What Is Klarna?
Consumers have more options than ever when it comes to paying for goods and services. Klarna was founded in 2005, and it is backed by a Swedish bank. Many consumers are choosing merchants that accept Klarna Credit because of the benefits and ease of using this line of credit.
Simply stated, Klarna Credit is a line of credit that can be used by consumers to make online purchases. It’s quickly growing in popularity, with more than 60 million customers located throughout the world. The company is based in Sweden, but they offer lines of credit throughout most countries. Over 75,000 companies currently accept Klarna as a form of payment.
Pay After Delivery
Perhaps the main draw to Klarna Credit is that consumers can make a purchase now, have it shipped, and pay for it at a future date. All purchases made using Klarna Credit are covered under a generous 30-day grace period. During this time, no interest is accrued on the purchase. Consumers can repay their debt anytime during this grace period. Any remaining balance after the grace period has passed is subject to finance charges.
If you select pay after delivery, you will not be asked to provide any additional payment or financial information. Your order will be processed with a single click. Information on how to complete your payment is emailed. No additional fees are charged for 30 days after the purchase.
No Credit Check
There is no credit check to use Klarna Credit. However, they may run unrecorded inquiries into your credit history, but these checks do not negatively affect your credit rating. To be eligible for Klarna, you must 18 years of age or older. Pay after delivery is offered based on several things, including total purchase price, availability, and order history. It’s not offered on all purchases.
To maintain an active Klarna account, you’ll be required to provide a valid email address, postal code, and mobile number. All statements are delivered via email. Klarna will only use your mobile number if they need to get in touch with you.
Simple Repayment
Once you place an order using Klarna, you may choose to repay immediately or during the 30-day grace period. Both credit and debit cards are accepted. If you return your purchase, account will not be charged.
When making a repayment, you’ll have the option of paying either the interest-saver amount or the minimum amount. The interest-saver amount is what you should repay each month to remain eligible for the promotional zero interest plan. If you choose to only pay the minimum amount, your remaining balance will be subject to the current interest rate.
Klarna vs. PayPal For The Happy Shopper
The way Klarna operates may seem very similar to PayPal, but they attract customers for very different reasons. While both are offered by merchants as payment options, those who choose Klarna are often attracted to the ease of use, without requiring extensive background or credit checks.
Making Purchases
When a customer chooses to pay with PayPal, they will choose to pay either from their PayPal balance or an attached credit card. Klarna, on the other hand, only requires users to provide them with their email address, postal code, and mobile number. No other financial information is requested. Klarna then decides, in a matter of seconds, whether to assume the risk of your purchase.
The unique design of Klarna makes it exceptionally simple and convenient to make a purchase. You don’t have to remember any credit account numbers, and you never have to worry about handing over your financial information to a merchant. This is similar to how PayPal works, except users maintain their financial information on the PayPal portal. Klarna only collects your financial information whenever you go online to make a repayment.
Reducing Fraudulent Activity
Both Klarna and PayPal attract customers because of their commitment to making purchases safer. These companies have different safeguards in place to prevent fraudulent activity. PayPal monitors accounts around the clock, looking out for suspicious activity. Customers are notified right away when a fraud activity is suspected.
Whenever you make a purchase using Klarna Credit, your purchase is run through a series of algorithms. A purchase may be declined if it fails to pass these checks. It only takes a few seconds for customers to know if their purchase is approved or not.
Taking Risks
Perhaps the biggest difference between PayPal and Klarna is customer risk. Whenever you make a purchase using a PayPal account, the money is debited immediately. With Klarna, on the other hand, the company decides whether to take a risk on loaning money to you. Since they don’t run any credit checks, every purchase poses a financial risk to the company.
Klarna makes money through fees collected from merchants and interest paid by customers. If a customer fails to repay their account, Klarna is still responsible for repaying the merchant. This is a huge risk. Millions of dollars are set aside each year to cover defaulted payments. Despite the risk to the brand, Klarna reports their default rate being under one percent.
New Klarna users are the biggest risk.
The company uses certain algorithms to decide whether to take a risk on a new customer. Established users, on the other hand, are less likely to default. They may be offered more generous credit lines because of their history with the company.
Businesses that Accept Klarna
Klarna is already a huge success in Sweden, where it first began. Now it’s developing an impressive following in many other countries around the world, including the UK. This buy-now-pay-later service is a huge selling point to businesses who are looking to increase their customer base.
All types of online companies are using Klarna at checkout. From clothing stores to home entertainment, you can buy just about anything you need using Klarna Credit. Some of the top businesses that offer Klarna at checkout include:
- TopShop
TopShop is a women’s apparel company that offers a wide range of clothing options, including workwear, casual wear, outerwear, shoes, accessories and beauty products. - ASOS
ASOS is one of the leading fashion brands, catering to both men and women. They’re known for sizing inclusivity, with more than 30 sizes offered to customer of all body types. - Casper
Casper is reinventing how people shop for mattresses. They sell high quality mattresses, pillows, bedding, and frames to help you get a better night’s rest. They’ve become known for their risk-free, 100-night trial. - Gear4Music
When it comes to music, you’ll find all the equipment and gear you need at Gear4Music. They carry the most sought-after names in guitars, keyboards, and orchestral instruments. - Schuh
Buying shoes online is easy at Schuh. They carry styles for men, women, and kids. You’ll always find all your favourite footwear brands in stock. - Swoon
Swoon seeks to provide boutique furniture for affordable prices. With a full selection of furniture, housewares, decor, and accessories, you’ll find everything you need to transform the look of your home.
