Klarna’s Business Model: Revenue Strategies Analyzed

As one of the world’s top financial technology companies, Klarna has revolutionized the buy-now-pay-later concept. With a platform that enables seamless shopping using a temporary Visa card, Klarna caters to customers worldwide.

Considered the pioneer of this modern stratagem, Klarna holds the largest market share and successfully completed its Initial Public Offering (IPO) in 2021, gaining significant popularity.

The Evolution of Klarna

Stripe, a relatively young company, was founded in 2010 by the talented Irish brothers Patrick and John Collison. Patrick, recognized at the young age of 16 as the Young Scientist of the Year for his work on the Lisp programming language, had to leave high school early to attend computer science classes at MIT.

John, on the other hand, achieved the highest score in the Irish Leaving Certificate, qualifying him for university, and he also pursued computer science at Harvard University, another prestigious institution.

During Patrick’s freshman year at Harvard in 2007, he and John established Auctomatic, an auction management system for online marketplaces like Amazon and eBay.

Auctomatic joined Y Combinator, a well-known startup accelerator, and a few months later, the company was acquired by Live Current Media for $5 million, with Patrick assuming the role of Head of Product Engineering at the young age of 19. Meanwhile, John was beginning his studies at Harvard.

The following year, John decided to drop out of Harvard, and the Collison brothers embarked on their next venture, Stripe. Notably, Stripe’s first funding came from Y Combinator, particularly from its founder, Paul Graham, who had previous knowledge of Patrick.

Sometime later, the brothers crossed paths with PayPal founders Peter Thiel and Elon Musk. This encounter resulted in a $2 million investment in Stripe, accompanied by valuable insights and guidance, as shared by Patrick.

Stripe was officially launched in September 2011, and within five months, it secured another round of funding totaling $18 million, led by Sequoia Capital and with participation from Affirm and PayPal.

Over the subsequent years, Stripe expanded its operations and product offerings, attracting notable clients such as Lyft and Wish. The COVID-19 pandemic in 2020 accelerated the shift to online sales for traditional businesses, driving Stripe’s growth and valuation from $20 billion in 2019 to $95 billion the following year.

Currently, Stripe collaborates with over one million businesses worldwide and employs a workforce of over 4,000 individuals.

Co-founders and Key Investors

Klarna Bank AB is primarily owned by its three co-founders. Prior to the company’s IPO in 2021, Sebastian Siemiatkowski, the CEO and co-founder, held an estimated 8% stake in Klarna, valued at around $2.2 billion.

Victor Jacobsson, another co-founder, owned approximately 10% of the company, with a valuation of about $2.7 billion. Niklas Adalberth, the third co-founder, possessed a 0.4% stake in the online fintech firm.

Apart from the co-founders, Klarna’s trajectory is influenced by prominent investors like Sequoia Lake, Visa, Permira, Atomico, and Ant Group. The company is guided by a board of directors led by Chairman Michael Moritz. The board consists of eight members who play varying roles in shaping the company’s direction.

Mission and Vision

Klarna Bank AB is driven by a straightforward mission: to simplify, secure, and optimize the payment process, ultimately delivering a frictionless experience for customers.

Furthermore, Klarna envisions a future where power is shifted from major corporations to the consumer. Their goal is to empower individuals, enabling them to make quick and well-informed decisions. By offering transparent and convenient financial solutions, Klarna aims to grant individuals more control over their financial decisions.

Through their unwavering commitment to their mission and vision, Klarna is dedicated to elevating the payment experience and revolutionizing the relationship between businesses and consumers.

How Does Klarna Make Money?

Klarna’s business model relies on four main sources of revenue, which allow the fintech company to generate funds. These revenue streams include merchant commissions, in-store Klarna Card transactions, interest charges, and late payment fees.

Revenue StreamsDescription
Merchant CommissionsKlarna charges merchants a fee for acting as an intermediary between consumers and retailers. Merchants pay a flat transaction fee and a percentage of the total sale value, varying based on the chosen payment option. Applicable to both online and in-store transactions.
In-Store Klarna Card TransactionsRevenue generated through the virtual Klarna Card used by shoppers for in-store purchases at affiliated brick-and-mortar stores. Klarna earns income from late payments by consumers and also benefits from merchant commissions. Accepted by major retailers.
Interest ChargesKlarna earns revenue from consumers who opt for financing options. Interest charges apply, with rates varying based on the repayment period and the consumer’s credit score. Four-installment and 30-day payment options do not incur interest charges.
Late Payment FeesConsumers who miss payment deadlines for the four-installment and 30-day payment options incur late payment fees. Klarna imposes per-payment fees and a monthly charge for each month of delayed payment. Klarna remains responsible for paying merchants even if consumers default on payments.

