Klarna.com – Buy Now, Pay Later

By | December 1, 2015

Do you own a website where people pay by credit card? If so, you may be interested in a new service that could increase your sales. I have no affiliation with this company, I have not tried it myself, and am not endorsing them. I just thought it is something other business owners might be interested in, so here are the details:

In a previous posting, I wrote about how in 2002 I created an online payment system called DigiCredit.com where people could buy virtual goods (site memberships, ebooks, songs, etc.) with no money up front and no credit check. Instead, they would have 30 days to pay by cash, check, or credit card. I used this on a few of my sites, and although only 20% of the people paid the bill, it still increased my overall profits.

I recently found out that Klarna.com launched this year in the U.S. (they are already big in Europe) and is offering a service similar to DigiCredit for e-commerce sites that sell physical goods. They are using much more sophisticated technology than I was (they use advanced data analytics and modeling to decide if the customer is creditworthy), but the basic idea is the same. No credit card info has to be entered at the time of purchase; just your email address and zip code. You then have 14 days to pay, with no fees or interest due. This is especially handy for customers on mobile devices because a lot less information has to be typed in while they order. Not all buyers will qualify for the 14-day payment terms, but those who don’t just need to fill in their credit card details like with a normal shopping cart, so there is no downside to using it. Klarna assumes all the risk from the sale, pays the merchant immediately, and collects the amount due from the consumer.

What is amazing is that Klarna.com is able to offer this for around the same price as other merchant solutions such as Stripe.com, Paypal.com, or your bank. There are no monthly fees, statement fees, or minimums. I don’t know how they can make a profit after taking into account the buyers that don’t pay their bill, but that is not something the merchant has to worry about.

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