As retailers grapple with providing efficient, secure payments options for online purchases that increase conversions, a new option is emerging in the online payment game. Stockholm-based payments upstart Klarna has partnered with Overstock.com to move into the U.S. online retail space.
Klarna functions in a similar manner to PayPal or Stripe, helping retailers process payments. The difference is that instead of requiring customers to log-in, enter credit or debit card information, or store a credit card in a profile, Klarna’s reduced-friction payments system uses the customer’s email and shipping addresses for the first order.
Klarna CEO Sebastian Siemiatkowski explained that the service provide more than just a way to get instant credit, however; it’s also a checkout service that handles all sorts of payment methods, including storing credit card information for future use. The most significant aspect of Klarna, he says, is that it simplifies the checkout process, allowing users to make purchases using fewer keystrokes. “there is still too much friction with payments, too many steps, too much stuff you have to enter,” he told Wired.
And Klarna’s advantage is that it works on the web as well as inside mobile apps, and also functions across a wide variety of devices. Siemiatkowski described the payment system as “Amazon One Click but for all online merchants.”
Using that information, Klarna issues shoppers temporary credit using 200 variables based on public records, then offers 14 days to pay with a card or beginning a payment plan with 11.95 percent interest.
Overstock.com saw an increase in mobile sales conversions following the adoption of Klarna, according to Retail Dive, and they anticipate nearly $100 million in sales completed through the new service next year. Klarna says 67 percent of its merchants see conversion rates improve between 10 percent and 50 percent when switching to Klarna, according to re/code.
Klarna already handles more than 10 percent of ecommerce transactions in European online retail, and is now looking to break into the American market. Klarna CEO Sebastian Siemiatkowski told Fortune that the company will differentiate itself from competitors Stripe and PayPal because it is going after larger, established retailers such as Overstock in the U.S.
Klarna anticipates signing contracts with 50 to 60 additional U.S. merchants by Dec. 31, and “we would be disappointed if there weren’t hundreds of merchants selling with Klarna in the U.S. by the end of 2016,” Brian Billingsley, chief executive of Klarna North America, told Digital Transactions News.
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