Klarna is a "buy now, pay later" (BNPL) service that allows consumers to make purchases online or in stores without paying the full amount upfront. Users can choose to pay in four equal, interest-free installments spread over six weeks, pay the entire amount within 30 days, or finance purchases for longer periods with interest through Klarna's partners. Customers must be 18 or older and can manage payments through the Klarna app. Klarna does not charge fees for the standard "Pay in 4" service but may charge fees for late payments or if using the service outside partner retailers. Klarna makes money by charging merchants a fee per transaction rather than charging customers interest on the basic BNPL plans. Merchants benefit because Klarna assumes the risk of nonpayment and typically pays them within a few days of purchase. Key features include:
- Paying in 4 interest-free installments every two weeks
- Paying full amount within 30 days, interest-free
- Long-term financing options with interest for larger purchases
- No credit check for sign-up; soft credit check during purchases
- Consumer protection such as late fees capped at 25% of the purchase amount
- Secure data handling and regulatory compliance by Klarna
In checkout, customers select Klarna as the payment option, and Klarna verifies the purchase, assumes payment risk, and advances funds to the retailer instantly, while the customer pays Klarna back according to the chosen plan. This system aims to make shopping more flexible and accessible while reducing merchant cart abandonment by simplifying checkout and payment options.
