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Dec 10, 20203 min read

The questions on your lips – how does Klarna make money?

Klarna K logo

by Klarna

Here at Klarna we love speaking to our consumers. We often talk to you on social media, in our app and (when it’s not 2020) in person!

We recently asked you what you would like to know more about – what are those burning questions? The informative ones, the crazy ones and for some of you, just the general curiosities! You came back in your thousands, so for the next few months, we will have a new blog live every week answering some of the most popular topics. New products, regulation, who came up with the concept of Klarna and who are the brains behind some of our biggest campaigns like Clothes Love All, we’ve got it all covered, and can’t wait to share with you more of our journey.

First up, the burning question on a lot of your lips was “how does Klarna make money”

How does Klarna make money

What’s the catch?

We hear you, some people think it seems too good to be true. Especially with our Pay in 3 instalments and Pay in 30 days products which are interest free, so who pays for it?

In the UK we have three products, Pay in 30 days, Pay in 3 instalments and Financing.

For our two most popular and widely used products, Pay in 30 days and Pay in 3 instalments, we make our money through a retailer fee. Our retailers pay us a transaction fee each and every time you shop on their website or in-store with Klarna. Last year we processed over 20million transactions so that means we are able to offer you our service completely free of charge. This model is similar to all other payment methods that retailers offer – credit cards, debit cards they all have a fee, only old fashioned cash doesn’t come at a price (and in 2019, UK Finance found this accounted for less than 30% of transactions – imagine what that is in 2020).

Our third product, Financing is for when you want longer term financing to help you spread the cost from 6-36 months, this is only for larger purchases like furniture and technology. Financing has a mix of retailer fees and (sometimes) a small interest charge for the consumer (up to 18.9% APR).

So why do retailers pay to work with Klarna?

There are lots of reasons that retailers pay to work with Klarna, as we mentioned above, our fees are similar to those they’re already paying to process card transactions, and offering Klarna gives consumers additional flexibility.

For pure-play online retailers, many of whom have never had a High Street presence, offering Klarna helps consumers to try before they buy. If you want to check the quality, view different colours or sizes, Klarna’s Pay in 30 days is the best way to try before you buy and only pay for the items you love and those you want to keep.

Another reason that Klarna is used by so many retailers is because of the flexibility we provide. For a generation of shoppers who have turned away from traditional forms of credit such as high cost credit cards, Klarna is a safe, secure and interest free way of spreading the cost of an investment purchase over 30 or 60 days.

So that’s it… your first question answered – check back next week for more!

Copyright © 2005-2023 Klarna Bank AB (publ). Klarna Bank AB (publ) is authorised and regulated by the Swedish Financial Supervisory Authority. Deemed authorised by the Prudential Regulation Authority. Subject to regulation by the Financial Conduct Authority and limited regulation by the Prudential Regulation Authority. Details of the Temporary Permissions Regime, which allows EEA-based firms to operate in the UK for a limited period while seeking full authorisation, are available on the Financial Conduct Authority’s website. Klarna Bank AB offers both regulated and unregulated products. Klarna’s Pay in 3 instalments and Pay in 30 days agreements are not regulated by the FCA. Klarna Bank AB (publ) registered and head office: Sveavägen 46, 111 34 Stockholm, Sweden. A Swedish public limited company (publikt bankaktiebolag) registered with the Swedish Companies Registration Office with organisation number: 556737-0431.