Since its establishment in 2005, Klarna has had a meteoric rise. Constantly expanding its market presence across the globe, it now has 45 million customers and works with 65,000 merchants in 18 markets in Europe and the US. Patrick Brusnahan takes a closer look at the third-party payment service provider

Klarna is a Swedish third-party payment service provider which primarily operates in Europe and, more recently, in the US. The firm offers credit for e-commerce purchases, which can be redeemed through invoices, payment cards and bank transfers within 14 days. Its clients include Spotify, Samsung, Disney, Asos, Fitnessguru, Adlibris and Wish.

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A key acquisition for the company was the purchase of Analyzd in May 2011. A risk management and fraud prevention company operating in Israel, the US and the EU, the deal allowed Klarna to improve its protection against attacks and fraud.

In December 2013, Klarna purchased the German payment service provider Sofort. Sofort is an e-commerce PSP that operates in Germany and Austria. The deal was completed in March 2014 and, while Sofort kept its branding, Klarna gained access to nearly 50% of online merchants in Germany. This transformed the company into one of the largest payment service providers for European e-commerce.

Its main sources of revenue are transaction fees and interest on credit. However, other sources of revenue include setup fees, monthly fixed costs, and penalties for late payments.

Klarna actually generated 30% of its transaction volume from Germany, its largest market after Sweden.

Key Financial Data

  • Net revenues: $332M (2015)
  • Net income: $11m (2014)
  • Total transaction value: $9bn (2014)

There are several products and services contained within Klarna. Its first is an invoice-based payment. When a purchase is confirmed, the merchant sends the merchandise with an invoice. The buyer repays the amount within 14 days of delivery. Payments can also be made through monthly instalments on request by email. Instalment plans can incur interest and administrative fees. There is no revolving credit option and payments are due within a defined period.

In addition, there is Klarna Checkout, a simple app for payment. Customer login details are saved for specific IP addresses. Klarna requires three simple steps for login and payment; Enter your email address and postcode, accept or edit the billing address and confirm by tapping Buy Now. This option can also be used without having to log in.

Users can select Immediate Checkout or Pay After Delivery. Immediate Checkout is what is says on the tin; an immediate payment is made from any Visa, MasterCard, American Express or Discover payment card. Pay After Delivery gives users 14 days from receipt of the order.

Klarna Deposit Account offered a fixed deposit account for medium- and long-term investments. Customer can deposit anything between €10,000 ($11,265) and €500,000. Amounts up to €100,000 are backed by the Federal Deposit Insurance Corporation (FDIC) and the account management fee is waived.

The interest rates can go up to 1.4% per annum and customers can open accounts for different periods, including 12, 24, 36, and 48 months.

  Klarna PayPal
Annual Transactions $9bn (2014) $282bn (2015)
Active Users 45 million (April 2016) 179 million (2015)
Scope E-commerce E-commerce, P2P
Payment Instruments Credit line, credit transfer Cards, e-money, credit transfers
Payment Method API API, beacons, QR codes, facial recognition, app
Key Markets Sweden, Germany, UK, 14 other European countries and the US 2013 countries including the US, the UK, Germany, Australia and New Zealand

Geographical Presence

  • As of April 2016, Klarna is used by 45 million customers and 65,000 merchants in 18 countries.
  • It is headquartered in Stockholm, Sweden.
  • Klarna was used for nearly 39.5% of all online purchases in Sweden in 2015.
  • Klarna covers more than 50% of online merchants in Germany.
  • In 2015, Klarna accounted for 10% of total e-commerce payments in Northern Europe (Denmark, Finland, Germany, Norway, Sweden, and the UK).

Significant Events

Year Events Comment
September 2015 Partnership Klarna expanded to the US through a partnership with Overstock.com.
September 2015 Partnership American Express users in Sweden, Germany, Finland and the US can use Klarna Checkout.
February 2015 Partnership Klarna launched its service on Tradera, an eBay subsidiary in Sweden.
June 2014 Expansion Klarna launched its full range of products and services in the UK
April 2014 Product Launch Klarna Checkout was launched in Germany and the UK, enabling merchants to separate order confirmations from actual payments.