Swedish payments firm Klarna claims to be turning over EUR2.3bn (USD3bn) in transaction volume annually via an online invoicing service that lets users buy goods and pay for them later. Here deputy CEO and co-founder Niklas Adalberth talks to StrategyEye about mobile, expansion and rivals in the highly-competitive European payments space.
¤ How does Klarna work?
We’re trying to bring the smooth experience you have in a physical shop online. You enter your name, address, date of birth and then press purchase. We do an instant credit check on you and if that comes out well, we approve the purchase and the merchant ships the goods. You transfer the money 14 days later. We pay the merchant no matter what happens, so we stand the end risk.
¤ How does your model work?
We take a similar percentage fee as credit cards from the merchant…about 3% on average. It’s not a fee. The merchant gets an increase in sales because the customer feels so safe using our service since they don’t transfer the money until they receive the goods.
¤ Who are your biggest competitors?
PayPal, which owns a similar company in the US called BillMeLater. The difference between BillMeLater and Klarna is that it is a credit-focused solution, whereas Klarna is about removing risk for both consumer and merchant. People use us because they want to play safe and they want to pay when they are sure they have received the goods.
¤ How do you differentiate yourself from PayPal?
With companies like Square and PayPal you have to enter your credit card details. Klarna is an end-to-end system; we do everything. This makes it possible for us to innovate in payments because we are not based on any other kind of infrastructure. When you pay with PayPal you have to go through this complicated registration process to get this wallet, you don’t have to do that with us. You don’t have to pre-register and you settle 14 days later. With PayPal you settle directly. Changing the VISA/MasterCard standard is quite complex and you can’t do that in a short time.
¤ What percentage of e-commerce transactions does Klarna represent in Sweden?
Around 25%. In Sweden, 60% will go with Klarna at the check-out. We’re not an alternative payment option, we are the main payment option by far. And I see that growing, also in the other countries we are active in. We’re not just increasing sales, we’re increasing market share.
¤ How many merchants use Klarna?
More than 20,000 are now connected. We have everything including one of the largest book stores in the Nordics, Ad Libris and all kind of different industries – clothing, electronics, everything.
¤ How popular is your mobile product?
More and more. We haven’t spent enough time on it but we have a good product for it and I think it’s going to grow significantly. More traffic is coming to e-commerce sites from mobile and it makes even more sense to have a simple payment option when you shop on mobile.
¤ What percentage is coming from mobile now?
I do not know that number but it’s low.
¤ What is driving wider growth in e-commerce?
Convenience and supply. The further into the countryside you are, the more you will use online shopping because local supply is not that big.
¤ Will mobile play a bigger role?
For sure – as more and more people go online with their phone. I heard merchants are getting 20% of traffic from mobile phones now. I don’t think it’s going to be an in-app experience because people don’t want to download an app. It will happen in the normal browser on your phone – that is where the traffic is coming from and that will continue.
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