The news: Klarna applied to be a Utah-chartered industrial bank, per a press release. 

A charter and FDIC backing would let Klarna bring its banking operations in-house, covering payments, savings, credit, and merchant services. 

Klarna has held a European banking license since 2017 and currently offers US banking services through a network of partner banks, including WebBank, which holds its US savings accounts.

Why this matters: A charter would eliminate a structural cost that has limited Klarna's rewards competitiveness. Bringing its banking services in-house avoids any revenue-sharing, which could help Klarna compete better with US card issuers on rewards. The rewards gap is visible in the membership tiers Klarna launched in December:

• The Premium tier costs $19.99 per month and offers 1.5% cash back.
• The Max tier costs $44.99 per month ($539.88 annually) and offers 2% cash back, comparable in price to Citi Strata Elite but with weaker travel and hospitality benefits.
• Cash back offers can also be redeemed through partners such as Air France-KLM, British Airways, SAS, Global Hotel Alliance, and Wyndham.

Many no-fee US credit cards already offer 2% cash back without any subscription, making Klarna's offer hard to justify on rewards alone.

But credit cards net much higher interchange than Klarna’s debit card, which will still limit Klarna’s ability to fund rewards.  

Implications for fintechs: Klarna is deepening its commitment to compete on value for US consumers who want better rewards more so than it is trying to compete directly with retail banks for deposits. 

As Klarna translates improved profitability into more competitive rewards, other fintechs need to strengthen their rewards to avoid losing their user bases.

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