What is Klarna?

Klarna is a bank, and not just a payment solutions provider. It is also a company that offers safe checkout solution for online businesses, and a payment solution for online shoppers.

Online business owners can charge payments with this system, and the consumers can pay without exposing their credit card numbers to the merchant, thus adding a layer of security for their identity and purchases.

The thing that makes it different is that the merchants who use Klarna can charge their customers with any type of payment provider. The only thing a customer needs to do is to provide his email address and postcode, and then the purchase will be completed.

With Klarna, a merchant can take online payments, can also charge the customer once the delivery is complete, which is commonly known as cash-on-delivery or COD, and also charge customers on an installment basis.

Basically, Klarna is a financing program, and it is powered by WebBank.

Klarna’s Background

Today, no one really questions PayPal, eBay, or Amazon. These may not all be payment solutions providers, but shoppers are confident in providing their credit card information to these online stores.

Klarna is not new to the industry, but it is certainly not as old as the big three. Klarna was founded back in 2005 in Sweden. The company’s goal was to make it easier and safer for people to pay online.

Today, Klarna is one of the biggest financial institutions in Europe. It services 60 million consumers globally, and there are more than 130,000 merchants in 14 countries that accept Klarna as a payment method.

How Does Klarna Work?

Most online payment solutions work this way:

  • The consumer signs up for an account
  • After registration, the customer has to add a credit card or bank account
  • The customer has to fund the payment solution account if using a bank
  • If not, the customer can make a purchase and then log in
  • Then he will be charged for his purchases

Klarna does not work this way. Instead, it somehow reversed the process. In Klarna, you just need to sign up for an account and add your social security ID.

If you are eligible for a Klarna account after passing micro-credit check, you can start using your Klarna account.

After shopping and you are now on the checkout page, you simply have to pay using your email address and postal code.

Now, this is where the magic happens. Klarna pays the merchant where you shopped. The merchant will never have access to your credit card or banking information. The merchant will not ship your item, and then you have to pay Klarna what you owe.

Typically, Klarna will send you an invoice within 14 days. You can pay this invoice using a credit card, bank transfers, or checks.

Another option that you have is to add a funding method to your Klarna account AFTER you made the purchase. But you have to do this in the next thirty minutes after Klarna paid for what you bought online. If not, you will receive an invoice.

What this tells us is that Klarna is a credit system that was turned into a payment system. The beauty here is that consumers will always feel safe when making online purchases. The only company who would ever know their financial information is Klarna.

For merchants, they can expect consumers to make emotional purchases. Consumers are more likely to jump the gun when buying online if they do not have to pay instantly.

Also, Klarna offers a buy now, pay later program. And on top of that, the consumer has the choice to pay in four installments with no interest at all.

Klarna is a global brand which is used by big companies in different industries like H&M, Adidas, and IKEA.

Klarna Mobile App

Klarna wants to take advantage of the fact that most people today do their shopping via mobile. And because of this, there is an app that people can use to instantly access their Klarna accounts.

If you have the app, you can create a wishlist by adding some expensive things that you do not want to buy yet today. If the item ever gets a price drop, the Klarna mobile app will notify you.

It is also the app that allows you to buy now and then pay later in four equal installments. This happens because as you download the app and log in, Klarna is going to do a credit check on you.

If you are credit-worthy, you will be eligible for the buy now, pay later program. With Klarna, you can buy from any online retailer.

Also, the Klarna app allows you to track and manage all your purchase in one place. Typically, if you buy on Amazon, your Amazon account will only show you your Amazon purchases. The same thing goes with PayPal.

With Klarna, you can pay any retail merchant, so now you can visit a dashboard that shows you ALL your online purchases.

How can this happen?

Klarna is a bank. It is like being issued a credit card by a bank like Bank of America. Every time you use that credit card, your transaction will be recorded by Bank of America.

Klarna works similarly, but it added more bells and whistles to its app and its pay later program.

It is also through the app where you can create a single-use virtual credit card that you can use to make a purchase and then pay in four installments. There are no fees or interests in this Klarna payment system.

The app also allows you to create a payment schedule for your purchases. You can create a payment schedule that suits your financial situation. However, like any bank, you have to pay when the bill is due.

If you schedule a payment that is beyond your due date, you will be charged interest rates.

Buyer Protection Program

Klarna has what is called zero tolerance for fraud. What this means is the consumer is protected if there was an unauthorized payment or purchase made from his account.

If you ever find out that this happened, you must contact Klarna customer Service within 60 days from the date that the purchase appears in your app, your credit card or bank statement. You should also file a claim within 30 days after Klarna notifies you that the payment is due.

This is not the only buyer protection offered here. With Klarna, you can file for a dispute if your purchase was not delivered. However, you must first contact the merchant to check if the item was shipped. If you still do not have the item and your bull is already due, you can ask Klarna for assistance.

For returns and refunds, this will be processed as per the online store’s policy. Klarna also protects its merchants. If you are a buyer, you must prove that you have already shipped back the item to the seller.

Klarna will check with the seller if he has received the returned item. If the seller confirms this and allows a refund, Klarna will process it.

All refunds will be processed by how you paid. If you paid using a bank account, Klarna would deposit the refund back to the same bank account. If you used a card, Klarna would refund to your card.

To get full coverage for the buyer protection program, there are some important details that a customer must know.

Klarna covers you if you did not receive the goods that you paid for. Even if the due date is coming close, you do not have to pay, provided that you call customer service and ask the payment to be postponed.

