How Does Klarna Make Money: Klarna Business Model

It’s becoming more and more common for people to buy now and pay later when they buy things online or in stores. Some 39 percent of people have used these short-term, points of sale installment loans at some point.

Klarna is one of many websites that offer this kind of financing. An estimated 90 million people are served by the company, which was founded in Sweden in 2005. It processes two million transactions every single business day.

In this article, we will answer the question “ How does Klarna make money?”

About Klarna

Klarna is a Swedish company that makes it easy for people to pay for things online and make direct payments. It also makes it easy for people to pay for things after they’ve bought them.

More than 4,000 people work for the company. Most of them work at the headquarters in Stockholm and Berlin.

In 2019, about $35 billion worth of online sales were made by the company. As of 2011, about 40% of all e-commerce sales in Sweden were made through Klarna.  During the year 2021, the company said it had a value of $45.6. Klarna is a payment processing service for the e-commerce industry.

As a company, Klarna manages store claims and customer payments for stores and their customers. People call it a “Buy now, pay later” service provider because it gives customers credit on their purchases as part of the checkout process, so they don’t have to pay right away.

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How Does Klarna Work?

In order to get an adequate answer to the question “how does Klarna make money?”, you have to know how Klarna works.

Klarna is a purchase-now, pay-later business focused on internet shopping. You can use the Klarna mobile app anywhere online or at participating merchants by selecting Klarna as a payment method throughout the checkout process. There are no interest charges unless you finance your purchase, and you can repay your debt in a variety of ways.

For example, you can pay off the entire purchase in 30 days (Pay in 30 Days), in four interest-free installments (Pay in 4), or over a six to 36-month period. A minimum purchase of $10 is required with Klarna.

It makes no mention of a buying limit. Rather than that, your credit limit and available credit are determined by:

  • How long have you been a Klarna customer?
  • How many Klarna transactions have you already repaid
  • Daylight Savings Time
  • The purchase’s magnitude

In general, the more frequently you pay with Klarna, the higher your credit limit may be, as long as you pay on time.

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Klarna Business Model

For the most part, Klarna’s business model consists of payment solutions and consumer loan products that are tailored to the needs of online retailers.

Currently, Klarna’s services have expanded beyond typical e-commerce to include payment management in a variety of settings such as public transportation, the news media, and increasingly in physical stores.

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1. Users

Klarna does this through a variety of direct and credit payment alternatives, such as card payments and direct banking, as well as services like invoicing, sales financing, and immediate payments, among other things. Klarna has been chosen by more than 87 million clients.

Klarna is used by 67 percent of customers to break down the cost of purchase into smaller, more affordable payments. Klarna provides users with a variety of flexible payment methods and app features that enable them to manage their finances and budget.

Klarna is used by 48% of people to try on a few various sizes at home and then keep the one that fits the best. The Klarna app offers a seamless, hassle-free buying experience that guides users through every stage of the purchasing process. Throughout the process, from discovering what they love to report a return, it allows consumers to try on their favorite goods in the comfort of their own homes before determining which items they want to keep.

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2. Merchants

Payment solutions and consumer credit products from Klarna are designed to help merchants improve sales while decreasing their working capital requirements. Klarna’s payment solutions and consumer credit products are available on all major e-commerce platforms.

Klarna provides retailers with a smooth operating environment as well as increased client acquisition, which helps them to grow their businesses. Klarna has more than 250k store partners in 17 different countries. These stores include some of the greatest in the business, such as Macy’s, Ralph Lauren, Sephora, Urban Outfitters, Etsy, North Face, and Lululemon, among others, as well as smaller businesses.

How Does Klarna Make Money?

How does Klarna make money if there is no fee and no interest accrued? What exactly is the snag here? Payment solutions provider Klarna receives money from both merchants and consumers that utilize the company’s payment solutions.

