If you haven’t already heard of Klarna, the 10 year old Swedish e-commerce company that provides payment services for online storefronts, then you soon will, because they are going to be huge! Its business model is simple. Klarna allows its users to pay for goods and services by using nothing more than an email address and zip code. It then pays the retailer and bills the customer later. It is this separation of the buying and paying process that makes it stand out from other online payment companies which collect payments from the customer immediately and then forwards those payments to retailers through a web of payments processors, credit card schemes and card-issuing and merchant banks. It also assumes the customer risk, meaning the merchant will always get paid even if the customer doesn’t pay. The company says more than 35 million people have now used its service through the 50,000 merchants that currently use it. In 2014, the company handled about $10 billion in online sales.
The Company launched in the U.S in in September, thanks to a partnership with Overstock.com and expects revenues to rise by about 40 percent this year as a result. Klarna investors include Sequoia Capital whose investment portfolio includes the likes of Google, Apple, Paypal and Stripe. Not a bad endorsement! Unfortunately its services are not available on the Irish market, but it is only a matter of time. Klarna’s ultimate aim is to disrupt the entire retail banking market. It recently applied to be a registered bank. With a current valuation of over €2.25 billion they are a force to be reckoned with!!
Users don't have to create an account or type in credit card details when checking out in an online store using Klarna, entering instead as little as an email address and zip code to settle the bill while having the option of paying Klarna later, as with a normal credit card. Klarna runs a quick check using its algorithms and data it has built up over a decade and then, if approved, pays merchants instantly and bills customers for settlement later. The company had a $2.25 billion valuation at the end of last year, after Swedish insurer Skandia bought a 1 percent stake for 200 million crowns ($23 million), and already handles 10 percent of all online transactions in Europe. In Sweden it now processes 40 percent of all online purchases.