Shopping with Klarna Credit is easy. Once you fill your shopping cart, you’ll be able to choose Klarna from the payment options. Simply enter your shipping information, and your order will be on its way.
You won’t have to worry about remembering your credit card information or signing up for store accounts. More companies are choosing to accept Klarna as they see how much their customers appreciate its ease of use.
Klarna Partnership with Worldpay
Worldpay now partners with Klarna, which makes purchasing products from all over the globe easier than ever. The credit and invoice system of Klarna has proven very popular with consumers.
With this partnership, consumers can enjoy making purchases from all over the world without worrying about the security of their financial information.
What Is Worldpay?
Worldpay is one of the best-known online payment companies. The company operates globally, and they process payments from 146 countries and 126 different currencies. It’s their goal to streamline the international buying process, helping businesses grow and reach new customers. They currently accept over 300 different payment types.
Why is Klarna a Good Partner for Worldpay?
To stay relevant in the e-commerce world, businesses need to meet the demands of their customers. More customers are looking for simple online payments. Online shopping is very popular, and many consumers are using their mobile phones to make purchases.
When making a purchase through a Worldpay affiliated business, consumers want to make sure they get exactly what they order. International orders always pose some risk. Therefore, Klarna is the perfect partner for Worldpay.
Worldpay affiliated businesses that accept Klarna are giving customers the chance to purchase products now and pay for them later. If for some reason a product isn’t delivered or doesn’t meet the customers’ standards, the customer doesn’t lose any money. Instead, the product is returned, and the customer’s Klarna account is refunded. Lessening the purchase risk makes potential customers more likely to make an international purchase with a new merchant.
Financial Information is Safe
One of the biggest worries for customers is handing out their financial information to a business that is based out of another country. There is always the risk that this information won’t be properly stored or handled. However, the partnership between Klarna and Worldpay completely eliminates this risk.
No financial information is ever sent to the international merchant at the point-of-sale. Instead, Klarna gathers the customer’s email and postal code to make the purchase. An invoice is then generated, and the customer is offered a no-interest grace period to repay their debt.
Klarna is changing how people shop online, both locally and globally. By adapting to the demands of global consumers, Worldpay and Klarna are helping international businesses reach a new customer base. This partnership is sure to help increase sales for merchants from countries across the globe.
Will Klarna Replace Credit Cards?
In a world where plastic has replaced cash, the unique buy-now-pay-later vision of Klarna is already taking the online shopping world by storm. This Swedish company currently accounts for over 40% of online payments in their local country, and it’s becoming vastly popular in many other areas around the world.
Klarna is a payment staple in even more countries. It won’t replace credit cards but will continue to offer an alternative flexible credit option for the masses and not just the few for online purchases.
That said, there are key points on the future of credit cards versus other flexible credit like Klarna.
The Rise and Fall of Credit Cards
It’s almost hard to believe that only a few decades ago people were still paying with cash and writing cheques. Credit cards became a staple in the wallets of consumers because they’re easy to use. When buying products in person, the credit card is simply swiped by an electronic to complete the transaction.
Credit cards are the staple for online purchases. Consumers diligently enter their credit card numbers during checkout, and their orders processed and shipped.
However, online shopping is now used by most households on a regular basis. Because of this, many e-commerce sites have been attacked by hackers who are looking to steal credit card numbers. This has made more people look for alternative ways to make online purchases without exposing their credit card information.
PayPal Credit
PayPal saw the concern of consumers and introduced their PayPal Credit model. Those who were approved for PayPal Credit were able to make online purchases and pay for them later. When making a purchase through PayPal, no financial information is ever sent to the merchant, giving many consumers peace of mind about shopping online. However, the process of opening a PayPal account and applying for a line of credit is tedious. Many consumers don’t want to deal with the hassle of setting up an account.
Klarna Credit - A Better Option
The founders of Klarna Credit decided to make online shopping easier and safer for all. When using Klarna Credit, shoppers only need to enter their email, shipping information, and mobile number. There’s no need to remember long credit card numbers. You don’t have to open any new shopping accounts. Klarna also reduces the risk of your financial information ending up in the hands of criminals. Their buy-now-pay-later model is very popular with consumers.
While credit cards are still very popular, more consumers prefer the simplicity of shopping with Klarna Credit. Time will tell if credit cards will feel Klarna as a direct competitor, but even if they’re not, credit card companies will need to introduce innovative products, like those offered by Klarna, to entice new customers.
