How does Klarna Make Money?

How does Klarna Make Money?

In recent years, Klarna has emerged as a leading player in the fintech industry, providing innovative payment solutions to consumers and merchants worldwide.

Klarna offers a range of services, including online payments, buy now pay later (BNPL) options, installment plans, and more.

With its user-friendly platform and flexible payment options, Klarna has gained popularity among consumers and partnered with numerous merchants, making it a significant player in the e-commerce and retail sectors.

But how does Klarna make money? In this in-depth article, we will explore Klarna’s business model, revenue streams, and key strategies that have contributed to its success in the fintech industry.

Overview of Klarna

Klarna is a Swedish fintech company founded in 2005 by Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson.

The company initially started as an online payment service provider but has since evolved into a full-fledged payment solutions provider. Klarna’s mission is to simplify the buying experience for consumers and merchants by offering a seamless and flexible payment process.

Klarna’s core offering is its online payment platform that enables consumers to make purchases from online merchants and pay for them later in a variety of ways, such as installment plans or buy now pay later options.

Klarna also provides merchants with an end-to-end solution that includes payment processing, fraud prevention, and customer support, making it a comprehensive payment partner for online retailers.

Klarna’s Business Model

Klarna operates on a unique business model that combines different revenue streams to generate income.

Let’s take a closer look at the key components of Klarna’s business model:

Merchant Fees

One of Klarna’s primary revenue streams is merchant fees. When consumers make purchases using Klarna’s payment solutions, merchants are charged a fee for the transaction. This fee typically includes a percentage of the transaction value, which varies based on factors such as the merchant’s size, industry, and location, as well as the specific Klarna product used for the transaction.

Merchant fees are a significant source of revenue for Klarna, as the company partners with a wide range of merchants across various industries, including e-commerce, fashion, beauty, electronics, and more. The more merchants that integrate Klarna’s payment solutions into their online stores, the more revenue Klarna can generate from merchant fees.

Interest and Fees from Consumers

Klarna also generates revenue from interest and fees charged to consumers who use its buy now pay later (BNPL) and installment plans. When consumers choose to pay for their purchases in installments or delay their payments, Klarna may charge interest, fees, or other charges as part of the repayment terms.

The interest and fees charged to consumers provide Klarna with an additional source of revenue. However, it’s worth noting that Klarna has positioned itself as a consumer-friendly payment provider, offering transparent and flexible payment options with no hidden fees or interest for most of its products. This approach has helped Klarna gain consumer trust and loyalty, which has contributed to its success in the market.

Cross-selling and Upselling

Another way Klarna generates revenue is through cross-selling and upselling. Once a consumer has made a purchase using Klarna’s payment solutions, the company can leverage its customer data and transaction history to offer personalized recommendations and promotions for additional products or services.

For example, Klarna may offer consumers special deals or discounts on related products from other merchants, or suggest additional installment plans or buy now pay later options for future purchases. These cross-selling and upselling efforts allow Klarna to generate additional revenue by driving more transactions and increasing the average transaction value.

Partnerships and Integration Fees

Klarna also generates revenue through partnerships and integration fees. Klarna collaborates with various merchants, e-commerce platforms, and payment gateways to integrate its payment solutions into their online stores. These partnerships often involve integration fees, which merchants pay to Klarna for the technical setup and maintenance of the payment solutions.

Integration fees can vary depending on the complexity of the integration and the size of the merchant. For larger merchants or e-commerce platforms, the integration fees can be a significant source of revenue for Klarna. Moreover, partnerships with popular e-commerce platforms and payment gateways can also help Klarna expand its reach and attract more merchants to use its payment solutions, thereby generating more revenue.

Data Monetization

As a fintech company, Klarna collects a vast amount of data on consumer purchasing behavior, transaction history, and payment preferences. This data can be valuable for merchants, advertisers, and other stakeholders who are interested in understanding consumer behavior and preferences.

