How does Klarna make money?- Klarna business model

How does Klarna make money?

Klarna is a Swedish fintech company that presents online financial services like online storefront payment, direct payment & also post-purchase payment. Klarna platform has achieved a frontline position in the global payment & shopping services by providing users convenient & flexible shopping & purchase experiences to 90 million which covers more than 250,000 merchants in 17 countries. Here we are to see How does Klarna make money?.

Klarna shares & provides the customers with simple convenient ways of payment like direct payment, post-delivery payment & installment plans so that users can whenever & however they feel to pay.

In 2005, Klarna was founded in Stockholm, Sweden. Years have passed with the evolution of technology but the motive of Klarna has & will remain the same, that is to make online shopping easier & simpler for the customers. Even with adopting the latest technology trends of the real world on the Klarna platform, the goal will always be the same.

Klarna has some of the sources from which they can generate revenue for themselves. Klarna earns revenue through merchant fees, late payment fees, interest on customer loans, interest on cash & interchange fees.

Klarna business model

Payment Fees

Klarna makes most of its net revenue by applying charges on merchants like a fixed transaction fee & a variable percentage fee. The fees amount also depends on which payment method the customer uses & also varies on their country location.

If we consider the United States then businesses must pay a $0.30 transaction fee. The variable fee ranges from 3.29% to 5.99%.

Klarna provides various payment methods, from direct checkouts to loan financing. For Instant Shopping Solutions, Klarna charges merchants:

  1. Product fee is $30.
  2. Transaction fee fixed amount is $0.30.
  3. 3.29% of onsite & 3.79% of off-site sales as variable fees.

A user who is not ready to pay immediately, for them Klarna provides financing methods like

  • 4 Instalments includes 4 times payment covering the total amount with 2 weeks gap between each payment. Klarna charges a $0.30 fixed fee along with a 5.99% variable fee to merchants.
  • Financing- These methods include breaking the cost into monthly payments where the period of this type of payment lasts up to 36 months. Klarna charges a $0.30 fixed fee along with a 3.29% variable fee to merchants. Customers will also have to pay interest on the loan, ranging from 0% to 29.99% APR.  Klarna earns much more with this type of payment.

Other Revenue Sources for Klarna

Adding up to above-mentioned sources are

Pay in 30 days

This type of payment provides customers to first try a product then they can pay for it within 30 days. This kind of payment mostly applies to fashion merchants like ASOS or TOMS. Klarna charges a $0.30 fixed fee along with a 5.99% variable fee to merchants.

Klarna also charges a late payment fee on a monthly basis which can last up to $35 if customers didn’t meet the correct payment date.

Interest of Cash

Klarna utilizes cash residing on that account to lend it to other institutions like banks, etc. Klarna collects interest from these institutions. As of 2019, all US bank’s net interest margin was 3.35%.

As per the 2020 report, Klarna’s worldwide revenue reached $1 billion. This shows the company had a 40% increase in revenue as compared to the year 2019.

History of Klarna

Sebastian Siemiatkowski, Victor Jacobson & Niklas Adalberth, three of them participated in the Stockholm School of Economy annual entrepreneurship award in 2005, to present their idea on providing customers & merchants a simpler way of online shopping payment methods. But they failed.

By not worrying about the results of that competition, they started the work of establishing Klarna. Jane Walerud, an angel investor & Erlang systems sales manager, showed interest in the idea of Klarna & he invested in their company & he also provided them a programmer to develop Klarna’s online platform.

As the investment increased on Klarna, the services of Klarna reached Norway, Finland & Denmark. In 2010, Klarna also provided their operation in Germany & Netherlands. In May of 2010, San Francisco-based Sequoia Capital entered into Klarna as an investor. In the same year, Klarna increased its revenue by 80%. This resulted in the outbreak of British Newspaper, The Telegraph covered & listed Klarna company as one amongst the 100 most promising young tech companies in Europe.

In 2011, General Atlantic invested $155 million by joining DST Global. In the half-year of 2011, Klarna owned Analyzd, an Israeli company that had a business activity on markets of Europe, Israeli & the United States. Analyzd is famous for providing services like risk management & online payments.