If you have already paid Klarna for the money they fronted, and still you do not have the item, you first have to contact the seller. Next, contact Klarna, and they will conduct an investigation. If it turns out that the shipment was missing, you will get a refund from Klarna.

Here are some more details about buyer protection:

  • You can get a refund for defective products
  • You can cancel your order, but you have to send the goods back to the seller
  • You only have 14 days to cancel from the date of your purchase or 14 days after you have received your goods
  • You can ask for a refund or cancellation if the goods you received do not match what was advertised
  • The only purchases covered by the buyer protection program is are physical goods.

Here are some examples of items without coverage of the buyer protection program:

  • Digital goods like eBooks or online courses
  • Customized products
  • Cash products like digital coins
  • Illegal items
  • Items against Klarna’s ethics policy

Merchant Payment Solutions

Online sellers have different features to enjoy with Klarna. Below are the most important ones.


This is the checkout system that you can integrate into your website to be able to process Klarna payments. It immediately identifies repeat customers, so the system can auto-fill a customer’s shipping details upon checkout, this giving a smooth checkout experience.

Klarna also ensures you get paid right away since it funds that payment. If it does, your sale is guaranteed.

In Store

This is the feature that you can use in your brick-and-mortar business. Instead of paying with cash, the consumer will just tell you that he will pay with Klarna.

If consumers do this, they have the option to pay even if they do not have cash. Klarna takes care of the financing, so you can make a sale even if the consumer has no cash.

Now, it is between Klarna and the consumer to settle the money that the consumer owes to Klarna.

Slice It

You will enjoy this feature if you are selling big-ticket items. The Slice It feature allows your customers to buy your expensive items upfront even if they have no money. And then, they will pay Klarna on an installment basis.

The great thing about this is that your customers do not even need a Klarna account before making the purchase.

If you offer Klarna in your online store, a consumer will see that with Klarna, he can pay on installment. If he chooses to pay with it, he just has to complete a one-time registration.


If it succeeds, Klarna will pay you the entire cost of the item, and now you can ship it.

Merchant Insights

You can also view a dashboard if you use Klarna to accept payments.

In this dashboard, you can view the following:

  • Number of orders
  • Total sales average order value
  • Weekly sales
  • Number of installment purchases

There are more business analytics you can see here. What it can do is to help you make informed business decisions. If you are seeing that more customers are buying on a Wednesday, then you might bump up your marketing efforts on this day.

You can assess if your sales are up during paydays, or if customers have a strong preference to buy if they have to pay on installment.

On-site Messaging

As a merchant, you will have a plugin that will let your customer, or site visitor, send you messages directly on your site. It is like a live chat function, which means you no longer need to activate another plugin just to have this feature.

With on-site messaging, you can increase your conversion rate because you can answer all your customer’s inquiries. If you know what your customers are looking for, you can even create a personalized offer.

You can also provide clarification on how Klarna works, and give them an assurance that their shopping purchase will be paid upfront by Klarna.

Platforms Supported

There are two options on how you can use Klarna. The first one is by directly integrating the system to your website. The second one is through using online store platforms.

With direct integration, you must be really computer-savvy. What this means is that you need to understand computer languages like APK, SDK. You should also know what environment your website is running in, like Java, PHP, and more.

To start the direct integration, you have to get test credentials. You will be asked to integrate Klarna in their own test environment.

If you pass it, just follow the integration guide and then check if the system works.

The other method is by using Klarna’s partner platforms. Klarna works with Shopify, Magento, WooCommerce and others.

The integration is simple. All you need is a Klarna account. Then, you need to choose the Klarna plug-in from your online store platform. Download and install it, and then launch it.

Upon launch, provide your Klarna credentials, and the integration will be completed. Once this is over, your customers can now see that you are accepting Klarna payments.

Klarna Pricing and Fees

Klarna is not always free for the merchant. It is free to use by the consumer, but the merchant has to pay transaction costs.

And since it is a global company, the fees and pricing are different per country.

In the United States, Klarna charges merchants a Transaction Fee and a Variable Fee. These two may or may not apply depending on how the customer wants to pay for the purchase.

  • Pay Later – if the customer will pay later, the merchant has to pay $0.30 for the transaction fee and then 5.99% as a variable fee for the overall transaction cost. Pay later means that the customer will pay in 30 days.
  • Slice It – if the customer will slice the price and pay in instalments, the transaction fee is also $0.30, but the variable fee is 3.29%.

Should a customer decide to pay in full, the merchant will not pay any fees.

Now, the users do not have to pay interest if they will pay within 14 to 30 days from the date of the transaction. They also will not pay any fee of the chose to pay in installments.

However, they will pay a late charge if their payment is delayed. This is how Klarna earns money from the users, since Klarna paid the purchase upfront, and needs the interest to cover for these costs.

Klarna charges an APR rate of 18.9% for your purchases. APR means Annual Percentage Rate. If you purchases $100, your interest rate is $100 X 18.9% = $18.9.

Overall you will pay $118.9. The interest is spread over 12 months. So if you pay in six months, you will only pay $18.9 / 2 = $9.45 plus the original $100.

You will also pay late fees and charges, which vary from one country to another.


Klarna is like a credit card with no physical card involved. There are limits to how much you can borrow depending on your credit history. Klarna can be used on both online and offline purchases, provided that the merchant accepts it as a payment system.