Interest on Cash

In addition to the aforementioned revenue streams, Klarna also earns some money through collecting interest on the cash it holds. Similar to other large companies, Klarna maintains substantial funds in bank accounts, and the longer that cash remains unused, the more interest it accrues.

While the exact amount of interest earned by Klarna is unknown, most banks typically offer an interest rate of around 0.04%.

Due to the relatively low interest rates provided by banks, interest on cash is not a significant source of revenue for Klarna, and it does not play a prominent role in their business model. However, it is worth noting as an additional minor revenue stream for Klarna.

Profitability of Klarna

At present, Klarna’s current business model is not yielding any profits. This may come as a surprise considering the substantial amount of money flowing through transactions, but it is not uncommon in the buy-now-pay-later industry.

The buy-now-pay-later sector is known for its high capital requirements, and Klarna invests significant amounts of money in expansion efforts to stay competitive. In 2021, the company reported a loss of $730 million despite generating $1.5 billion in revenue.

The challenges of attaining profitability in the buy-now-pay-later space have been exacerbated in recent times due to uncertain economic conditions and shifts in consumer behavior influenced by political factors.

Klarna Business Model

The business model operates in the following way:

Klarna’s Customer Segments

It operates as a multi-sided business model, relying on two interconnected customer segments:

  • Consumers: These individuals choose Klarna for its secure and flexible payment options, allowing them to pay for products after delivery;
  • Merchants: Businesses and brands join the Klarna platform to offer consumers increased flexibility in purchasing their products.

Klarna’s Value Propositions

  • Convenience: Klarna Checkout provides a seamless and convenient shopping experience, allowing users to make one-click online purchases using their stored financial information. This saves time for both consumers and merchants, reducing the need for administrative resources;
  • Performance: Klarna consistently delivers strong results for merchants, leading to a significant increase in conversion rates on platforms such as wish.com, adlibris, and fitnessguru. Merchants have experienced over a 40% improvement in conversion rates when utilizing Klarna’s services;
  • Risk Reduction: Klarna offers protective features such as the Pay After Delivery service, which allows consumers to pay for their purchases only after receiving the ordered products. Consumers have up to 14 days after delivery to initiate payment, reducing risks for both consumers and merchants. Klarna assumes the risk on both ends and receives reimbursement when the consumer pays;
  • Increased Brand Reputation: Klarna has earned widespread respect and achieved significant success in the market. With over 45 million consumers, 65,000 retailers globally, and overseeing 400,000 daily transactions, Klarna holds an impressive 10% share of the Northern European eCommerce market. Its brand has gained recognition and trust among users and merchants alike.

Klarna’s Channels

Klarna operates through both online and offline platforms, catering to a wide range of user preferences. While the majority of buy-now-pay-later transactions occur through Klarna’s online platform, retailers are increasingly adopting in-store options, which have garnered positive feedback from users.

To further enhance accessibility, Klarna offers the Klarna Card and app in addition to its website and social media presence. These additional channels provide customers with more ways to access and utilize Klarna’s services, adding convenience and flexibility to the overall experience.

Klarna’s Customer Relations

  • Merchants: Klarna places a strong emphasis on establishing and maintaining customer relationships through its merchant-centric approach. By prioritizing merchant needs, Klarna ensures convenient support and solutions for consumers;
  • App Interface: Accessible through the Klarna app, users can easily navigate and utilize Klarna’s services. The app streamlines payment processes, providing users with essential payment information and enhancing their overall experience;
  • Communication Channels: Offers multiple channels for communication. Users can reach out to Klarna via official email or through social media platforms such as Facebook and Twitter. These channels provide convenient means for users to engage with Klarna and seek assistance when needed.

Klarna’s Revenue Streams

  • One-Time Payments: Consumers and merchants are required to make one-time payments to access certain services, such as installment payment solutions and Klarna Checkout;
  • Transaction Charges: Merchants using Klarna for transactions pay a fee of 1.5% to 3% for each transaction made;
  • Usage Charges: Merchants are charged a monthly fee for using higher-end features like Klarna Checkout;
  • Interest Fees: Consumers who default on payments through specific payment options are liable to pay interest fees.

