Klarna has secured a $1bn fundraising round bringing the valuation of the buy now pay later firm to $31bn.
The four times oversubscribed round makes Klarna the highest-valued European private fintech after a surge in online shopping during the pandemic.
It comes amid speculation that the Swedish payments firm will go public with chief executive Sebastian Siemiatkowski telling Reuters a direct listing was possible.
This process would see Klarna circumvent the cost of a traditional listing by not selling any new shares and has been used by other tech firms like Spotify.
The company hit $1bn in annual revenue for the first time last year with operating income of $1.2bn. Losses widened by 50 per cent as a result of increased costs associated with international expansion.
Klarna also announced it would pledge one per cent of the capital raised to a sustainability initiative which is due to launch next month.
“Consumers want transparent products to help them bank, shop and pay that reflect the way they live their lives, not just outdated traditional models. Each and everyone of us at Klarna will continue to work hard on this, but it is also time for us, with our culture of change, disruption and innovation, to focus on tackling bigger, more complex issues,” Siemiatkowski said.
Klarna is the leading buy now pay later firm which allows customers to spread out the cost of purchases over a period of interest-free installments. The firm makes money by taking a fee from merchants each time a customer makes a purchase.
But the sector has come under scrutiny recently as the City watchdog laid out plans to regulate the sector amid concerns vulnerable customs are struggling with repayments.
Under the plans, providers will be subject to FCA rules and undertake affordability checks before lending and ensure customers are treated fairly.