Klarna, a Swedish fintech unicorn, gets a full banking licence

BANKS moan incessantly about over- regulation. Yet their banking licences come with perks: in most places only licensed institutions can accept deposits and offer current accounts; within the EU, “passporting” means a bank licensed in one country may operate across the single market. So some European financial-technology (“fintech”) upstarts have started to seek banking licences. On June 19th, Klarna, a Swedish payments firm valued at $2.25bn, became the latest—and the largest so far—to get one.

European fintech firms have various reasons for seeking approval as a bank. Bunq, a Dutch firm and one of the first to get a licence, started out in payments, like Klarna, but expanded to deposit accounts. Some, like N26 in Germany or Atom Bank in Britain, sought to be full-service, online retail banks from the outset. Others, such as ClearBank, a new British clearing and settlement bank, want to offer services to other firms.

Of those focused on the retail market, Klarna is better placed than most to profit from its new privileges. Many upstarts struggle to overcome the advantages banks enjoy because of incumbency, notably large customer bases. But Klarna already has 60m customers across Europe who use it to pay for online purchases from 70,000 merchants: last year, it processed €13bn ($14.7bn) in transactions. The firm plans to use this customer base to launch a wider range of retail-banking offerings, like bank cards and payroll-linked accounts.

But not all aspire to banking licences, which take time and effort: 20 months in Klarna’s case. Murray Raisbeck of KPMG, an auditing firm, reckons that smaller and more specialised firms will wait for simpler licensing regimes, or choose to work with existing banks. From next year, new EU rules will force banks to open up the accounts of willing customers to third parties, including unlicensed fintech firms. Squeezed by new competition, incumbent banks may yet come to pine for the days when their main complaint was about regulation.