2012 was the year when Klarna started providing services to Austria. In 2013, Klarna acquires SOFORT. Even after, they provided services on a stand-alone basis. As Klarna launched in the United States in 2015, they focused more on the US because it was the way for future growth for Klarna.

In 2018, Klarna itself stated 60 million users & nearly 90,000 merchants are connected to them. In 2019, Klarna raised money to $460 million to liberate the payment presence in the US, by coordinating with Dragoneer Investment Group, Bank of Australia, CommonWealth, HMI capital, etc. This funding round valued Klarna at $5.5 billion, which made Klarna the largest financial technology start-up in Europe. In 2020, Klarna owned Nuji.

In 2021, Klarna achieved a raise to $639 million in a fundraising round led by SoftBank Group’s vision fund 2 which made Klarna’s valuation reach $45.6 billion.

Klarna Working Process

Klarna, a payment service provider which gives a service to users to try out the products before they pay for them. Klarna connects with distributors so that they can handle the payment process on the distributor’s behalf.

Klarna provides various possibilities of payment to customers like paying directly to multiple interest-free rates. Various payment processing options have been given to users like online payment through PayPal, bank transfer, or Klarna mobile app.

If a customer had a bigger purchase the Klarna provides them a maximum run rate of 36 months other than this multiple payment installments are also offered.

Klarna doesn’t charge customers but distributors indirectly charge customers. Klarna benefits customers by not charging customers in different ways like interest, fees, or late charges.

Unique Strategies of Klarna 

Klarna introduced a new kind of model to the customers which is “buy now, pay later.” This made users attracted to these new ventures. Klarna also provides various kinds of payment services to their customers like providing customers a timeline of 30 days to 36 months of opportunities to complete their payment. 

And also Klarna doesn’t charge money from the users or customers for their revenue, they usually earn revenue through charging commission from merchants. This provides a payable amount of products to the customers because it doesn’t charge money via users. 

The only way Klarna earns money through users or customers is when they select long-term plans for the biggest products plans of users. Because they get 36 months to complete that cost amount which helps to generate the interest if the user hadn’t paid it on time. So, if the user is consistent on paying regular monthly amounts then customers can save their money.


Klarna is one of the five highest-valued financial technology companies worldwide. It is next to companies like Ant Financial, Robinhood, Stripe, & many more.

However, these became possible because of the convenient services provided by Klarna. Their services indirectly make the company to its earn revenue. Klarna makes revenue from merchant fees, interest on customer loans, interchanging fees, interest on cash, late payment fees, pay within 30 services, & many more. 

So, these all help company to generate revenue & use that revenue to grow more in the future.

Frequently Asked Questions

1. What is Klarna?

Answer: Klarna connects with distributors or retailers to provide users or customers their needy products from small to big-budget products with fluency in payment procedures also. Klarna connected with more than 250,000 online stores & has more than 85 million users or customers globally who have constant transactions with the Klarna app.

2. How can users reach Klarna?

Answer: Users can reach Klarna by visiting their website where they provide a customer services page so that they can solve the customers’ issues. Other than the website, users can download the Klarna website where they can have one-to-one interaction through a chat system & it is accessible 24/7. Users can solve any type of issue let it be a transaction issue, inquiry, etc.

3. What type of user information does Klarna collect?

Answer:  Klarna collects two kinds of information one is personally identifiable information & the second one is non-personally identifiable information.

  • Personally identifiable information includes the user’s name, email address, telephone number, postal address, IP addresses, & financial account information which the user provides like credit or debit card numbers. Klarna can also collect personally identifiable information from third parties like data vendors.
  • Non-personally identifiable information includes demographic information, general location information, etc. If non-personally identified information is linked to personally identified information then it will be notified as personally identified information.

These all factors are Klarna itself stated in its privacy policy. So, this is true & accurate. All information is taken care of with high security through various technologies so that an unknown person can access this information.

4. How does Klarna uses customer’s personal information?

Answer: Klarna uses customers personal information to provide Klarna services & to provide customer support, processing users transactions & notifying users about their transactions, detecting & solving the frauds with the users, contacting the users through call, text, or email, sending offers & promotions for Klarna services, etc. These all operations are operated with high security so that all information should be between the user & Klarna company itself. 

How does Klarna make money?- Klarna business model

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