Klarna sees its value slashed by 85% in latest round of fundraising

The company, which enjoyed stellar growth while also being criticised for potentially leading shoppers into unsustainable debt, announced the valuation after the conclusion of a difficult $800m funding round as investors continued to question the true worth of many tech businesses.

Klarna, which in May announced its first ever large-scale job cuts, shedding 10% of its more than 7,000 staff, said that its popularity was continuing to surge and that with more than 150 million customers globally, it is bigger than American Express. Klarna has more than 16 million UK customers.

Investor enthusiasm for fintech companies, especially buy now, pay later firms, has waned as consumers struggle to cope with the cost of living crisis and the risk of defaults on payments rise.

Meanwhile, deep-pocketed Silicon Valley rivals such as Apple have moved into the market with products like Apple Pay Later.

Last year, the Treasury announced that the Financial Conduct Authority was to be given powers to regulate firms such as Klarna and Clearpay, amid fears that a surge in their popularity during the pandemic could leave consumers with high levels of debt.