Cross-border is next big shift in e-commerce payments nobody’s paying attention to, says Klarna boss

Klarna Money2020

In ten years since launch, e-commerce payments firm Klarna has quietly grown to be one of Europe’s most highly-valued financial tech startups with 45 million users, 65,000 merchants, 1,500 employees and a $2.25bn price tag. Launching in the US six months ago and now live in all states, co-founder and CEO Sebastian Semiatkowski said on stage at Money2020 Europe the region was already generating 10% of its volume last month. He also said an IPO isn’t on the cards any time soon and he’d “never” consider launching in China because of the strength of Alipay. The firm has also just partnered with Modo to accelerate merchant on-boarding globally. So where is Klarna at in its growth and what’s next? Catching up with PaymentEye during the show, he talks about why cross border is the next big shift in e-commerce, the challenges of hiring senior talent and the evolution of the Nordic startup scene.

Where’s Klarna at in terms of growth right now?

The UK and US are our startup markets, they’redoing well but it’s early days, Germany is more like growth where a lot of heavy growth is coming while the Nordics are our home turf where we’re the market leaders.

US volume and user growth is much higher than expected so that’s all very good. Of course merchant coverage always takes a long time – you have to go out there and sign them up, get them integrated so that takes long. But if we compare it to our German or Swedish launch we are further ahead in terms of merchants too.

Why was time right for the US?

People always talk about how it’s the most competitive market in the world and so on. But we just feel we have our own approach, we have our long term vision of what we want to do with the company and where we see opportunity and we just don’t see people doing the same thing we’re doing.

Some of that differentiation comes down to the nitty gritty details and some of it has to do with our company’s long term vision and to us, being in the us market is a must for that global vision we have. Our presence there is important and we’ve seen a huge uplift for our European business as a consequence of just being on the map.

How close to bigger vision are you?

I can imagine 2020, what it will look like and the US, is a very important piece of that puzzle but beyond that it’s hard to tell. In the end if you want to make it big you have to make a bet and believe in it. Ignore some of the stuff going on around you – otherwise there is just so much noise. Some of it goes away, some is real. You have to have your own vision and direction and just dare to go after it and hope you’re right.

How close to the original idea for Klarna is today’s business?

Looking at original vison documents, a lot of the things we discussed back then we have now delivered, but if I look at our vision for the next five years – those ideas were not there. We didn’t have the depth of understanding of the industry, landscape, consumers and everything going on. Some massive shifts started happening since we launched of which mobile was the more important one. We’ve been a bit slower on country roll out than I’d have liked, but faster on other things and mostly we’ve delivered what we set out to do.

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What other key shifts have impacted Klarna?

Mobile is the biggest one. The second one is there’s been a shift where consumers are willing to adopt things that connect to their financials much faster that connect to their financials than they would have done 10 years ago. If you look at younger generations you can see how much more rapidly people are adopting new technology if it works. P2P is the thing people have talked about for years and now suddenly we’re seeing traction with things like Venmo in the US or Swish in Sweden.

The other big thing that’s happening that people are not really aware of is cross border. Partly because media is dominated by big countries where that has less of an impact, but Icelandic people have been shopping cross border forever. In Sweden we’re seeing a lot of online shopping volumes shifting from local retailers to international and more niche retailers. Same in the US and the UK and meanwhile in Chinese people are buying from outside the country and that will explode in the next few years. That will be a massive shift.

Five or ten years from now we will say wow: that was a massive shift when ecommerce moved to cross border. It’ll be like when the founders of King or angry birds created this game and suddenly they were selling to people all over the world. Five years from now we’ll see people creating their own jeans and suddenly it’s the new Levis online, selling to people globally with USD1bn sales after one year. Things that were impossible ten years ago will become possible.

I guess that’s confluence of payments and logistics?

That’s the thing – digital goods are easier to distribute and that has been a challenge for retail. But now thigs like payments, customs, logistics are being solved – not over night, but it is changing.

Are you still engaged with the Nordic startup community?

Definitely – whenever entrepreneurs call I try to be available and give something back. I am a business angel myself in 10 companies in Europe.

How much has Nordic startup ecosystem changed?

Massively. At that time, Stockholm had no ecosystem of angels, VCs, no other companies that had been successful and therefore nobody to start their own or join new companies and share expertise. With companies like Spotify, Klarna and King that’s changed now. There’s still a bit of a problem around Series A funding compared to London or Silicon Valley but in general the ecosystem is very strong.

The biggest challenge for Stockholm as a tech city is for companies like us and Spotify. If we want to recruit younger or more junior people – I might be able to get a Brazilian developer who thinks it’s cool to move to Stockholm, but when I want to recruit a thirty to forty-year old executive professional who wants to take next step in career, there’s a big difference between moving to Stockholm versus Silicon Valley. We have our techniques but access to talent on senior management level is a challenge.

What would you improve?

I always kid about how we were invited to Downing Street three times before any politician came to see us, but London has been very smart at positioning itself as a an important tech hub. Swedish politicians totally missed that. Only now they’re like, ‘oh we have three unicorns and that’s more than any other European city!’. But I’d preferably not have them doing anything – it’s reached that critical mass where it’s thriving on its own accord.

I’m happy to hear the current ruling party will invest in tech through by partnering with VCs, but if you have a successful idea the world is global today. Sequoia flew in for us and they will fly in for someone else.

One thing that’s very bad is compensation in stock is very hard under current legislation. It’s kind of ironic that a country that’s all about social democracy and everything equal for everyone makes it hard to do.

One trend or piece of technology you’re excited about?

I really dislike all this management literature like the book Good to Great but there is a piece of advice I liked in there. That is: do not bet your company’s success on a single technology like fingerprint ID for example. Not that you can’t do that, there’s a company in Sweden that seems to be super successful doing that, but I prefer being a bit more controlling and put my company at stake on things that don’t matter what tech is successful as long as I can still be successful.

I am excited about cross border – how can we help consumers do more cross border? But that doesn’t make for great headlines!



You might also be interested in…

> Our coverage of the beginning of Money20/20 Copenhagen.

> Our deep-dive into one of the Monday Track Sessions covering top payment trends!

> Our exclusive interview with Wirecard’s SVP Christian von Hammel-Bonten about what the next great payments frontier is likely to be.

Missed our special edition PAYMENTS {R}EVOLUTION magazine at Money20/20? Download the FREE digital version of it by clicking on any of the articles below!


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