| Industry | Finance |
|---|---|
| Founded | 2005 |
| Founder(s) | Sebastian Siemiatkowski, Niklas Adalberth, Victor Jacobsson |
| Area served | Sweden, Norway, Finland, Denmark, Germany, Netherlands |
| Key people | Sebastian Siemiatkowski (CEO) Michael Moritz (Board Member) |
| Employees | Approx. 600 (July 2011) |
| Website | www.klarna.com |
Klarna provides payment solutions for the e-commerce sector. About 20% of all e-commerce sales in Sweden goes through Klarna[1][2]. The company's payment solutions,which are built using the programming language Erlang, are offered by more than 12,000 e-stores across Europe – mainly in Germany, Netherlands, Sweden, Finland, Norway and Denmark. The office in Israel focuses on Research & Development (R&D). Today the company has over 600 employees, most of them working at the headquarters in Stockholm.
Klarna’s core idea is to let consumers pay after delivery of their goods, and thereby create a trustful, friction-free and instant buying process by letting the customers verify themselves using basic personal data.[3] Klarna is a part of the wave of start-up companies developing data-driven financial services.[4][5]
Contents |
In 2005, the three founders Sebastian Siemiatkowski, Niklas Adalberth and Victor Jacobsson won the Stockholm School of Economics annual entrepreneurship award with their idea on how to provide consumers and merchants with safer and simpler online shopping payment methods. The same year, the company Kreditor was founded (which in 2009 was re-named Klarna).
In the end of 2007, venture capital firm Investment AB Öresund invested in the company.
Three years later after starting up in Sweden, Klarna started selling their services in Norway, Finland and Denmark. In 2010, Klarna also entered Germany and the Netherlands.
In May 2010, San Fransisco-based Sequoia Capital entered as investors. In connection with the investment, Michael Moritz became member of Klarna’s Board of Directors, this was the first time Moritz entered a European company board.[6] Later the same year, venture capitalist Klaus Hommels, who had previously invested in Skype and Spotify, joined the board of Klarna.
During 2010, Klarna increased their revenues with over 80% to 54 Million USD (~400m SEK)[7]. In early 2011, The UK magazine The Telegraph listed Klarna as one of Europe’s 100 most promising young tech companies.[8]
In May 2011, Klarna acquired the Israeli company Analyzd, with business acitivity on markets in Europe, Israel and the U.S. Analyzd are specialized in risk management and online payments and its founders have previously worked for PayPal.[9]
In 2011, Klarna announced a new service for mobile applications which would allow consumers to purchase goods inside mobile apps without providing any sensitive data. The goal with the service is to reduce the friction during the buying process for consumers when shopping through apps.
Klarna’s code base is written in Erlang, a programming language designed by Ericsson which supports hot swopping in order to make fault-tolerant and non-stop running applications. Owing to Erlang, Klarna is able to run their services almost without any down-time. According to Erlang Factory, they’ve only had 30 seconds of downtime in 3 years running Erlang which results in more than 99,9999% system availabilty. .[10]
Not only Klarna has seen interest in the advantages of using Erlang the past couple of years. The programming language is a key part of Facebook’s chat function[11], and Goldman Sachs used Erlang for the high-frequency trading programs.[12]
Klarna takes both the fraud- and credit risk for the merchants. To be able to take these risks, but still provide a high consumer acceptance rate, Klarna has developed an extensive risk model. Various different kinds of data from the checkout process are received and analyzed by Klarna’s algorithms. Location, time of purchase and even if the e-mail address is copied or typed in are examples of data that can signal fraud.[13]
Klarna offers payment solutions, mainly for e-commerce businesses. Klarna has two main products, Klarna invoice and their part-payment solution Klarna account. Klarna mobile is a third product that yet is only available in Sweden. The mutual idea for all Klarna’s payment solutions is to give customers the opportunity to shop instantly but pay afterwards when the goods have been delivered, in order to make it easier and safer to shop online.
With Klarna invoice, customers are given credit but can shop without using a credit card. The buying process differs slightly between countries. In Sweden, where Klarna was founded, the only thing the customers have to provide the e-store with is their unique identifying number, similar to SSN. In Germany, the customer is instead asked only for basic personal data such as date of birth, gender, address and e-mail.[14]
After filling in the details, Klarna’s system makes a decision whether to approve the customer or not. If the customer is approved, a credit of 10-30 days will be given, depending on the terms for the specific store where the purchase has been made. The goods will be delivered by the store and the customer receives an invoice through mail, e-mail or SMS.[15]
Klarna account is a part-payment service where the customer chooses the amount to pay and for how many months the payment will due. All purchases made using Klarna, no matter what store, are gathered on the same invoice that is sent to the customer on a monthly basis. The customer can end the installment at any time by paying off the whole remaining amount at one time.[16]
Klarna mobile is a payment method specially tailored towards on-demand products, micro-payments and services where the customer need instant access to the goods. The buying process can vary for different types of products but the buyer is always verified by Klarna using the cellphone.[17] Swedish TV-channels TV4[18] and Kanal 5[19], music streaming service Spotify, and on-demand media provider Headweb are some of the largest clients using Klarna mobile.
The service is currently only available in Sweden.
Klarna provides ready-made modules for easy-installation of Klarna’s products into the store. Klarna provides these open-source modules for free on their integration site, integration.klarna.com. Klarna’s free modules support most of the largest e-commerce web applications such as Magento and OsCommerce. The company also offers an API for advanced integrations in PHP, Java, .NET, ASP or Python.[20]
The merchants handle all purchases inside Klarna’s web-based back office application Klarna online. When a consumer make a purchase, it will instantly be presented in Klarna online. Klarna takes both the fraud and credit risk for the goods and pays the merchant. When the goods are ready to be shipped, the invoice is activated and sent either by Klarna, or printed and sent together with the goods by the merchant.
In 2010, global e-commerce sales estimated $948 billion[21]. Credit cards holds the position of the most popular payment alternative in both Europe and the US by a market share of approximately 40%.[22] In some European countries where Klarna operates, like Germany and Sweden, invoice is the most popular alternative.[23][24]
Klarna operates locally in 6 European countries; Sweden, Finland, Norway, Denmark, Germany and the Netherlands. Some of the largest competitors with similar product portfolios in these geographies include Swedish PayEx, German BillPay and Dutch AfterPay. Bill Me Later is an American company offering similar products to Klarna. Bill Me Later was aqcuired by PayPal in November 2008[25]