Shopping online has become something of a hobby – if not a pleasant distraction – for the modern pandemic Consumer. With this has come a need for brands of all sizes to have attractive Payment methods, particularly highlighted by the onslaught of furloughed or cost-conscious customers. A big name in the ‘buy now, pay later’ arena has been Klarna, the fintech company providing the most obvious (and popular) solution to a simplified and enticing shopping process. What is Klarna getting so right, and can small brands weigh in on its success?

What is Klarna?

The essential premise of Klarna is allowing shoppers to help spread the cost of their purchases with no interest or fees. Klarna’s business model is considered ground-breaking, with the flexibility and transparency in the solution offering an entirely new shopping experience. Being Europe highest valued private fintech, 200,000 retailers worldwide are now partnered, 10,000 of which are based in the UK. After passing a credit reference search, consumers are presented with three payment choice – pay in full 30 days after delivery, pay in three equal instalments over 60 days or finance plan between 6-36 months. Despite this, the brand receives full payment straight away. After Klarna has established the fashion industry as a key player to its success (mostly due to consumer convenience when it comes to trying different sizes), small and independent business are also in position to reap the benefits.  

Is it all too good to be true?

One positive knock-on effect from Klarna’s impact that could favour the smaller brand is the incentive to invest in longer-lasting, high-quality products. Coming away from the cycle of fast-fashion, many businesses that rely heavily on e-commerce have noticed an average total transaction revenue increase of 10% - the respectability of Klarna itself adding an extra sense of security through the payment process. That being said, Klarna has not been free from critique. The argument of making credit seem cool to a younger consumer demographic has often reared its head, despite the average age of a Klarna user not falling into the Gen Z category. Klarna have been quick to act and address this, with stressing that their revenue derives from charging consumer who fail pay back and introducing initiatives such as KlarnaSense – encouraging customer to shop smarter by choosing the right items.

By pledging 50% of their 2021 budget to supporting financial awareness and challenging their own regulations, Klarna have shown they’re in it for the long haul, with as much transparency and transformation that is needed. The horizon looks bright for the fintech too, with a move into physical stores already on the cards, supported by brands such as New Look and Schuh. It’s safe to say that it could be a mistake to miss out on the momentum, ease and popularity that Klarna continues to hold. Small and independent brands hold just as much to gain and the big-name giants and can utilise their success through their app, payment flexibility and future plans.

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