measures) and (ii) the amount of Erroneously Awarded Compensation is not subject to mathematical recalculation directly from the information in the Financial Restatement, then the amount of Erroneously Awarded Compensation shall be determined (on a pre-tax basis) based on the Company's reasonable estimate of the effect of the Financial Restatement on the Company's stock price or total shareholder return (or the derivative measure thereof)

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upon which such Covered Compensation was received; and the Company must maintain documentation of the determination of that reasonable estimate and provide such documentation to the NYSE. c. For the avoidance of doubt, the Company's obligation to recover Erroneously Awarded Compensation is not dependent on (i) if or when the restated financial statements are filed or (ii) any fault of any Covered Executive for the accounting errors or other actions leading to a Financial Restatement. d. Notwithstanding anything to the contrary in Sections 2(a) through ‎(c) hereof, the Company shall not be required to recover any Erroneously Awarded Compensation if both (x) the conditions set forth in either of the following clauses (i), (ii), or (iii) are satisfied and (y) the Board's committee of independent directors responsible for executive compensation decisions (or, in the absence of such a committee, a majority of the independent directors serving on the Board) has determined that recovery of the Erroneously Awarded Compensation would be impracticable: i. the direct expense paid to a third party to assist in enforcing the recovery of the Erroneously Awarded Compensation under this Policy would exceed the amount of such Erroneously Awarded Compensation to be recovered; provided that, before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation pursuant to this Section 2(d), the Company shall have first made a reasonable attempt to recover such Erroneously Awarded Compensation, document such reasonable attempt(s) to make such recovery and provide that documentation to the NYSE; ii. recovery of the Erroneously Awarded Compensation would violate laws of England and Wales to the extent such law was adopted prior to November 28, 2022 (provided that, before concluding that it would be impracticable to recover any amount of Erroneously Awarded Compensation pursuant to this Section 2(d)), the Company shall have first obtained an opinion of home country counsel of England and Wales, that is acceptable to the NYSE, that recovery would result in such a violation, and the Company must provide such opinion to the NYSE; or iii. recovery of the Erroneously Awarded Compensation would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company, to fail to meet the requirements of Sections 401(a)(13) or 411(a) of the U.S. Internal Revenue Code of 1986, as amended (the "Code"). e. The Company shall not indemnify any Covered Executive, directly or indirectly, for any losses that such Covered Executive may incur in connection with the recovery of Erroneously Awarded Compensation pursuant to this Policy, including through the payment of insurance premiums or gross-up payments. f. The Committee shall determine, in its sole discretion, the manner and timing in which any Erroneously Awarded Compensation shall be recovered from a Covered Executive in accordance with applicable law, including, without limitation, by (i)

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![](exhibit971-compensationr005.jpg)

requiring reimbursement of Covered Compensation previously paid in cash; (ii) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any equity or equity-based awards; (iii) offsetting the Erroneously Awarded Compensation amount from any compensation otherwise owed by the Company or any of its affiliates to the Covered Executive; (iv) cancelling outstanding vested or unvested equity or equity-based awards; (v) cancelling or offsetting against any future cash or equity-based compensation obligations; and/or (vi) taking any other remedial and recovery action permitted by the memorandum and articles of association of the Company and applicable law. For the avoidance of doubt, except as set forth in Section 2(d), in no event may the Company accept an amount that is less than the amount of Erroneously Awarded Compensation; provided that, to the extent necessary to avoid any adverse tax consequences to the Covered Executive pursuant to Section 409A of the Code, any offsets against amounts under any nonqualified deferred compensation plans (as defined under Section 409A of the Code) shall be made in compliance with Section 409A of the Code. 3. Administration. This Policy shall be administered by the Committee. All decisions of the Committee shall be final, conclusive and binding upon the Company and the Covered Executives, their beneficiaries, heirs, executors, administrators and any other legal representative. The Committee shall have full power and authority to (i) administer and interpret this Policy; (ii) correct any defect, supply any omission and reconcile any inconsistency in this Policy; and (iii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of this Policy and to comply with the memorandum and articles of association of the Company and applicable law (including Section 10D of the Exchange Act) and applicable stock market or exchange rules and regulations. Notwithstanding anything to the contrary contained herein, to the extent permitted by Section 10D of the Exchange Act and the Listing Rule, the Board may, in its sole discretion, at any time and from time to time, administer this Policy in the same manner as the Committee. 4. Amendment/Termination. Subject to Section 10D of the Exchange Act and the Listing Rule, this Policy may be amended or terminated by the Committee at any time. To the extent that any applicable law, or stock market or exchange rules or regulations require recovery of Erroneously Awarded Compensation in circumstances in addition to those specified herein, nothing in this Policy shall be deemed to limit or restrict the right or obligation of the Company to recover Erroneously Awarded Compensation to the fullest extent required by such applicable law, stock market or exchange rules and regulations. Unless otherwise required by applicable law, this Policy shall no longer be effective from and after the date that the Company no longer has a class of securities publicly listed on a United States national securities exchange. 5. Interpretation. Notwithstanding anything to the contrary herein, this Policy is intended to comply with the requirements of Section 10D of the Exchange Act and the Listing Rule (and any applicable regulations, administrative interpretations or stock market or exchange rules and regulations adopted in connection therewith). The provisions of this Policy shall be interpreted in a manner that satisfies such requirements and this Policy shall be operated

