Klarna (KLAR) CEO Sebastian Siemiatkowski says that President Donald Trump should go even further in shaking up the U.S. credit card industry, which he called an “extraction machine” that takes money from poorer consumers. In an interview on Bloomberg TV, he pointed to Federal Reserve data showing that credit card rewards shift about $15 billion a year from lower-income users to wealthier ones. He said that people with high credit scores earn about $200 a year, while subprime borrowers lose around $55, making the system unfair and, in his words, like a regressive tax.
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Trump recently called for U.S. lenders to cap interest rates at 10%, but Siemiatkowski argued that the limit should be even lower, suggesting 0% in a social media post. Klarna, which started as a buy-now-pay-later company, has since grown into a full lender and now offers its own credit card. Over the past year, the volume of its “fair financing” loans jumped 139% worldwide and 244% in the U.S., with American interest rates ranging from 0% to 35.99%. He added that Klarna complies with regulations and that most customers pay in fixed installments, so few end up paying the highest rates.
So far, the Trump administration has not explained exactly how any new credit card rules would be put in place, but the threat is already affecting the market. For instance, JPMorgan Chase (JPM) CFO Jeremy Barnum warned that the proposals could seriously disrupt the bank’s business. Meanwhile, five-star Wells Fargo (WFC) analyst Mike Mayo said that a 10% cap could wipe out a year’s worth of credit card profits and reduce lending. However, he also noted that if traditional credit becomes harder to access, companies like Klarna could benefit as more people turn to buy-now-pay-later options.
Is Klarna Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on Klarna stock based on nine Buys, two Holds, and zero Sells assigned in the past three months, as indicated by the graphic below. Furthermore, the average Klarna price target of $44.36 per share implies 46% upside potential.
