Swedish payment company Klarna, which lets online shoppers buy now and pay after their purchases have been delivered, has just started a push into the giant US market.

By separating buying from paying, Klarna says it offers shoppers a more convenient experience.

New customers only need to enter their email and billing address to make their purchase – they fill in their other details later when it’s time to pay. For returning customers, it's a one tap payment experience.

Klarna pays the retailer immediately and collects payment from the shopper later.

Chief executive Sebastian Siemiatkowski says that 10 years ago when the company was founded, it was important to offer post-delivery payments because consumer trust in internet commerce was low.

“Klarna was founded with the idea of simplifying buying,” he told Banter. “Shopping online was – and in many cases still is – far too complicated and insecure without enough attention paid to the consumer experience. We saw the opportunity to create a payment service that would change all that, putting the consumer experience first and combining simplicity with safety”.

These days it’s all about convenience.

Paying later “is still important for the consumers, but more as a way to limit the friction during the checkout process. For the retailers, this means more successful sales and a guarantee that they will get paid immediately while Klarna assumes all the risk,” Siemiatkowski says.

“We are primarily about creating a great and seamless consumer shopping experience on all devices, and I believe the demand for that type of service only will increase as online shopping continues to grow.”
Founded in Stockholm in 2005, Klarna says it is one of Europe's fastest growing companies.

It claims a 10 per cent share of the e-commerce market in Northern Europe, with 35 million end customers and 50,000 merchants, including household names such as Spotify, Disney, Samsung, Wish and ASOS. It processes around 250,000 transactions a day.

The company began operations in the US in August after signing up online retailer Overstock.com.
Siemiatkowski says the US launch was an important step in the company’s vision of becoming “the world’s favourite way to buy”.

“While our ambitions, of course, are much higher, the US market is so big that if we were to get a half a percentage point of market share it would have a tremendous effect on our company and growth,” says Siemiatkowski, one of the company’s co-founders.

In the US, PayPal also offers a service that lets customers pay after delivery, but Siemiatkowski believes Klarna’s ease of use will help it win over consumers.

“We are convinced that simplicity and a great consumer experience is the key to long-term success for payment services. Complicated checkouts with log-ins and passwords are a part of the past. I believe the easiness behind the Klarna checkout makes it very competitive in all markets,” he says.

Klarna, which means ‘brighten’ in Swedish, doesn’t have any current plans to launch in Australia but says it is always monitoring new markets.

By paying merchants before it receives payment from customers, Klarna assumes the credit risk but says its risk assessment protocol means it has only very limited problems with non-payment.

“By using advanced data analytics and modelling taking almost 200 factors into account, Klarna gives approved consumers a seamless buying experience and uses incremental identification to deter potential fraudsters,” says Siemiatkowski.

When it comes time for consumers to pay for their goods, Klarna says it accepts all major payment methods such as pay after delivery, pay monthly, card payment or direct bank transfer and when it enters a new market it tries to include the popular local payment options.

In the longer-term, Siemiatkowski believes the future of payments will be increasingly shaped by mobile. “I predict that fast and agile payments companies will have a lot of opportunities in that type of market.”

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