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So i have been seeing this company everywhere online on checkouts and i don't like it as i think it just encourages people to not be sensible  for example even a family member teenager talking about buying clothes using it :/ if you don't have £50 to by a jumper then don't

But today i had a dentist appointment and was 25 minutes early so sat in the waiting room staring at the wall and ear wigging i was surprised at how many people were taking on finance options with them but also that Klarna was the company behind this 


So how the fuck does it work, surely all this debt they are funding is going end in tears

Klarna makes money by charging merchants a fixed transaction as well as a variable fee. The amount of fees charged is dependent on the merchant’s country of operations as well as the payment method chosen.

Founded by two Swedish business students in 2005, the company has proven to be a great success. Klarna has raised a total of $2.1 billion and is valued at $10.6 billion, making it Europe’s highest-valued FinTech startup.

Consumers have the option to choose from a set of different payment options, ranging from paying directly (and up to 30 days later) to multiple interest-free rates. Payments can be made online (e.g. through PayPal), via bank transfer, or the Klarna mobile app.

With bigger purchases, Klarna also allows you to finance with a maximum run rate of 36 months and multiple payment installments. 

Consequently, Klarna does not charge the consumer but the retail stores it works with. There are no interest, fees, or late charges. Payment approval for consumers depends on a soft credit check (without affecting your credit score), your credit history, age, salary, and other factors.

So why would an online store give away shares of their revenue to have payments processed? Because, as the company states, having Klarna as your payment solutions leads to a 44% increase in orders (i.e. conversion rate) and a 68% increase in order volume.

Another big advantage for the merchant is the fact that whether or not the customer ends up paying, Klarna already transfers the money for the transaction.

How Does Klarna Make Money?

Klarna makes money by charging merchants a fixed transaction fee and a variable percentage fee. The fees are dependent upon the payment method the customer chooses as well as the country.  

Taking the United States as an example, businesses must pay a $0.30 transaction fee. The variable fee ranges anywhere from 3.29% to 5.99%.

Klarna offers a variety of payment methods, ranging from direct checkouts to loan financing. For its Instant Shopping solution, which allows customers to check out within a matter of a few clicks, Klarna charges its merchants:

A $30 monthly product fee
A fixed $0.30 transaction fee
Variable fees up to 3.29% for onsite and 3.79% for offsite sales, respectively

For users that don’t want to pay immediately, Klarna offers a variety of financing methods. These include 4 Installments, Financing, and Pay in 30 days.

With 4 Installments, as the name indicates, customers can settle their bill over the course of 4 payments (with 2 weeks in between each payment). Klarna charges merchants a $0.30 fixed fee as well as variable fees up to 5.99%.

Klarna Financing allows customers to spread the cost by paying monthly. Customers will complete a minimum of 3 payments while the payment period can last up to 36 months. Klarna charges merchants $0.30 fixed and 3.29% variable fees.

On top of that, consumers will have to pay interest on the loan, which can range from 0% to 29.99% APR. This gives Klarna an additional stream of income.

According to Crunchbase, Klarna has raised a total of $2.1 billion across 21 rounds of debt and equity funding.

In September 2020, Klarna became Europe’s highest-valued FinTech startup with a valuation of $10.6 billion. It also became one of the fifth highest-valued FinTech’s worldwide, next to companies like Robinhood or Stripe.

In the first half of 2020, Klarna generated sales volumes and revenues of $22 billion and $466 million, respectively. The company posted a net loss of $59.8 million during that same period.

Edited by DoINeedOne
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PayPal offers the pay in instalments option. Klarna seem to be trying to muscle in on this.

I suspect the problem for them is going to be the uptake of their service by merchants. We were asked about integrating this with a client's website just last week and the quote was for 30 hours with only a medium degree of confidence.

The documentation makes bold claims about customers being more likely to purchase if the Klarna header is shown at the top of the merchant's website but I'm not so sure about that. I'd never heard of it. I have heard of PayPal and they have simpler implementation code.

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  • 1 month later...

Looks like the big banks are out looking for that klarna scalp. Lots of talk about banning it - why? It's 0% finance so much better than overdrafts or credit cards. I don't agree with buying things on the never never but that seems to be the way of the world now 

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14 hours ago, spunko said:

Looks like the big banks are out looking for that klarna scalp. Lots of talk about banning it - why? It's 0% finance so much better than overdrafts or credit cards. I don't agree with buying things on the never never but that seems to be the way of the world now 

I used Klarna to purchase a parachute and it's a hassle if you want to clear the balance early, not possible and the way Klarna charge to your credit card puts your head in a spin. On/off/on/on - I'll stick to plain vanilla options in future.

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A second client has asked about integrating Klarna.

I thought to ask them if they had some sample code in ASP.NET C# so as to try to nail down a time estimate for the integration.

The contact form on their website doesn't work unless you submit a file, so I picked a picture of a ship. Then it told me there was an error.

I called them and the lady I spoke to didn't seem that knowledgeable and didn't have any documentation or code samples to offer.

So that's the second merchant to baulk at the 30 hours development estimate and drop the idea, even though their Klarna account has been created and is ready to use.

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