Klarna adds clientscl for its plans to buy now, paypa later
It’s bbeen quite a year for onlinonline financial-services comcompany Klarna, which hhas its U.S. headquarters in Columbus.
The Swedish e-commerce company signed 500 online retailers for its new service, which allows consumers to buy products now and pay for them later.
And the company’s North American operations signed on a new CEO, Jim Lofgren, replacing central Ohio native Brian Billingsley, who recently was named chief revenue officer for Dallasbased payment-service company Modo.
“We serve more than 70,000 merchants over 18 markets, and our data in the U.S. market is really very similar to other markets,” Lofgren said recently. “We’re making a very significant impact for our merchants.”
Founded in 2005 in Sweden by Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson, Klarna has grown quickly in Europe, taking its payment services beyond its home base in 2008 to Norway, Finland and Denmark, and in 2010 to Germany and the Netherlands.
While continuing to expand in Europe, Klarna launched in the United States in September 2015 with its first clients — Overstock.com and Shoes. com. Today, clients include Microsoft, TaylorMade and Lenovo, too.
A big part of the reason that merchants are signing on is Klarna’s policy of fully disclosing interest rates to customers before they make a purchase — typically around 8 percent or 9 percent — and not varying the interest rate by customer.
That’s unlike the experience that customers have with other financing providers, where interest rates can unexpectedly come in as high as 30 percent.
The stunned customers “consequently abandon their purchase,” said Lofgren. “There is an ethical consideration here, too. Do they have a reasonable chance of paying off their debt?”
Under Klarna’s system, consumers enter basic information — typically date of birth and the last four digits in a Social Security number
— and, using Klarna’s sophisticated computer programming, find out instantly whether they’ve been approved and can complete their purchase.
“We’re being very transparent, giving everyone the chance to have the same interest rate,” Lofgren said. “We’re seeing a lot of other merchants aligning with our train of thought. Once you introduce our payment option, most retailers see average order size goes up.”
The primary reason for this is that consumers see at the point of sale how much their monthly payment will be. “When they see it’s eight bucks a month, maybe
they’ll decide they can afford another item.”
Klarna’s system is part of a trend in payment to “simplify, simplify, simplify,” said Lee Peterson, an executive vice president at WD Partners, a Dublin retailconsulting company.
“This is banking of the near future,” Peterson said. “So simple, easy to use, easy to find out where you stand, and of course, more costeffective than most current options. This reminds me of when Amazon came up with the ‘one click’ idea. Now, it’s what we all expect.”
Overall, merchants using the Klarna system have seen an average 58 percent increase in order value, Klarna reports.
At computer and smartphone company Lenovo,
for example, “we drove a 45 percent increase in average order value with Klarna’s flexible online financing,” said Gianfranco Lanci, Lenovo’s chief operating officer, in a statement.
Klarna’s merchants also have seen a 25 percent increase in repeat purchases because Klarna does not require returning users to go through the application process again, as some competitors do.
Klarna also has borrowed an idea from smartphone companies by introducing a subscribe-to-own or subscribe-to-upgrade program for Microsoft, as well as TaylorMade golf clubs.
“We’re offering (TaylorMade) players a program where they buy a driver and pay over 18 months, but
after 12 months they can actually send it back and get the latest version — and pay the same fee,” Lofgren said. “We’re seeing tremendous interest in upgrade programs.”
In the coming year, Klarna will roll out other products, he said, not divulging specifics.
“We’re looking at rapid growth,” Lofgren said. “It’s going to be exciting, but it puts us in an interesting spot as demand for people will increase in Columbus and New York,” Klarna’s other U.S. office. “In Columbus, we have around 70 employees, and as we grow, we’ll have a need for talent.”