Product Model

Klarna is an e-commerce payment service provider that operates a product business model. Klarna’s online platform replaces the checkout on e-commerce websites and allows consumers to access instant credit and to pay after their order has been delivered.

The “Klarna Checkout” accepts all major credit and debit cards, and provides the option to “Pay After Delivery”. This feature enables customers to purchase goods and not pay for them for up to fourteen days, allowing customers time to see the product before completing the payment. Customers are sent an invoice via email that must be paid within the time frame or they will face late fees. Klarna therefore removes the risk from buyers and sellers by allowing consumers to pay for products after they have received them and by taking on the risk of a consumer not paying.

Klarna also offers “Klarna Payment” allowing consumers to “Buy Now, Pay Latter”. Merchants can opt in for this service, allowing their customers the option of opening a line of credit to pay for purchases. This does not affect when merchants receive payment for their goods. This credit line is with Klarna not the merchant and Klarna takes on the associated risk. Customers pay interest of 18.9% on balances that are not cleared after the end of the billing month. This credit line functions in a similar way to a credit card.

The credit facility Klarna offers is approved or rejected instantaneously at checkout by utilising Klarna’s affordability assessment technology. This allows customers to access credit quickly and easily for purchases made online.

Once a consumer has purchased using Klarna further purchases can be made with one-click. This improves the conversion rate resulting in more sales for the merchant.


Founded in 2005 Klarna has raised a total of $327 million since its original angel investment of $80,000. The company began life as an entry into the Stockholm School of Economics’ annual entrepreneurship award. The idea was rejected but the three founders Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson decided to proceed with their idea and the business has since grown into a multi billion-dollar company. The Swedish firm continues to grow and began expansion to the US in 2015.


Klarna has two main customer groups: e-commerce merchants looking to enhance their websites payment options and consumers looking for added security, speed and/or simple access to credit when purchasing products online. Total end-customers: 45 million. Total number of merchants: 65,000. Number of transactions per day: 400,000. Total transactions from start: 315 million.


For businesses:

- Provides a payment service that is simple to set up on web sites and mobile apps

- Reduces risk of fraud as Klarna takes responsibility for payments

- Increases conversions – the number of people who complete purchasing after searching and/or adding products to basket because of the simplicity of the payment service and the additional credit facility

- Speeds up payment to ‘one click’ and offers simplified payment methods for customers while accepting a wide range of payment options – minimising the number of customers unable to purchase on the site

- Offers financing for no extra cost or risk to merchants, increasing likelihood of purchases

For consumers:

- Speeds up payment process

- Allows payment after delivery - reducing risk of transaction

- Easy instant access to credit with competitive interest rates.

- Allows consumers to manage their payments; for example to aggregate different purchases into a single payment and invoice, or to pay at the end of the month.


Merchants sign up for both the “Checkout” and “Payment” service by contacting the firm by email or telephone. Once signed up merchants can manage their account online via the Klarna website.
Consumers can only sign up for Klarna when they make a purchase from a Klarna affiliated the ecommerce site. The options available to consumers on a particular merchant’s website will be dependent on the services and conditions the merchant has selected. The option to “Pay After Delivery” is available to all customers that pass the instantaneous affordability assessment but the option to take out a Klarna credit line with “Buy Now, Pay Later” is available only if the merchant has opted for this service.


Fees for consumers

Klarna does not charge consumers to use its “Pay After Delivery” service providing they repay their debt within 14 days of the purchase. Late payment results in additional fees (£8 UK $10 US per missed payment deadline max three deadlines until further action taken)

Klarna charges interest of 18.9% APR on purchase made through “Buy Now, Pay Later” if the balance on the account is not cleared by the end of the billing month. This product is comparable to a credit card in its function. The US bank WebBank provides the credit for these transactions; Klarna then purchases the loan from WebBank. This is necessary as Klarna does not currently have a banking license and cannot originate loans (Klarna applied for a Swedish banking license in winter 2015).

Fees for merchants

Klarna charges merchants a set up fee, monthly fee and a small percentage of each transaction. The details of these fees are dependent on the contract held with each business but are reported to be in the region of: $600 for set up fees, $90 per month and 1.5% - 3% for each transaction.

These fees are comparable to competitors Stripe and PayPal who charge 2.9% + $0.30 per transaction. However, the monthly fee charged by Klarna is more expensive than PayPal that charge $30 per month and Stripe who do not charge monthly fees.

Klarna does not charge for implementation of “Klarna Payment,” allowing customers to “Buy Now, Pay Later”. Merchants do not gain directly from customers choosing to pay using credit as Klarna retains interest payments and any fees charged.

In 2014 Klarna’s revenue grew 40% with total revenue €233 million, profits increased by 39% to €8 million. 2015 revenue grew further to $330 million with profit described as “very, very good” by Siemiatkowski.











Written by Thomas Murray under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. The information contained here should not be used for investment advice and is simply indicates the individual’s understanding of the company’s business models as of October 2016. © 2016

Back to overview