Klarna can monetize this data by providing insights, analytics, and targeted advertising services to merchants and other partners. For example, Klarna can offer merchants data-driven recommendations on pricing, inventory management, and marketing strategies. Klarna can also provide personalized advertising to consumers based on their purchasing behavior and preferences.

Data monetization can be a lucrative revenue stream for Klarna, as it allows the company to leverage its data assets and provide value-added services to its partners, while also respecting consumer privacy and data protection regulations.

Financial Services

In addition to its payment solutions, Klarna has also ventured into offering other financial services that generate revenue. For example, Klarna offers savings accounts and savings products through its Klarna Savings platform, where consumers can earn interest on their savings. Klarna may generate revenue from the interest earned on these savings or through other fees associated with these financial products.

Moreover, Klarna has also launched Klarna Card, a virtual credit card that allows consumers to make purchases anywhere online and pay later in installments or at the end of the month. Klarna Card may generate revenue from interest charged on outstanding balances or fees associated with the card.

Key Strategies for Klarna’s Success

Klarna’s success can be attributed to several key strategies that have helped the company establish a strong position in the fintech industry. Let’s explore some of these strategies:

Seamless and User-Friendly Payment Experience

Klarna has focused on providing a seamless and user-friendly payment experience for consumers, making it easy and convenient for them to make purchases online and choose flexible payment options. Klarna’s checkout process is designed to be quick and frictionless, allowing consumers to complete their purchases with just a few clicks.

Klarna also offers a range of payment options, including buy now pay later, installment plans, and other flexible payment options, giving consumers the freedom to choose how they want to pay. This user-centric approach has helped Klarna gain popularity among consumers, leading to increased adoption and usage of its payment solutions.

Merchant Partnerships and Integration

Klarna has formed partnerships with numerous merchants across different industries, ranging from fashion and beauty to electronics and home goods. These partnerships have allowed Klarna to expand its reach and offer its payment solutions to a wide range of consumers.

Moreover, Klarna has invested in seamless integration with popular e-commerce platforms and payment gateways, making it easy for merchants to integrate Klarna’s payment solutions into their online stores. This integration has facilitated widespread adoption of Klarna’s payment solutions among merchants, contributing to its revenue generation through merchant fees and integration fees.

Consumer Trust and Loyalty

Klarna has built consumer trust and loyalty through its transparent and consumer-friendly approach. Klarna’s payment solutions are designed to be transparent, with no hidden fees or interest for most of its products, and clear terms and conditions. Klarna also provides excellent customer service, with responsive support channels and easy-to-use self-service tools, which helps build trust and loyalty among its user base.

Klarna also prioritizes data privacy and security, complying with strict data protection regulations and implementing robust security measures to protect consumer information. This commitment to consumer trust and loyalty has helped Klarna establish a strong brand reputation and gain a competitive advantage in the fintech industry.

Innovation and Flexibility

Klarna has demonstrated a strong focus on innovation and flexibility, constantly evolving its products and services to meet the changing needs of consumers and merchants. Klarna has introduced new features such as the ability to pay in installments, pay later, and split payments, providing consumers with more flexibility and convenience in their payment options.

Klarna has also expanded its services beyond just payments, offering savings accounts, virtual credit cards, and other financial products, diversifying its revenue streams and catering to a broader range of consumer financial needs.

Global Expansion

Klarna has pursued a global expansion strategy, expanding its operations beyond its original market in Sweden to multiple markets worldwide. Klarna now operates in over 20 countries, including the United States, the United Kingdom, Germany, Australia, and many others, and serves millions of consumers and merchants globally.

This global expansion has allowed Klarna to tap into new markets and diversify its customer base, contributing to its revenue growth. Klarna’s ability to adapt its payment solutions to local markets, while maintaining its core value proposition of flexible and convenient payments, has been a key driver of its success in expanding its global footprint.