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![](exhibit971-compensationr006.jpg)

accordingly. If any provision of this Policy would otherwise frustrate or conflict with this intent, the provision shall be interpreted and deemed amended so as to avoid such conflict. 6. Other Compensation Clawback/Recoupment Rights. Any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies, rights or requirements with respect to the clawback or recoupment of any compensation that may be available to the Company pursuant to the terms of any other recoupment or clawback policy of the Company (or any of its affiliates) that may be in effect from time to time, any provisions in any employment agreement, offer letter, equity plan, equity award agreement or similar plan or agreement, and any other legal remedies available to the Company, as well as applicable law, stock market or exchange rules, listing standards or regulations; provided, however, that any amounts recouped or clawed back under any other policy that would be recoupable under this Policy shall count toward any required clawback or recoupment under this Policy and vice versa. 7. Exempt Compensation. Notwithstanding anything to the contrary herein, the Company has no obligation under this Policy to seek recoupment of amounts paid to a Covered Executive which are granted, vested or earned based solely upon the occurrence or non-occurrence of nonfinancial events. Such exempt compensation includes, without limitation, base salary, time-vesting awards, compensation awarded on the basis of the achievement of metrics that are not Financial Reporting Measures or compensation awarded solely at the discretion of the Committee or the Board, provided that such amounts are in no way contingent on, and were not in any way granted on the basis of, the achievement of any Financial Reporting Measure performance goal. 8. Miscellaneous. a. Any applicable award agreement or other document setting forth the terms and conditions of any compensation covered by this Policy shall be deemed to include the restrictions imposed herein and incorporate this Policy by reference and, in the event of any inconsistency, the terms of this Policy will govern. For the avoidance of doubt, this Policy applies to all compensation that is received on or after the Effective Date, regardless of the date on which the award agreement or other document setting forth the terms and conditions of the Covered Executive's compensation became effective, including, without limitation, compensation received under the Klarna Group plc Omnibus Incentive Plan, and any successor plan thereto. b. This Policy shall be binding and enforceable against all Covered Executives and their beneficiaries, heirs, executors, administrators or other legal representatives. c. All issues concerning the construction, validity, enforcement and interpretation of this Policy and all related documents, including, without limitation, any employment agreement, offer letter, equity award agreement or similar agreement, shall be governed by, and construed in accordance with, the laws of England and Wales, without giving effect to any choice of law or conflict of law rules or provisions (whether of England and Wales or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than England and Wales.

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![](exhibit971-compensationr007.jpg)

d. The Covered Executives, their beneficiaries, heirs, executors, administrators and any other legal representative and the Company shall initially attempt to resolve all claims, disputes or controversies arising under, out of or in connection with this Policy by conducting good faith negotiations amongst themselves. To ensure the timely and economical resolution of disputes that arise in connection with this Policy, any and all disputes, claims or causes of action arising from or relating to the enforcement, performance or interpretation of this Policy shall be referred to and finally resolved by arbitration under the LCIA Rules, which Rules are deemed to be incorporated by reference into this clause. The seat, or legal place, of arbitration shall be London, United Kingdom. The language to be used in the arbitral proceedings shall be English. The Parties undertake and agree that all arbitral proceedings conducted with reference to this arbitration clause will be kept strictly confidential, as well as any decision or award that is made or declared during the proceedings. Any such award rendered shall be enforceable by any court having jurisdiction and, to the fullest extent permitted by law, the Covered Executives, their beneficiaries, heirs, executors, administrators and any other legal representative and the Company shall waive (and shall hereby be deemed to have waived) the right to resolve any such dispute regarding enforcement of such award through a trial by jury. To the fullest extent permitted by law, the Covered Executives, their beneficiaries, heirs, executors, administrators, and any other legal representative, and the Company, shall waive (and shall hereby be deemed to have waived) the right to resolve any such dispute through a trial by jury. e. If any provision of this Policy is determined to be unenforceable or invalid under any applicable law, such provision will be applied to the maximum extent permitted by applicable law and shall automatically be deemed amended in a manner consistent with its objectives to the extent necessary to conform to any limitations required under applicable law.

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