Wikipink
Traditional banks are failing consumers
For far too long, credit card companies and traditional banks have taken advantage of their customers with opaque interest rates and excessive fees.
The system is broken.
And it will collapse.
Klarna is different. We give our customers fairer, more sustainable access to interest-free payment options and financing when they need it.
By publishing our metrics transparently, we show that interest-free Buy now pay later products deliver better outcomes for consumers than traditional credit options. While BaFin requires traditional banks to disclose their costs transparently, we have always done so voluntarily and publicly.
A fair alternative to traditional credit
Klarna is known as one of the leading companies in Buy now pay later (BNPL). However, the industry has faced heavy criticism for allegedly offering consumers questionable credit products. That's why it's more important than ever for us to show how our Pay Later and financing options set us apart from traditional financial services and the wider BNPL industry.
€250 vs. €1,726
The average outstanding balance in Germany is €250. By contrast, the average overdraft balance in Germany is €1,726, with an average interest rate of 12 – 20%. 99% of all Klarna transactions in Germany are interest-free.
€75 billion
Outstanding credit card debt in Germany totals €75 billion. According to Deutsche Bundesbank data, interest rates on consumer loans also rose by 16% over the course of 2023. As a result, consumers in Germany are increasingly looking for more sustainable payment alternatives.
0.4%
While media reports claim that BNPL is one of the factors behind the growing number of young people in debt, Klarna's default rate in Germany is below 0.4%.
The beginning of fair and sustainable payment methods
Since Klarna was founded in 2005 and launched in Germany in 2010, we’ve redefined the shopping and payment experience. We’ve made payments safer, more transparent, and smoother for all our customers, bringing Germany’s popular pay-by-invoice option into the digital age. Our business model is based on merchant fees, not consumer fees. We take our responsibility as a payment provider and lender very seriously. Long before regulation was introduced in the BNPL sector, we put a range of measures in place to protect our customers. These include credit checks with every purchase, restricting access to our services if repayments are missed, and financial education initiatives specifically for younger generations.
99 %
Amounts repaid
< 1%
Global default rate
< 0.4%
Default rate in Germany
Klarna's payment products
Pay in 3
Pay in 3 is our most popular product worldwide. It splits a purchase into three equal payments. The first is paid at the time of purchase, the second after 30 days, and the third after 60 days. No extra costs, no fees, and no interest.
Pay in full (Sofortkauf)
Pay in full, also known as Sofortkauf, is our established product in the German market. It’s a super-easy way for customers to pay for their purchases immediately by debit card. In Germany, 42% of all transactions are paid in full.
Pay Later (invoice payment)
With Pay Later, shoppers have 30 days to pay, interest-free. This means they can try their items before paying for them. Pay Later also offers extra security when shopping online with Klarna. Money is only debited from the customer’s bank account if they decide to keep the item.
Financing
Just 1 % of all Klarna transactions in Germany use financing. Klarna’s financing option is our answer to a traditional, regulated credit product and can make sense for more expensive purchases. Most of these financing plans run for 6 – 24 months and have an effective annual interest rate of 0 – 14,9 %.*
*Representative example pursuant to § 17 (4) PAngV: net loan amount 1.000 €, total amount 1.076,39 € payable in 12 monthly installments of 89,78 €, borrowing rate 14,90% p.a., effective annual interest rate 14,74% p.a. The lender is Klarna Bank AB (publ.), Sveavagen 46, 11134 Stockholm, Sweden
99% of all payments are interest-free
We see every late payment as a failure
We have no interest in lending money to people who can’t afford to repay it. That’s bad for our business. We encourage on-time payments: In Germany, we remind customers five times to pay the outstanding amount and give them up to 75 days beyond the original payment deadline.
We send an initial fee-free reminder one day after a payment is due, followed by the first formal payment reminder after a further five days if the payment still hasn’t been made. At this point, we charge a late fee of 0,95 €. After the 49th or 62nd day following the payment deadline, we charge another late fee and allow additional grace days. If the payment remains outstanding, the amount due is passed to a debt collection agency, which contacts the customer by phone, SMS, letter, and email. The customer is also blocked from making further payments with Klarna. This prevents them from using Klarna for additional financing and building up more debt.
There's no typical Klarna customer
The average Klarna customer in Germany is 42. The fastest-growing user group is people over 58.
Our consumers love us
Klarna has a 4,8 rating in the App Store. Traditional banks score 4,7. Don’t believe us? See for yourself: Deutsche Bank (4,7), Commerzbank (4,7), Volksbank (4,7), and Sparkasse (4,6) in the App Store.
Sources
Digital Economics: €75 billion in credit card debt in Germany
Focus: According to the Bundesbank, the cost of consumer loans rose by around 16% over the course of 2023