Welcome to the Qliro Q3 Presentation 2025. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now, I will hand the conference over to CEO Christoffer Rutgersson. Please go ahead.
Great. Welcome to today's Q3 presentation for Qliro. I'm Christoffer Rutgersson, the CEO here since a bit more than three years. With me today, I also have our new CFO in the background. He's only been here for a few days, so I will run through the financials as well today. The agenda for today, I will walk through some of our strategic highlights as usual, then we jump into the financial update, talk a bit about the outlook, and then end with some Q&A. First of all, we still see a big opportunity to build a new European leader in Composable Payments, starting in the Nordics where we want to achieve kind of market leadership within the next few years. We are taking clear steps in that direction by accelerating our total payments volume growth to more than in Q2.
We are up to 50% volume growth in Q3, up from 37% in Q2. We also see kind of a change in trend and a turnaround in the BNPL share of checkout or share of the total volume, leading to a BNPL volume growth of around 20% - 90% in Q3, up from previous where kind of BNPL volume had been fairly flat. We think that's a good indicator for kind of upcoming loan book growth as well as the income growth, which we still kind of estimated around 15% in Q4. We also continue to see a strong momentum in the SME segment, with more than 30% of our volume growth coming from the SME segment. New sales on the SME side are reaching a new all-time high, both in September and also again in October so far, if we compare to previous months.
We see a big step up in kind of the commercial momentum. We'll come back to what that means. We also have a good traction in our new Nordic market. We launched our Norway sales office August last year, and we launched in Finland in April this year. We see a good momentum in both markets. So far, since market launches, we have more than SEK 2 billion in total payments volume signed in new contracts from new merchants in those markets. Also, as we announced after the Q2 report, we have initiated some organizational changes combined with our other initiatives to accelerate scalability, efficiency, and kind of the profitability, with profitability being expected already in Q1 next year. Overall, our vision is to build a European leader in Composable Payments. We want to be the best partner for modern e-commerce companies that have a modern tech stack.
We're doing a lot of partner integrations to make sure we are leading in this field. We're starting in the Nordics, but we already have global capabilities, and most of our merchants that start processing with Qliro today use us for all their international volumes, not only in the Nordics. Our mission is to deliver a world-leading experience for merchants in their customer journey, and we're taking good steps in that direction also in Q3 with a couple of product launches, especially on the onboarding side, where we're improving the onboarding experience so we can be quicker to onboard new merchants with a good experience. We have the ambition to become the Nordic market leader within the next three to five years.
We still have less than 5% market share in the Nordics, but if we keep up growth at this level, we expect to be a market leader within the next three to five years. Going into kind of the strategic highlights, we launched in Q2 our new generation of the checkout, Checkout Gen 3. Internally, we call it Generation Lion, with the strongest checkout performance in the Nordics. We have done extensive A/B testing of new merchants going live on the platform, comparing their previous supplier of payments to our new checkout. This is something we initiated already in the autumn last year when we launched the second generation of the checkout last year, kind of the summer of 2024.
We did a big kind of marketing campaign where we offered merchants to do A/B testing, and if we would lose a single A/B test, we would pay SEK 1 million in penalty fee. So far, we haven't lost a single A/B test against any Nordic or global competitor. We've done A/B testing against all of the niche banks that are in payments. We've done it against the market leader, Custom, Form Krona Checkout, but also towards some of the global PSPs like Adyen. Typically, we see a conversion uplift for merchants of around 5%, which directly increases the merchant sales, which is also why we see a big intake of new merchants upgrading to the Qliro platform.
Also, if compared to the niche banks that are also offering Pay Later services, we typically see also an uplift of 30 %- 40% in share of Pay Later, in kind of share of the total payments volumes. Given that we have a stronger brand and a great consumer experience that we invested a lot in, we see kind of a higher share of Pay Later, which is good for us, it's good for the consumer, and it's also good for the merchants that typically reduce their cost of payments when shifting to us, given that they get a better payment mix in their checkout on top of the increased conversion. With that said, if we look into why leading merchants are choosing Qliro, we are positioning Qliro as the leader in both merchant experience and consumer experience.
That could be compared to, for example, Klarna that in the past were strong in this field, but then sold their checkout and now focusing only on the consumer experience and went into more of the marketplace business, a bit like Amazon, focusing on kind of price comparisons and not only the merchant experience. We have the niche banks that typically don't invest as much in product and the consumer or merchant experience, but offer this kind of financial services. We have the global players that are offering payments but don't have their own Pay Later, so don't have the economic strength of having their own Pay Later solutions. This leads to a couple of benefits for merchants. First of all, the leading conversion, which drives more sales for the merchants.