Paying fees to merchants, charging late fees, charging interest on consumer loans, and charging interbank costs and interest on currency are some of the ways that Klarna makes money. Klarna offers three different payment options: pay in 30 days, pay in three payments, and financing.

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Klarna’s most popular products, Pay in 30 days and Pay in 3 installments, are completely free for consumers, but retailers are required to pay a fee to cover the company’s payment solutions. Typically, the commission paid by the store is more than the commission paid to Visa or Mastercard by the credit card companies themselves.

Here’s a breakdown of how Klarna makes money;

Paying merchant fees, charging interest on its consumer loan business, and charging late fees on loan repayments are all ways that Klarna makes money. The cash-on-interest model and interchange fees used by the company generate significant revenue as well.

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1. Fees for making payments

Merchants are charged fixed and variable transaction fees on all consumer payments, and this is where the majority of Klarna’s revenue comes from. The fee scale is determined by the payment method selected by the consumer as well as the country in which the transaction takes place.

Merchants in the United States are charged a flat fee of $0.30 as well as a variable percentage fee ranging from 3.29 percent to 5.99 percent. From loan financing to direct checkout options, Klarna offers a wide variety of payment methods to merchants. In exchange, Klarna pays the merchant in advance, assuming the credit risk associated with the customer.

Purchase now and pay later, pay in 30 days, and short-term consumer financing are all available as payment options. Customers who choose to pay in four easy installments over eight weeks, with two weeks in between each payment, will have the option to purchase now and pay later. Customers have the option to pay up to 30 days later without incurring any interest or upfront fees if they choose to pay in 30 days.

Using the Klarna Instant Shopping portal, existing Klarna customers can complete their purchases in seconds by using pre-filled payment information. For this service, Klarna charges the merchant a $30 monthly membership fee as well as a $0.30 fixed transaction fee as well as a variable transaction fee that starts at 3.29 percent for onsite transactions and increases to 3.79 percent for all offsite transactions.

2. Fees for currency conversion

Klarna will open a bank in Germany in 2021, allowing the company to offer its customers the option of opening a bank account. As a result, Klarna account holders get all of the savings and transfer advantages that come with having a traditional bank account, without the hassle.

Klarna also provides account customers with a free debit card that can be used at ATMs throughout Europe. The customer’s debit card is used to complete the transaction, and Klarna receives an interchange charge from the transaction. This cost, which is often less than 1 percent of the total sale value, is the responsibility of the merchant.

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3. Cash interest is calculated on a daily basis.

Klarna also lends money to other financial organizations, like banks, using the cash deposits of its customers as collateral. Among those working in the banking industry, this is a completely typical and legal practice. Klarna obtains interest payments at the rate of the interbank lending market in exchange for lending the cash.

Klarna receives this net interest on margin from its institutional partners, which accounts for a large portion of the company’s total revenue stream.

FAQs On How Does Klarna Make Money

Can You Use Klarna to Pay Bills?

No. While some buy now, pay later financing platforms might allow for bill payment, Klarna is designed strictly for shopping.

Does Klarna check your credit?

Yes, Klarna can check your credit. But whether this involves a soft or hard credit check depends on which payment option you choose.

What credit score do you need to use Klarna?

Klarna doesn’t specify any minimum credit score that you need to use its services. But generally, the better your credit is, the easier it may be to get approved with financing through Klarna.

Does Klarna charge interest?

Klarna charges no interest when you choose the Pay in 4 or Pay in 30 Days options. Both of these buy now, pay later loans are interest-free as long as you pay what you owe in full within the allotted time frame.


Klarna is elevating the shopping experience, boosting store growth, and increasing consumer engagement and loyalty. Klarna intends to expand into other markets and revenue streams, including non-credit and affiliate services. Following the successful introduction of the savings accounts, Klarna is hoping to expand its offering to shops and customers globally.

Klarna also wants to continue building worldwide consumer-centric products that create an enjoyable shopping experience for consumers. Klarna may offer services that are even more personalized to each consumer, paving the way for future preference and growth.


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