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Is Fintech the Future of E-Commerce?

November 13, 2018

Fintech firms are experiencing a purple patch with the likes of PayPal and Klarna becoming synonymous with millennials and younger generations. Klarna is so popular it has even become part of our vocabulary with avid fashionistas exclaiming ‘just Klarna it’. Opinions on Klarna’s rise are divided with some worried about the online payment platform while others boldly claiming it can become the next VISA or Mastercard.

While Klarna’s impact cannot be fully understood just yet, it is massive. According to their own findings, Klarna has to date over 60 million end-customers, 100,000 merchants and 800,000 transactions a day. All of this culminates in the Swedish firm controlling 10% of Northern Europe’s E-commerce market share. With plans to expand across the world, and a special focus on the US market, it’s high time we understand how and why Klarna works for customers and online retailers.

How Does Klarna Work?

Klarna Ice Cream (Source: Software Engineering Daily)

Klarna is essentially a payment processing platform like Pay Pal with one added difference. Instead of having to pay up front, users can order the goods with Klarna taking on the risk. It has proved especially useful to online consumers as they can order clothes online, receive them, try them on, and return the ones they don’t want all without any money leaving their account. At the end of the loan period (usually between 14-30 days), Klarna will ask users to settle this debt. As long as the balance is paid within the period of time users pay no interest. This system runs counter to the hard credit checks banks use when people apply for credit cards. Thousands of people from students to new UK residents are embracing this relatively easy service. No need for three years’ proof of residence or formal credit checks. Klarna does limit how much it will lend making it useful for clothing, accessories and other non-large purchases.

This simple system has seen it win new vendors across the world and, for a fee, provide boutiques, e-commerce and small business owners with credit options and none of the risk.

Partnership with Modern Brands

Partnership with H&M

One of Klarna’s biggest moves has been its partnership with H&M and Shopify.  By aligning themselves with H&M’s the fintech firm has affirmed its place as an important player in the online retail sector. Other brands have been quick to jump on the bandwagon with the likes of ASOS, Topshop and Schuh proudly listed on the Klarna website.

By building Klarna directly into their e-stores, some of the world’s most popular brands have become synonymous with the payment platform and afforded it an air of being young and vibrant.

Is Fintech Helping or Hindering Young Spenders?

Shopify Partners with Klarna

This brings us on to one of Klarna’s biggest detractors. Is it teaching vulnerable youngsters bad spending habits? Opinions are varied with the Financial Times calling Klarna ‘the new debt trap for millennials’ while Business Insider claims ‘Klarna could demolish the banking sector as we know it’. Whatever the case; millennial aversion to credit cards is well-placed and born out the 2008 financial crisis and its knock-on effects. Millennial spending is more focused on flexible, transparent options without the obvious threat of credit card debt. What’s more by spending online purchases seem less significant as bank balances change without actually handing over cash.

That being said there are still users who may indulge and overspend landing themselves debt with Klarna instead. While Klarna state they will offer guidance and extensions to vulnerable spenders it is to be seen how it will deal with actual debt collection.

What Does it Mean for E-Commerce


Whatever the case, merchants cannot ignore consumers’ desire for options with Researchscape International finding 47% of consumers desiring instant finance options and a stunning 75% are more likely to select online merchants that offer instant financing over those that don’t. What’s more 40% of people surveyed admit they would spend more in a single session if they had the option of instant financing. This shows a huge shift to cash-poor consumers who rely on stretching their salaries to fulfil their consumer needs.

While only time will tell what Klarna’s approach will do to global spending habits it is certain to help online retailers receive greater conversions and fuller carts. Partnering with services like Klarna is one of the myriad ways SMEs and large companies can improve their online presence. At Fifteen, we specialise in helping you find the tools to get your site to the top.




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