Swedish Online Payments Provider Klarna Plans to Enter US Market

August 25, 2014 by
Swedish Online Payments Provider Klarna Plans to Enter US Market

Swedish e-commerce company Klarna, a fast-growing online payments solution popular in Europe, is setting its sights on the global market and it hopes to offer its services in the United States by early next year.

Analysts say the company will face several challenges to make this plan a reality, but backers are betting on Klarna’s technology.

Klarna makes buying simple by just requiring the customer’s email address and postal code to complete the purchase. It underwrites the financial risk for sellers until consumers pay for their purchases, either right after the checkout or upon the arrival of their orders.

Klarna, however, may find itself stuck in debt if consumers fail to pay for their purchases. These may become more difficult as it expands its reach to consumers beyond Europe.

Industry insiders say Klarna should have the technology to detect online fraud and security breaches if it wants to reach millions of consumers. Backers say this will not be a problem.

“Klarna is like an iceberg because consumers only see about a tenth of what it does,” said Zurich-based early-stage investor Klaus Hommels. “The real secret sauce is how it analyzes credit risk.”

Klarna is also expected to face intense competition from traditional finance players and e-commerce firms such as PayPal, which also offers a similar service (Paypal Credit) in the US.

In spite of all the risks and challenges, there is still an attractive opportunity for Klarna, as consumers increasingly use mobile phones to purchase products online. And to rise above the competition, Klarna is determined to “make online payments as simple as using Google,” says Klarna cofounder Niklas Adalberth.

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