Secondly, we're offering upsell functionality where we can keep the order open, enable consumers to add more products into their order, which drives a higher order value for the merchant and hence a gross margin tree boost for the merchants. They get more money per order. We're focusing a lot on having a very modular and composable checkout that fits well into the modern partner ecosystem for merchants. Hence, we're working a lot also becoming a partner with the merchants focusing on performance. That's what's been leading to some of the performance metrics I just showed. We're also making sure we have a premium consumer experience, so we make sure consumers are happy and coming back again and again.
We see the financial impact of that, that we are reducing reminder fees, for example, but on the other hand, we believe that if the consumers are happy with the experience, they will come back more often, both to us and to our merchants, increasing the customer lifetime value, both for us and the merchants. Overall, this typically leads to a positive business case of kind of 10x - 20x in return on investment compared to the kind of cost of change when kind of merchants are changing providers. Overall, as I mentioned before, we see a total payments volume growth of 50% in Q3.
On top of that, we have signed merchant agreements with volumes that are expected to take us to around additional 34% growth compared to our volume the last 12 months, leading to a total payments volume expected at kind of an annual basis of SEK 21.5 billion when all the merchants are kind of fully up and running. That's kind of very good for also kind of the growth kind of going forward. We have experienced challenges during the spring in kind of a reduced kind of share of checkout for BNPL volumes that we also presented in the Q2 report. We see that turning around now, leading to a growth in BNPL volumes. We see a 90% growth in BNPL volumes.
The BNPL volumes is basically all our different part payments products, which is the most profitable payment products we have, representing around 90% of the gross profit in the business. That we see a volume growth in BNPL is very positive. We expect that to lead to a growth in the loan book and then to income and gross profit in kind of the coming quarters. If we look at the SME business, overall in merchants, which is primarily driven by SME, but also including enterprise, we're growing more than 100% in merchants. We still see kind of an acceleration in the number of merchants kind of upgrading to Qliro and being onboarded to the platform. Q3 is a high number despite basically half of Q3 being vacation months where typically merchants are not making technical changes in July and the first half of August.
The underlying momentum coming into the rest of the autumn is even stronger than we see here. On the right-hand side, you see the contribution to our operating income from the SME business of around SEK 14 million in Q3, representing 15% of our total operating income. Most interesting, we can see that new cohorts of SME business are kind of adding more and more operating income. We see a good retention of previous cohorts being onboarded in kind of even back to kind of before 2024. We see a big value of kind of continuing to invest in accelerating the SME space and continue to accelerate volume to drive kind of the growth going forward. If we look at Norway and Finland, where we have launched during the last year, we continue to gain increased momentum. So far, new merchant contracts represent over 15% in volume growth.
More than SEK 2 billion in transaction volume or total payments volume that we signed so far. Finland, of course, being a bit behind Norway as we launched Finland eight months later than Norway. The first months in Finland, we have a stronger momentum than we had the first months in Norway. We are very optimistic about Finland catching up over the next 12 months as well. On top of that, we are supporting our merchants in processing payments also outside the Nordics. That's also why we're seeing a bit stronger volume in Pay Now transactions than in Pay Later transactions as we only manage Pay Later on our own products in Sweden, Norway, Finland, and Denmark. We're also addressing some larger European merchants that could use Qliro for the Nordic business in the future. That's an opportunity that's not materialized yet, but we continue to focus on it.
Jumping on to some of our initiatives to increase efficiency and scalability in the business, these different areas were presented also in Q2. After the second quarter, we also launched initiatives on the organizational side to streamline our organization and improve basically the setup, especially on our product and tech side, as well as on analytics and getting sales and marketing closer together. Combined with that, reducing staff a bit. We have done organizational changes that amount to items affecting comparability for severance and notice period in Q3 of around SEK 20 million. We expect a bit more in Q4, up to SEK 25 million in total for the second half of the year as announced previously. On top of that, we're doing initiatives to improve our Pay Later offering and increase the share of checkout of our BNPL products even further. We are investing in modernizing our platform.
