Boost Sales with Klarna: Elevate Your Ecommerce Strategy Now

What is Klarna?

Klarna is a BNPL service that allows customers to purchase items on credit and pay for them over time. Founded in 2005, Klarna has become a preferred payment option for many online shoppers. When a customer uses Klarna, the company pays the merchant the full purchase price upfront and then collects payments from the customer in installments. Klarna offers several payment options, including:

• Pay in 4: Customers can split their purchase into four interest-free installments, with the first payment due at the point of sale and the remaining payments spread over six weeks.
• Pay in 30 Days: Customers have 30 days to pay for their purchase without interest, with the option to pay early or extend the due date for a fee.
• Pay Over Time: This option allows customers to pay over a longer term, ranging from three to 24 months, with varying interest rates.
• Pay in Full: Customers can choose to pay the full amount upfront using their credit or debit card.

Klarna conducts a soft credit check to verify customer identity and assess their ability to make payments, ensuring a smooth transaction process for both merchants and customers.

Why Do eCommerce Businesses Use Klarna?

Higher Average Order Value

Offering Klarna as a payment option can lead to higher average order values (AOV). Customers are more likely to complete a purchase and spend more when they can spread the cost over time. Klarna’s reports indicate a 23% increase in AOV for merchants who offer their BNPL services. This trend is even more pronounced with Shopify‘s BNPL product, Shop Pay Installments, which can increase AOV by up to 50%.

Improved Cash Flow

Klarna’s payment structure benefits both merchants and customers. Merchants receive full payment upfront, ensuring steady cash flow, while customers enjoy the flexibility of choosing their payment plan. Klarna users reportedly have a 46% higher purchase frequency than average shoppers, making it an attractive option for businesses looking to improve cash flow.

Younger Customer Base

Klarna appeals to younger consumers, such as millennials and Gen Zers, who prefer the flexibility of BNPL services. Nearly half of these demographics have used BNPL options, compared to only 21% of older generations. By offering Klarna, businesses can tap into this growing customer base and meet their demand for competitive repayment terms.

Less Risk

Klarna assumes the risk of non-payment and fraud, allowing merchants to receive the full purchase amount even if a customer defaults. Klarna also handles customer payments and returns, reducing the merchant’s risk and administrative burden.

Integration with Your POS

Klarna integrates seamlessly with various point-of-sale systems, including Shopify. This integration process is straightforward, often taking as little as 20 minutes, making it easy for merchants to add Klarna as a payment option without extensive technical support.

Drawbacks of Klarna for eCommerce Businesses

Transaction Fees and Chargeback Fees

While Klarna offers many benefits, merchants should be aware of the associated costs. Klarna charges a transaction fee each time a customer uses the service, which can vary based on the merchant’s agreement and sales volume. Additionally, merchants may incur chargeback fees for transaction disputes.

Opaque Fee Structure

Klarna’s fee structure can be somewhat opaque, as the company does not publicly list merchant fees on its website. Merchants must contact a sales associate to obtain a customized quote, which can be a barrier for businesses seeking transparency.

Alternatives to Klarna

Shop Pay Installments

Shopify‘s BNPL service, Shop Pay Installments, offers seamless integration with online stores and POS systems, fast disbursement, and no payment processing fees for refunds and returns. Merchants pay a processing fee on each transaction, with rates available upon request.

Affirm

Affirm is another BNPL option that integrates well with Shopify. It offers higher credit limits and longer-term installment plans but does not disclose all fees upfront.

Afterpay

Afterpay provides a simple payment option with lower spending limits. While it may take longer to receive payment, it can be a good fit for businesses seeking straightforward payment solutions.

Frequently Asked Questions about Klarna

How does Klarna actually work?

Klarna allows customers to split their purchase into four equal payments, pay within 30 days, pay in interest-based installments, or pay in full. Merchants receive immediate payment, minus transaction fees, and Klarna collects payments from customers over time.

What is the downside of Klarna?

Klarna’s transaction fees can be high, particularly for merchants offering lower-cost items.

What are alternatives to Klarna?

Alternatives include Shop Pay Installments, Affirm, and Afterpay, each offering different features and benefits.

Does Klarna work with Shopify?

Yes, Klarna can be integrated with Shopify stores in a matter of minutes.

In conclusion, Klarna represents a powerful tool for eCommerce businesses looking to boost sales and enhance customer satisfaction. By offering flexible payment options and assuming transaction risks, Klarna can help increase average order values and attract a younger customer base. However, businesses should carefully consider the associated fees and explore alternative BNPL services to find the best fit for their specific needs.

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