If we ask any online shopper the one thing they’d love to change about the experience in online shopping, they’ll tell us about the onerous check-out process. Well, one CEO made his business model based on that critic. The company was founded in Sweden 2005 with the goal to make online payments safe, simple and smooth. This 11-year-old Swedish e-commerce company has separated the process of buying from purchasing with its payment solution called Klarna Checkout. (Klarna roughly translates to “clear” in Swedish.) .
Put simply, you visit a site powered by Klarna, input only your email and zip code, and presto, your item is purchased.
Once you check out, Klarna pays your bill and e-mails you an invoice. Klarna pays the retailer immediately and then collects the amount due from the consumer. You then have 30 days to pay back Klarna, using whatever payment method you like. The company makes its money predominately through the fees it charges merchants for its service. They also say that by using proprietary data analytics and modeling it can give approved consumers a seamless buying experience.
The big idea is to increase conversion rates, and whether or not they realize it, 60 million consumers have now used Klarna across the sites of 70,000 merchants, who understandably love the service. (The fewer keystrokes required, the higher the chance a purchase will be made, especially with a smartphone).
Next level – a full banking licence
Within the EU, “passporting” means a bank licensed in one country may operate across the single market. Therefore, some European financial-technology (“fintech”) upstarts have started to seek banking licences. On June 19th, Klarna, became the latest—and the largest so far—to get one by Finansinspektionen, the Swedish Financial Supervisory Authority.
This enables us to broaden our product portfolio for customers and merchants. With the best technological platform, no organizational legacy and a focus on customer experience, innovation and simplicity, Klarna aims to transform parts of retail banking.
Many upstarts struggle to overcome the advantages banks enjoy because of incumbency, notably large customer bases. But Klarna already has 60m customers across Europe who use it to pay for online purchases: last year, it processed €13bn ($14.7bn) in transactions. The firm plans to use this customer base to launch a wider range of retail-banking offerings, like bank cards and payroll-linked accounts.
“Klarna has played a role in disrupting payments services for the better and now as a consumer-oriented, product driven and technology intensive bank, we have the tools to drive change in retail banking. We will do this by providing solutions that ensure a smooth customer experience, help people streamline their financial lives and continue to support businesses by solving the complexity in handling payments. The opportunities are tremendous, it is a thrilling prospect.” noted Sebastian Siemiatkowski, Klarna’s co-founder and CEO, in a statement.
Klarna is now one of Europe’s largest banks, today active in 18 markets with more than 1500 employees. Last year Klarna was valued at $2,25 billion dollars.