Swedish startup Klarna has raised a fresh funding round of $650m at a post-money valuation of $10.65bn, making it by far the most valuable fintech in Europe.

The buy-now-pay-later company, which is making a big push into the US market ahead of a probable IPO, was last valued a $5.5bn in August 2019.

The company has benefited from the increase in online shopping during the pandemic, and investors are betting that this is an accelerating trend.

Sebastian Siemiatkowski, cofounder and chief executive of Klarna, said: “We are at a true inflection point in both retail and finance. The shift to online retail is now truly supercharged and there is a very tangible change in the behaviour of consumers.”

The company allows shoppers to pay for products bought online later in the month or in instalments, effectively giving them an interest-free loan. For taking on this credit risk, Klarna charges retailers such as Asos or H&M each time it is used. Retailers like the service because they think it encourages shoppers to buy online.

Silver Lake, the US private equity group, put in $500m of the fresh money in a further sign of how American buyout companies are ferociously snapping up growth assets. Silver Lake has been particularly active throughout the pandemic taking stakes in Airbnb, Twitter, Expedia and Reliance Retail.

Singapore’s sovereign wealth fund GIC, BlackRock and HMI Capital also put in money. Others, like Merian Chrysalis, TCV, Northzone and Swedish media house Bonnier have taken the opportunity to acquire shares from existing shareholders.

Egon Durban, Silver Lake’s co-chief executive, said: “Klarna is one of the most disruptive and promising fintech companies in the world, redefining the ecommerce experience for millions of consumers and global retailers, just as ecommerce growth is accelerating worldwide and rapidly shifting to mobile.”

According to Klarna, the new investment will help the company grow its global presence with a focus on the US where the company is growing particularly rapidly and now has more than 9m consumers.

Klarna is rare among European fintechs in that it has pretty much always been profitable since it was founded in 2005, with the exception of 2019 when it made a $93m loss. This was mainly due to challenges in the American market.

Despite originally seeing slow growth in the US, Klarna told Sifted in August 2019 that it was on the cusp of tapping into a monumental trend.

“There has been a massive amount of demographic shifts in the UK and in the US the last ten years that we were unaware of. Although credit card volume has grown about twice, debit card volume has grown tenfold and 70% of millennials in the US do not have a credit card, they only have a debit card,” Siemiatkowski told Sifted then.

The funding round of $650m will surely put Klarna one step closer to an IPO, which the company has said is most likely to happen in the US.

Other valuable European fintech companies include the London-based neobank Revolut, which was worth $5.5bn at the last fundraise, and German challenger bank N26, which is worth $3.5bn.

Mimi Billing is Sifted’s Nordic correspondent. She also covers healthtech, and tweets from @MimiBilling