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How Does Klarna Work: Klarna Business and Revenue Model Explained!

243 Views | 6 min | Published On: November 30, 2023 Last Updated: December 27, 2023

“It would never work and if it would banks would just do it themselves!” 

And this is how judges dismissed the Klarna team’s idea of Buy Now and Pay Later during a Shark Tank-style competition held in Stockholm in 2005. 

However, who'd have predicted that the Klarna team would go on to achieve such remarkable success with the same idea? 

Have a look at their exceptional numbers – Klarna is the largest BNPL service with 147 million active users. 

In today’s guide, we’ll discover thoroughly about Klarna Business model and revenue streams, SWOT analysis, and much more. So, without any further ado, let’s get started!

What is Klarna? 

Klarna is a financial technology platform that offers financial services, including direct payments, installment plans, and payment after-delivery options. 

Klarna’s business model – ‘Buy Now and Pay Later’ – allows consumers to try and purchase products without paying at that very instant. 

An overview of Klarna business

However, consumers will have the option to choose a payment method that has a 30-day period. Otherwise, they can pay in 4- installments without any interest. They can initiate the payment with the Klarna mobile app, PayPal, or bank transfer. 

Furthermore, Klarna provides financing programs for up to 36 months for customers who make larger purchases. 

Although several prominent shops also provide the payment platform in-store, Klarna is mostly utilized for e-commerce.


Klarna: Facts & Statistics

Following, we’ve listed some important facts and statistics regarding Klarna. Let’s check:

  • Founded in: 2005
  • Headquarter: Stockholm, Sweden 
  • Founders: Evgenii Kondratev, Niklas Adalberth, Sebastian Siemiatkowski, Victor Jacobsson
  • Business Model: Payment Solution for e-commerce
  • Total active consumers: 150,000,000
  • Total number of merchants: 500,000+
  • Number of transactions per day: 2,000,000
  • Number of employees: 5,000+

Also Read: A Comprehensive Guide to BNPL App Development like Klarna or Tabby

How Does Klarna Work: Klarna Business Model Canvas

Klarna offers a wonderful online shopping experience with a focus on online solutions. We've given you some enlightening details regarding Klarna's business model strategy. 

Business model of Klarna

1. Customer Segments

  • Target online shoppers and e-commerce retailers
  • Customer demographic ranges from small local businesses to larger international enterprises
  • Brands and businesses approach Klarna because consumers require high flexibility in buying products

2. Value Proposition

  • Simplified online shopping experience for consumers with the convenience of a one-click checkout process
  • Offers multiple flexible payment options(Buy Now and Pay Later, payment after delivery, EMIs without interest)
  • A win-win situation where customers can purchase their products without worrying about payment and businesses can boost sales and minimize cart abandonment.

3. Channels

  • Buy-Now-and-Pay-Later transactions on Klarna are operated through mobile, web, and API integration with certain e-commerce platforms. 
  • Ensures seamless, user-friendly, and efficient payment process among users and businesses
  • The Klarna Card and app complement the services offered by the company's website and social media pages.

4. Customer Relations

  • Klarna focuses on establishing strong relationships with its customers.
  • Maintains a user-centric approach and addresses potential concerns of customers.
  • Provide personalized assistance to consumers through chats, emails, phone calls, or social media platforms such as Facebook/Twitter.

5. Revenue Streams 

  • Both consumers and merchants have to make one-time payments to leverage Klarna’s services.
  • Merchants are obliged to make a transaction fee of 1.5 to 3% per transaction they make.
  • Merchants have to pay monthly charges to get access to Klaran’s high-end features.
  • Customers who utilize particular payment methods to default on their payments to Klarna may be subject to fees that are primarily charged to users.  

6. Key Resources

  • Klarna leads the BNPL market through industry expertise, customer data, proprietary technology, and relationships with collaborating with e-commerce platforms.
  • With the right strategy and collaboration, Klarna has scaled its business on a global level.

7. Key Activities 

  • Klarna’s core activities include daily transaction processing, business partnerships, credit risk assessment, platform development, fraud prevention, and customer support.

8. Key Partners

  • Klarna has partnered with over 60,000 globally renowned brands for the platform's BNPL service to operate.
  • By partnering with Amazon, Klarna has reached a wider audience globally with its BNPL service solutions.
  • By partnering with Alipay, Klarna was able to successfully expand its target market and enter the Asian market.

9. Cost Structure

  • Klarna has to manage both ends of customer and merchant payment transactions. Therefore, they ensure effective management of loan and credit risks.
  • Klarna incurs costs related to infrastructure maintenance, customer support, salaries, technology development, marketing, and legal compliance.

How Does Klarna Make Money?

The finance company Klarna's operational and execution methodologies, together with their four main revenue streams, enable them to attract funding. These consist of the following:

Different revenue streams of Klarna business model

1. Fees/ Commission from Merchants

The majority of Klarna's income is derived from merchant fees. A commission is imposed by the company on each transaction that is handled via its platform. 

Depending on the country and payment method used by the merchant, the commission percentage of the entire transaction amount can vary from 3.29 percent to 5.99%. Moreover, there is a fixed cost of $0.30 for each transaction. 