Challenges and Risks

Despite its success, Klarna also faces several challenges and risks that could impact its revenue generation and overall business performance. Some of these challenges include:

Regulatory and Compliance Risks

As a financial services company, Klarna operates in a highly regulated environment, and changes in regulations or non-compliance with existing regulations could pose risks to its business. Klarna must comply with various consumer protection, data privacy, anti-money laundering, and other regulations in the markets where it operates, which could increase compliance costs and limit its ability to operate.

Moreover, regulatory changes related to the use of credit and installment payments, interest rates, and other financial products could impact Klarna’s business model and revenue generation. It is essential for Klarna to closely monitor and adapt to regulatory changes to mitigate these risks.

Competition and Market Saturation

The fintech industry, including the online payments sector, is highly competitive, with numerous players vying for market share. Klarna faces competition from other established payment processors, such as PayPal, as well as emerging fintech companies and traditional financial institutions.

Moreover, as Klarna’s business model relies on partnerships with merchants, changes in merchant preferences or increased competition for merchant partnerships could impact its ability to attract and retain merchants, which in turn could affect its revenue generation.

Additionally, the buy now pay later and installment payment space, which Klarna operates in, is becoming increasingly crowded, with many new entrants and established players offering similar services. This market saturation could impact Klarna’s market share and revenue growth, and Klarna must continue to innovate and differentiate itself to stay competitive.

Credit Risk

Klarna’s business model involves providing credit to consumers for their purchases, and it faces credit risk as consumers may default on their payments. Klarna assesses consumers’ creditworthiness before providing credit, but there is always a risk of credit defaults, especially during economic downturns or unexpected events that impact consumers’ financial situations.

To mitigate credit risk, Klarna uses data-driven credit risk assessment models and sets credit limits based on consumers’ creditworthiness. However, if the credit losses exceed the projections, it could have a significant impact on Klarna’s financial performance and revenue generation.

Technological Risks

As a technology-driven company, Klarna relies heavily on its IT infrastructure and systems to process payments, manage data, and provide seamless customer experiences. Any disruptions or failures in its technology, including cybersecurity breaches, system outages, or data breaches, could disrupt its operations, damage its reputation, and impact its revenue generation.

Klarna invests heavily in its technology infrastructure and implements robust cybersecurity measures to mitigate these risks. However, the constantly evolving nature of technology and cybersecurity threats poses ongoing challenges, and Klarna must remain vigilant and proactive in addressing technological risks.


Klarna’s success in the online payments and consumer financing industry can be attributed to its innovative business model, strong focus on user experience, strategic partnerships with merchants, global expansion, and commitment to data privacy and security. By offering flexible and convenient payment solutions to consumers, while providing value to merchants, Klarna has positioned itself as a leader in the buy now pay later and installment payment space.

Klarna’s revenue generation primarily comes from transaction fees charged to merchants, interest income from consumer financing, and other fees associated with its additional financial products and services. Klarna’s strong growth trajectory, supported by its expanding customer base, increasing transaction volumes, and global expansion, has positioned it as one of the key players in the fintech industry.

However, Klarna also faces challenges and risks, including regulatory and compliance risks, competition and market saturation, credit risk, and technological risks, which could impact its revenue generation and overall business performance. Klarna must continue to innovate, adapt to regulatory changes, mitigate risks, and provide excellent customer experiences to maintain its competitive edge and sustain its revenue growth.

In conclusion, Klarna’s success in generating revenue is a result of its innovative approach to online payments, focus on customer experience, strategic partnerships, global expansion, and commitment to data privacy and security. As the fintech industry continues to evolve, Klarna’s ability to adapt, innovate, and provide value to both consumers and merchants will be key to its continued success in the online payments and consumer financing space.

About the author

Hi, I'm Lisa. I went from losing everything in my divorce, to beating all odds and becoming a financially free, independent Woman. My blog is about gaining financial freedom. Thanks for supporting my journey!

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