Swedish Payment Companies Aggressively Pursue U.S. Expansion

E-commerce gateway Klarna will soon launch in the U.S., the latest Swedish payment company to seek market share in the country.

Klarna, which has been hiring staff and building technology in anticipation of a U.S. move, joins another Swedish company, Seamless, which plans to launch its SEQR mobile wallet in the U.S. by June.

"We are looking forward with great excitement to the coming Klarna launch in the U.S. as it is the largest and most competitive e-commerce market in the world,” said Jens Saltin, head of expansion at Klarna, which offers buyers credit so they can shop online. “We will make it easier for U.S. retailers to sell to European users and enable sales growth for European retailers in the U.S., thereby minimizing the current barriers for global growth."

Klarna, which is currently available in 18 countries, moved into the U.K. in July last year.

The company offers short-term credit to consumers so that when they’re shopping online they can initiate the shipment of goods without paying first. Consumers must only enter their email address and zip code (or postcode in the U.K.). They then have 14 days to pay.

On average, Klarna Checkout increases conversions 25% to 30%, said Saltin.

At the end of the shopping flow, a consumer sees a “thank you” page. On the page is a button that can take consumers immediately to a payment page to enter their card details. Only 30% of Klarna users in the U.K. decide to pay immediately, Saltin said. Otherwise when the merchant ships the goods, Klarna sends a statement to the consumer asking for payment.

“We guarantee money regardless; if a card transaction is initiated that turns into fraud, that is a hit Klarna takes,” Saltin said.

Because Klarna is taking the risk, paying the merchant immediately, they must be particularly effective at vetting consumers. The company doesn’t offer credit to everyone, Saltin said. In the U.K. about 66% of consumers that want to use Klarna get the perfect buying experience, he said. The other one-third don’t get turned away, but instead must enter their card details immediately.

When Klarna moves into a region it’s unlikely it launches without at least one partner, similar to the strategy used by Seamless. Klarna partnered with Digital River last year, in anticipation of it's U.S. expansion. Plus many of the company’s merchant partners are big box retailers that have stores all over the world, Saltin said. Klarna has a network of about 50,000 merchants.

If a consumer has already purchased with one merchant in the network, the company through device fingerprinting knows who it is and will pre-fill checkout information if that same customer goes to another merchant in the network.

Klarna’s model is especially important as consumers initiate more commerce on mobile. Shopping cart abandonment, because of the amount of information consumers need to type into the small screen on mobile devices has been a big problem for e-commerce. “Payment is the annoying part,” Saltin said. Klarna makes it possible for consumers to pay on their own time, he said. 

With a few merchants in the Nordic, Klarna has been able to increase mobile payment conversions by 80%, Saltin said.