With the online shopping market growing ever bigger, retailers have had to become more creative around shipping, returns, size guides and online payments. The latter has been a hot topic lately, with more ‘buy now, pay later’ companies entering the market. Klarna is one of the companies we’ve heard a lot about, especially when they became the largest private fintech company in Europe with a $5.5 billion valuation and $460 million funding round earlier this year.
The numbers speak for themselves; ‘buy now, pay later’ seems to be a trend that’s here to stay. But with several players on the market, it’s getting harder to know which one to choose. These are the 6 main things for online retailers to keep in mind:
- Customer satisfaction
- Profitability vs pricing
- Fraud protection
- After-purchase experience
- Room for scalability
With that in mind, let’s have a look at how Klarna fits these demands. But first, a brief history and overview of the main products.
Klarna – the ‘buy now, pay later’ company (and much more)
Almost 15 years ago, Klarna was founded in Stockholm, Sweden with the aim of making it easier for people to shop online. Klarna pioneered the concept of ‘buy now, pay later’ (BNPL) in the Nordic e-commerce industry, giving consumers the possibility to buy products and pay later with an invoice. Since then, the company has evolved and now offers a wide range of payment solutions and features to enhance the shopping experience. Last year, Klarna launched its shopping app in the US which enables people to buy now and pay later everywhere. To date it has 1.8 million downloads – and that number is growing.
The fintech unicorn has become more than just a payments company, but the heart of Klarna’s business is still to give shoppers the opportunity to buy now and pay later. Here are the main payment solutions that Klarna offers:
This option allows customers to split their purchase into four equal payments. And guess what – it doesn’t cost them anything extra.
This is for larger purchases that customers want to pay for over a longer time period. Klarna’s flexible financing options range from 3-36 month plans.
Pay in 30 days
To put it simply: You give your consumers the opportunity to try it before they buy it, for no extra fee. You as a merchant receive payment upfront, leaving all the risk to Klarna.
But why is it that consumers want alternative payment options, and how do merchants benefit from offering these to their customers? The reasons are quite simple.
The consumer point of view
For you as a merchant to understand the importance of having alternative payment methods in your checkout, you need to know your customers. This is why shoppers want to buy now and pay later:
- They want to be sure they can trust the online retailer they’re shopping at. With Klarna in the checkout, they know that: a) the retailer has made it through Klarna’s underwriting process, and b) Klarna is the one taking on the financial risk.
- They want to be able to try before they pay for everything. Especially when it comes to clothing, it’s crucial to be able to return products.
- And most importantly, they want it to be smooth. When paying with Klarna, you don’t have to fill in your details (in some cases very little), since Klarna recognizes the customer based on previous purchases. If they are first time customers they can also shop as guests and no login is required. Easy-peasy! Easy-peasy!
The merchant point of view
Other than giving shoppers the smooth payment experience they love, there are clear benefits for you as a merchant as well.
- First of all, you won’t take on any risk when it comes to receiving your money. You get your payments up-front from Klarna, while they take responsibility for collecting payments from customers.
- Retailers typically see a 68% increase in average order value with Klarna Installments.
- 58% boost in average order value for retailers offering Klarna Financing.
- 20% increase in purchase frequency for customers shopping with Klarna Pay in 30 days.
- 44% of users would have abandoned their purchase if Pay later wasn’t available.
In addition to the points above, there are some clear benefits to choosing Klarna. Our checkout has actually proven to be three times faster than one of our competitors, and it also has 87.5 percent fewer steps to complete a purchase (1 step compared to 8).
Remember, you want the checkout to be fast, affordable and loved by your customers. The first two ones are covered in the diagram above, but what about customer satisfaction? Here are some final stats to sum it up:
- 90 percent of shoppers were very satisfied or satisfied when using Klarna.
- 85 percent of shoppers who use Klarna says it’s a better experience than other online checkouts.
With the new year approaching, let’s have a recap of Klarna’s 2019:
- A new merchant joined Klarna every 8 minutes; our global merchant family grew to 190,000.
- 16 million new consumers globally, including 6 million annually from the US alone. Meanwhile in the UK, over 55,000 new consumers are choosing Klarna every week.
- 70% of consumers make multiple repeat transactions over 12 months.
- The new US Klarna Shopping app is the #1 trending shopping app on Google Play Store, having launched in May. We’re on track for 4.5 million transactions in our first year of operation.
- 10,000 in-store solutions now live including at H&M, Samsung and Schuh.
- New merchants include River Island, Boohoo, Made.com, Michael Kors, Expedia, Abercrombie & Fitch, S by Serena Williams, Timberland, Lulus, Marchesa, Agent Provocateur, Rue 21, TOMS, Wayfair and Microsoft.