How does the klarna app work?

Klarna is one of the biggest fintech around the world. With over 150 million active consumers and more than 500 retail partners,  the company is valued at more than $45 billion.

Klarna’s app works with the BNPL(Buy Now, Pay Later) business model. On this model, the consumer can buy some product and pay for it a month later without changing the price.

Data from klarna’s web.

The company founded in 2005 is now active in 45 countries around 3 continents. According to his last report, the company has made $19 billion in revenue in 2022. 

Resume Klarna business model

Klarna benefits both retailers and consumers. It allows a safe and secure way to shop for the consumers and increases the retailer’s sales.

The platform partners with the retail merchants, who pay a fee to the company for each sale that comes through klarna. The consumers can have the benefit of purchase without paying at the moment.

The app is used frequently on ecommerce, this business model gives the consumer the chance to see the product before paying for it, and give to the retailer the assurance of the payment. Klarna assumes the risk on the transaction.

Klarna allows the merchants to use his services on the physical stores too. With virtual credit cards from klarna, the customers can have the same benefit in his physical purchases.

The benefits for customers

Klarna offer the following benefit for customers who use it:

  • Different payment options
  • Can pay after receive the products
  • Easy access to an alternative low cost credit.

The benefits for merchants

The retailers who use klarna have this benefits:

  • Allow to the customers more types of payments
  • Less risk of fraud, because the company always pays to mechants
  • Allow to offer financing in his business without any risk
  • The conversion rate is higher, due to a less commitment with buyers. 

How does klarna make money?

The app make money in 4 different ways:

  • Commissions from retailers
  • Interest fees
  • Late fees
  • Clarna card payments

Commissions from retailers

Each time that a customer purchases something using klarna the merchant pays a fee to klarna for using the service.

The amount to be paid by the retailers would depend on the payment type that the customer chooses.

The company have a flat fee per purchase and a variable fee depending of the purchase type 

Interest fees

The customers do not pay any interest if they choose the option to pay between 1 and 4 months. But for more expensive purchases klarna offers financing up to 36 months with some interest. The interest rate is variable in different cases. 

Late fees

In the interest-free options of payment. Klarna charges some interest if the customer doesn’t pay on time.

Card payments

On the mobile app, the user can have a virtual credit card and use it to pay his purchases on physical stores.

For this service, klarna has some fees for the merchant too. 

What is the competitive advantage of Klarna?

Klarna’s competitive advantage stems from the benefits it brings to both customers and retailers. It gives financial options for the client and zero risk for the merchant.

This with its user-friendly platform and good service sets Klarna apart from its competitors.

Klarna’s Founders

The klarna’s founders are Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson.

Their first idea was simple: make online payments easier and safer, both for consumers and retailers.

The idea was pitched at a competition in the Stockholm School of Economics.  At that time, the idea of BNPL was not so popular and the guys ended up last.

Despite that, the founders decided to start anyway. The first angel investor in the company was Jane Walerud.

The first name of this new fintech startup was “Kreditor Europe AB”, and his first launch was in Sweden, Norway, Finland and Denmark. 

By 2009 the company changed its name to Klarna. And by 2013, Klarna was valued at $ 1 billion. The company already was a unicorn. The rest is history.

Why is klarna so popular?

The app became very popular when they launched its BNPL feature in 2016. This innovative new feature, plus ten years in the fintech market for the company, allowed Klarna’s popularity to grow exponentially.

A few years later, the covid caused the use of e-commerce to grow and with it the service to grow.

So, Klarna has become popular due to his good service, his BNLP with non-interest features and  his connection with the ecommerce, an industry that has been growing exponentially the last few years. 

FAQs about the app fintech Business

What happens if I never pay Klarna back?

On the scheduled date Klarna will try to collect the payment, if you don’t pay,they will try to take the payment a few days later.  If again they can’t collect the payment, They will add late interest to your debt.

If for more days you don’t pay, the missed payments and unpaid debts are sent to debt collection. Is important to check the terms and conditions.

How many times can you delay a Klarna payment?

According to Karna’s terms you can delay the payment once per order. Then if you don’t pay they charge late interest to your debt.

Who is Klarnas target audience?

The main Klarna’s users are between 16 and 25 years old.

Does Klarna affect your credit score if you don’t pay?

No, using it doesn’t affect your credit score.

Who does Klarna use for debt collection?

The app uses TrueAccord for his debt collection.


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