U.S. Online Newcomer Klarna Expands Its User Base And Rolls out New Features

By Peter Lucas
@DTPaymentNews

Sweden-based e-commerce payments provider Klarna continues to expand its footprint in the United States by doubling its user base and adding new features to enhance the user experience.

More than 2 million U.S. consumers now use Klarna’s streamlined checkout service, generating hundreds of millions of dollars in sales, 14 months after U.S. operations began. That’s up from 1 million users during the first four months of operation, the company says. The average ticket size is more than $120. Overall, Klarna has more than 45 million users globally.

To make it easier for consumers to apply for a line of credit to pay for purchases, Klarna has reduced the information required to complete the credit application. Consumers applying for the financing option need only fill out a few data fields, such as name, date of birth, and the last four digits of their Social Security Number. In comparison, many lenders require between one and 20 data fields to be filled out when applying for credit online, the company says. Consumers are immediately notified whether they qualify. Subsequent purchases made using the financing option are a one-click experience, the company says.

Merchants offering Klarna automatically have the financing option added to their payment options at checkout. Merchants preferring to offer only the financing option can do so using Klarna’s application programming interfaces. Several merchants, such as Shoes.com, Onlineshoes.com, Kule.com, Fairwaystyles.com, and Rancourtandcompany.com have started offering Klarna’s financing option.

Merchants wanting to add the financing option and that use e-commerce, shopping-cart, or payment platforms that support Klarna can do so by turning the feature on through their platform’s administrative dashboard.

Platform providers supporting Klarna include BigCommerce, Shopify Inc., Magento, Cybersource, Demandware Inc., and OpenCart.

Reducing friction at checkout is a big part of Klarna’s strategy, as it is with all of its competitors, since shopping-cart abandonment is a frequent occurrence among mobile shoppers asked to complete multiple data fields at checkout. More than 50% of Klarna’s volume comes from mobile users, says Brian Billingsley, chief executive of Columbus, Ohio-based Klarna North America.

“By improving the user experience and offering consumers more flexible payment options, we help retailers and merchants of all sizes counteract the dropped-basket effect, boosting retention, loyalty, and sales,” Billingsley tells Digital Transactions News via email. “2016 has been focused on nailing the user experience and rolling out the credit products.”

Consumers approved for Klarna’s financing option are charged an annual percentage rate of 19.99%. The APR can vary for special offers and promotional purchases. The minimum interest charged is $2 per month. Once a user is approved for an account, Klarna pays the merchant, then bills the consumer for the purchase.

In addition to paying with a line of credit, consumers can pay for online purchases through Klarna using their checking account. To use the service, a consumer enters her email address and Zip Code for identification, then clicks on a link that transports her to a page where she enters her bank routing and account numbers. Consumers can also store their credit and debit card credentials in a digital wallet for payment after delivery. Consumers opting to pay after delivery receive an email with a link to pay when their order ships. Consumers have 14 days to pay from the date of shipping.

Klarna says it is not expecting an uptick in fraud, even though the holiday-shopping season has commenced and even though payment experts predict more fraud will occur online with the rollout of EMV cards in the United States. “Some of our strongest assets are our fraud-detection systems,” Billingsley says. “We stop most attempts before they even happen, and for the few that slip through, we take on the full fraud risk for both merchants and users.”

Klarna has a network of 65,000 merchants globally, including Overtock.com, Shoes.com, and Lyst, an e-commerce platform that allows consumers to shop more than 10,000 fashion designers and stores.

Looking ahead, the company plans to continue refining its checkout process, add new functionality, and more promotional financing options, Billingsley says.