During the summer, we went live with a new platform for our deposit products to widen the offering for consumers on basically our funding model where we're taking consumer savings, both in different euro markets as well as in Sweden. In Sweden, we go direct and that's where we have the new platform. On top of that, we're adding more euro markets going forward to get a better funding base. We're also changing our core platform for Pay Later. During the last month, we've been live with the first transactions on the new platform. That's a very good step forward, and we expect to migrate all of Sweden to the new platform during the first half of next year. We're also investing in process automations, especially on the operations side as well as in sales, marketing, and basically across the business, both from AI but also pure process optimizations.
We're also working hard on making sure we become smarter in our credit underwriting. We'll come back to that in the financial part of the presentation, but we are making good steps and becoming more effective on lowering our credit losses. We are making sure we have a strict cost control now until we get into profitability in Q1. These different areas combined with our expected growth will take us to profitability in the first quarter next year. Looking ahead, we still have our midterm ambition to build a market-leading position in the Nordics, and we are accelerating in that direction. Our commercial momentum continues to build up, and we expect to accelerate TPV growth with 34% on top of the last 12 months, only based on what we signed so far.
We continue to expect that we sign even more volumes month over month going forward as the commercial momentum accelerates. We're also running multiple initiatives to accelerate our BNPL growth and the share of checkout or share of the volume growth that is leading to BNPL volumes, as that's the main income driver. We also focus a lot on SME and expect that to continue to grow with more than 30% of the growth in volumes and typically more than double profitability that we see in the enterprise space. The Nordic expansion, we see a lot of potential, and we expect that to contribute even more also to income and gross profit growth going forward as more and more merchants in Norway and Finland come live on the platform.
Short term, we're focusing on improving not only income generation but also scalability and efficiency to make sure we get to profitability in Q1. We're also reiterating our guidance of around 15% income growth in Q4 on the back of the 19% BNPL growth we saw in the third quarter. With that said, let's jump into some financials. Some of this we already mentioned, we see the strong volume growth. However, that is not leading to income growth yet. We're seeing operating income growth of 3% in the quarter, and we'll come back to kind of what is kind of holding the operating income growth back a bit from previous expectations. Credit losses are fairly flat or slightly declining despite the growth in volume and Pay Later volume and the loan book growth.
That's a good step in the right direction, and we expect that to become even lower in the future given the trends we see on debt collection. Overall, gross profit was fairly flat in the quarter given this dynamic as we see a lot of new Pay Now volume as well as a lot of new BNPL consumers. We see a slight increase in variable cost on top of the TPV growth, but we expect that to kind of stabilize in line with the TPV growth in the future. Operating profit adjusted for items affecting comparability landed at -SEK 23 million in the quarter. Given the cost savings we now do with the organization and the other initiatives, we expect that to reach profitability by Q1 next year.
If you look at the loan book, we see that kind of coming back to accelerated growth compared to Q1 and Q2, growing 6% in the quarter driven by primarily the increase in BNPL volume and the share of BNPL volume from new volume. What we see here on the right side is the share of total payments volume, that's kind of our most profitable Pay Later products, the BNPL volume. That's been around 19-20% in the past, declining during the spring down to 14% in Q2, then increasing every single month since then. We are at 15% for Q3, we were at 16% in September, and we see slightly higher numbers in October. That's kind of very positive. It's basically as we encounter new merchants with new volumes, we also encounter new consumers, and it takes some time for the new consumers to get used to Qliro.
Typically, we see consumers start using our invoice products first, where we have seen a stronger volume growth in invoice, similar to the TPV growth. When the consumers are used to invoice, they also start to trust us to use us also on the Pay Later side. We see that now with kind of the BNPL volume as share of TPV start to increase again. If you look at the operating income development for the quarter, as I mentioned, we were 3% up, a bit down compared to previous expectations. If you're looking at new merchants that have been onboarded to the platform since the beginning of 2024, they are adding SEK 17.7 million in operating income in the quarter. The challenge in the income growth has not been the new merchants, but rather the headwinds in the backbook, especially in the existing enterprise portfolio, primarily driven by three things.
First, the lower share of BNPL, as I showed you on the previous page, has been going down from around 19% - 14% in Q2, which means the growth in the loan book has been a bit less. Hence, we make less money on the historic enterprise portfolio than in the past, as that has been declining. As that is turning around to growth, we expect that to not be a headwind in the future. We also see slightly less reminder fees, given that we have improved both our credit underwriting as well as our kind of downing chain and consumer experience. We see that also when we look into credit soon, that we are reducing the share of consumers going to debt collection. We also have still some repricing effects from the backbook, primarily to former group merchants.