On the Klarna platform, users will be offered several payment options. It includes payment in 30 days, card payments, and financing plans (6,12,24, and 36-month term plans).

However, the company does not charge any monthly fees, setup fees, or minimum volume commitments from merchants.

2. Interest Rates

If customers choose financing from Klarna for larger purchases, then Klarna charges up to 19.99% APR over a period of up to 36 months. However, the interest amount rate varies from customer to customer and that depends on their credit score. 

Customers do not pay any interest if they choose Klarna's pay in 30 days option or the four-installment payment option.

3. Late Payment Charges

Klarna incurs late payment charges from users who miss or delay in making timely payments. 

To encourage timely payments and economical purchases, late fees will be divided into many categories and calculated using the entire order value as of October 24, 2022. Check the following table to see information on late fees.

Total Order Value Fee per Late Repayment Maximum Late Fee per Order Snooze Fees
$0-24.99 $0 $0 $0
$25-59.99 $2 $6 $1
$60-99.99 $4 $12 $2
$100-199.99 $6 $18 $3
$200 and above $8 $24 $4

Keep in mind that Klarna is responsible for paying the merchants any unpaid balances, even if customers neglect to make payments.

4. Klarna Card Transactions

Klarna also generates revenue through virtual cards made accessible to customers. With this card, customers can initiate in-store purchases in retail stores which are in collaboration with Klarna. 

Many customers link their virtual cards to Google or Apple wallets. It further helps them to enable swift payment processing after creating a budget for the merchant or retailers they use it for.

Here, Klarna's primary revenue stream is late payments to customers who are in default. But the way the card functions also makes it possible for the fintech company to significantly raise the amount of merchant commissions they stand to get.

Customers can use the Klarna Card at a number of well-known stores, such as H&M, Nike, IKEA, The North Face, GameStop, Sephora, and Foot Locker.

5. Interest on Cash

Among the above-mentioned revenue streams – there’s also one more way to generate revenue. It includes interest on cash. Like many other businesses, Klarna also accrues interest on cash on the funds stored in the banks. 

Note: Interest on cash cannot be a substantial source of income due to the low-interest rates banks offer, hence this isn't actually a component of the Klarna business model. However, it's noteworthy since it's one more meager revenue stream for Klarna.

SWOT Analysis of Klarna Business Model 

Following, we’ve discussed the SWOT (Strength, Weakness, Opportunities, Threats) analysis of Klarna's business model. Let’s learn:


There’s a huge demand among consumers to leverage the brand services. Next, Klarna’s platform offers certain payment options for users. 

In addition, with the cutting-edge technology of banking software, Klarna stands at the top. Also, Klarna offers better risk protection to its customers. 


Users have complete control over Klarna because of the way its business model is configured. Consequently, a higher rate of payment default can significantly impair the franchise's financial position.


Currently, Klarna is active in only 10 countries. And they still have a long way to go to reach users on a global market scale, including Africa and Central America. 


With success comes competitors – there’s a growing number of competitors in the market in which Klarna operates. 

Final Thoughts 

With the advent of technology, it is important for businesses to make the best out of it. Klarna is exactly doing that –leveraging modern technology to transform the Fintech sector. 

Klarna’s business model has earned them high valuations for the past few years, and it will be interesting to see what happens with the company over the years to come.

Klarna’s marketing strategy has been to partner with major brands and offer services as a payment option. This has helped the company grow rapidly, and it is now one of the leading providers of online payments.

The fact that Klarna’s business model is not currently profitable is not unexpected, as the company has to reinvest profits to expand and keep up with the competition. 

Build App Like Klarna Business With Apptunix Mobile App Development

To build a Fintech app like Klarna requires a solid foundation in terms of team, technology, and business strategy. For that, you have the best mobile app development company, Apptunix that will fulfill your vision into reality. 

With advanced technology, professional developers, designers, and other team members – Apptunix will take your business to the next ultimate level. 


Frequently Asked Questions(FAQs)

Q 1.Will Klarna Impact Credit Score?

Klarna will impact your credit score a few times. If you fail to miss or delay your installment payments, your credit score will drop. 

When customers first sign up with the Klarna platform, it does some soft checks on customers but – it doesn’t place any impact on credit scores. 

All in all, the only thing that needs to be considered is that customers must make payments either in full or pay monthly timely installments.


Q 2.What are the Benefits of Klarna for Merchants?

Through the provision of a smooth and flexible shopping experience, Klarna’s services help businesses by increasing customer loyalty, conversion rates, and perhaps average order values. Also, Klarna takes on the risk of non-payment to ensure that retailers get paid on schedule.


Q 3.Is Klarna Safe and Secure?

Yes, it is safe and secure to use Klarna. It is a financial institution that ensures a smooth and secure shopping experience for customers. Also, Klarna makes use of advanced encryption technology to safeguard customer’s data. 


Q 4.What are the competitors or alternatives of Klarna business?

The top three alternatives or competitors of Klarna are Afterpay, Affirm, and Paypal which provide merchant processing and online payment processing services. 


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