For the last few years, Sweden-based online payment provider Klarna has slowly and steadily become a bigger e-commerce presence than PayPal…in Europe. Its arrival in the U.S. seemed to be a matter of “when” rather than “if” (CNN Money speculated about Klarna’s American intentions way back in June 2014)–and that when is today.
Klarna has just announced a partnership with Overstock.com that will bring them to the States for the first time.
The launch partnership will have Overstock using Klarna Checkout for mobile web guest purchases. What sets Klarna apart from its competitors is how it analyzes credit risk. PayPal, for example, requires customers to have a credit card already on file or money in an account, whereas Klarna uses an algorithmic risk assessment of the customer based on behavior and credit scores, with the least risky guests able to make purchases with just their email and delivery address and pay within two weeks. Klarna’s business model assumes the payment risk in the interim, allowing those less risky guests (probably 80% of the time, according to The Wall Street Journal) to receive and review the item before paying.
Klarna will not only compete with PayPal in the U.S., but Stripe as well–two services Klarna has already surpassed in Europe. A key metric of success for online payments has been the number of credit cards companies have on file, The Wall Street Journal writes, but last September Klarna chief executive Sebastian Siemiatkowski pointed out that this is chiefly due to the friction it takes to enter credit card information in the first place. Out of a hundred potential buyers on a desktop PC, two-thirds never complete their purchases, a number that rises to 90% abandonment on mobile. By making the process easier, Klarna claimed last September to have a conversion rate close to 50% on both mobile and desktop.
Today, Klarna claims in its launch statement that its Klarna Checkout has an equally high conversion rate on mobile as on desktop. Klarna also assumes both fraud and chargeback risk for merchants.
Klarna first talked about a U.S. expansion back in Sept 2014. Last December, Klarna said it would likely spend $100 million on the U.S. expansion. Klarna has already set up its U.S. headquarters in Columbus, Ohio, with offices in New York City and San Francisco.