As that loan book from those merchants is maturing, we expect that repricing effect to become less and less in future quarters. If you look at the credit side, credit losses were fairly flat in the quarter, - 2%. We see very good leading indicators on the exports to debt collections. Given that our credit strategy is to use solution rate agreements, we know already in advance how much we're going to get paid for the non-performing portfolio when it goes to debt collection. When the debt is going to debt collection, we basically know how much our future credit loss is going to be. We see overall for both invoice and BNPL, we have a 70% reduction in the debt collection rate.
We've looked at BNPL only, which typically represents the majority of the credit losses, given that we have a longer maturity on those loans, as well as typically larger balances per consumer. We see a 40% improvement in the debt collection rate across all our markets in general. That's a very good leading indicator for the future development of the credit losses. If you look at the restructuring program or the efficiency program, including the organizational changes, we are taking roughly SEK 20 million in items affecting comparability in the quarter. This was announced in the end of September, and we have executed on most of it during the last two weeks of September. Some of that is slipping into October, so we expect another up to SEK 5 million in items affecting comparability for the restructuring, also hitting Q4.
Overall, the program has been running according to plan, and we expect that to bring us back to profitability by Q1, as mentioned before. If you look at the cost base, we are increasing in variable cost, as mentioned, a bit more than the volume growth, driven by a lot of scoring costs and identification costs for new consumers. We are investing in our market expansion, so we are still increasing on the sales and marketing side. We see a slight increase in D&A, as more of the CapEx gets activated and written off. We are fairly flat on fixed cost in general. It is the investments in growth as well as in product development that is representing the growth in the cost base. If you look at capital, we are still well capitalized after Q3. With that said, let's go into the outlook. Looking ahead, we continue to accelerate.
We expect around 15% income growth in Q4, with continued acceleration in 2026, as more of the volume growth is converting into BNPL volume growth, which in turn is leading to loan book and income and hence gross profit. We expect that growth to accelerate going forward on the back of the success in the commercial momentum and the volume growth. We are expecting additional 34% volume only from merchants already signed, and we continue to sign new merchants every month. We expect this to increase going forward. We are growing in both the SME and enterprise space, and we will continue to build on the momentum also in Norway and Finland. The team in Finland is still fairly small, but making good progress.
We will focus on initiatives to accelerate the income generation from the new volume, improving our scalability as we're taking on a massive amount of new merchants, and also work on the internal efficiency. With that said, we will focus to also, of course, living up to our mission to deliver a market-leading experience for our merchant and the consumer journey as we continue to grow. With that said, I open up for the Q&A.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more phone questions at this time, so I hand the conference back to Christoffer for any written questions.
We have one written question about the cost connected to the divestment of the previous kind of digital banking or kind of private loan portfolio. We divested our private loan portfolio in the summer of 2024. Most of that cost was taken at that time, and then we have some final costs for that hit in Q2, but we don't have any material costs for that in Q3, and the remaining non-performing exposures are kind of fully covered. We don't expect any more costs kind of connected to the divestment of that business area. Now we focus fully on payments and making sure we get growth and profitability in the payments business.
We also have one question on that we are reiterating the 15% operating income growth for Q4 and profitability in Q1 2026, and if we can quantify the key drivers and the biggest sensitivities that could move that timeline. The biggest drivers are the combination of cost savings as well as the expected volume growth of BNPL, that in turn is kind of driving the growth of our loan book, and this is the loan book that is primarily driving the income and gross profit. Of course, kind of the biggest sensitivity to that is hence the kind of the BNPL volume growth. Given the growth we see in Q3 of kind of 90% of BNPL volumes, we are fairly comfortable that we will live up to both operating income growth in Q4 as well as the profitability in Q1.
We also have one question on if we've seen any changes in consumer behavior through Q3 and early Q4 on conversion, basket size, and delinquency. Of course, on the delinquency, as mentioned, we see a much lower rate of consumers going to debt collection now than in the past. Compared to a year ago, we see 40% less on the BNPL products, which is a very good leading indicator that we expect credit losses to reduce as ratios on the loan portfolio and the volume also going forward. We also had one question of kind of the previously announced bid interest that we announced during the summer from the board, and it's more of a board question than a CEO question. If and when kind of that bid interest materialized to a real bid, that of course would be announced. Do we have any more questions?
No more questions at this time. I hand over to you, Christoffer, for any closing comments.
Great. Thank you very much. If you have any more questions, don't hesitate to reach out to me or our investor relations, and we're more than happy to answer. Thank you for today, and if no more questions, we meet in three months again. Thank you.