Klarna’s Key Resources

  • Brand Reputation: Klarna’s strong brand name and track record of success in the buy-now-pay-later industry make it a desirable choice for both merchants and consumers seeking flexible payment options;
  • Cutting-Edge Technology: Klarna sets itself apart from competitors by leveraging its proprietary software platform, incorporating advanced banking software for efficient and seamless operations. This technology enables Klarna to deliver a superior user experience;
  • Strategic Partnerships: Klarna’s strategic partnerships play a crucial role in its global expansion and scalability. Collaborations with key industry players allow Klarna to extend its reach and have a broader impact in the market. These partnerships enhance Klarna’s offerings and bring additional value to its users.

Klarna’s Key Activities

  • New Banking Model: Klarna continuously explores new opportunities globally through its improved banking model;
  • U.S. Scalability: Klarna focuses on expanding its marketin the United States, aiming to surpass its presence in Germany.

Klarna’s Key Partners

  • Amazon Partnership: Through its partnership with Amazon, Klarna gains the opportunity to provide its buy-now-pay-later solutions to a wider global consumer base, leveraging Amazon’s extensive reach and customer base;
  • Retail Partnerships: Klarna forms strategic alliances with more than 60,000 renowned brands worldwide, allowing it to offer its buy-now-pay-later services to a diverse range of consumers. These partnerships with well-known retailers enhance Klarna’s presence and accessibility in the market;
  • Alipay Collaboration: Klarna’s collaboration with Alipay has been instrumental in its successful entry into the Asian market. This partnership has enabled Klarna to expand its target audience and effectively cater to the needs of Asian consumers who use Alipay as a popular payment method.

Klarna’s Cost Structure:

  • Technology: Klarna adopts a cost-driven structure, capitalizing on its cutting-edge banking infrastructure and seamless integration with partner platforms to drive revenue growth through efficient process automation;
  • Credit and Loan Risk Management: Given its role in overseeing both ends of a transaction, Klarna places a strong emphasis on effectively managing credit and loan risks associated with its services. Through robust risk management strategies and thorough assessment processes, Klarna ensures the financial well-being of both consumers and merchants involved in its transactions.


Affirm, Sezzle, PayPal Credit, Afterpay, Splitit, and Zip are among the major competitors of Klarna.


Affirm, established in 2012 and based in San Francisco, USA, is a BNPL (Buy Now, Pay Later) platform. It was co-founded by Max Levchin, who also co-founded PayPal. Affirm allows users to determine their payment amounts for products over a duration of 3 to 36 months, depending on their approval.

Affirm has formed notable partnerships with companies such as Shopify, Walmart, BigCommerce, Zen Cart, and Amazon. These partnerships enable Affirm to offer its BNPL services to customers of these popular platforms.


Sezzle, established in 2016 and headquartered in Minneapolis, USA, has a significant presence in North American markets. It has expanded its operations to Europe, including countries such as Germany, Austria, Belgium, France, the Netherlands, Italy, Spain, and the UK.

Initially launched as an automated clearing house (ACH) payment system, Sezzle shifted its focus to the BNPL industry due to increasing demand. Unlike Klarna and other BNPL services, Sezzle does not offer customers the flexibility to choose their payment terms.

In 2022, Sezzle made history by becoming the first BNPL company to go public, marking a significant milestone in its growth and development.


PayPal, the well-known fintech giant founded in 1998 in Palo Alto, USA, is likely familiar to you. It was established by Peter Thiel, Max Levchin, Ken Howery, Luke Nosek, and Yu Pan.

When it comes to competing with Klarna, PayPal provides users with a line of credit previously known as “Bill Me Later,” in addition to its own BNPL service called “Pay in 4,” which was launched in June 2022. PayPal’s Pay in 4 allows customers to make purchases at the point of sale using loans that can be repaid over a period of 6 to 24 months.

Users have the option to make payments every two weeks or monthly. However, it’s unclear how PayPal enforces payments since they do not charge late fees.

As PayPal Pay in 4 is relatively new, it is currently available in limited regions, including the US, the UK, Germany, France, Italy, Spain, and Australia.


Founded in 2014 and headquartered in Australia, Afterpay is a BNPL (Buy Now, Pay Later) company. It operates not only in the Australian market but also serves customers in the US, the UK, Canada, and New Zealand.

Unlike Klarna, Afterpay does not require credit score checks for loan approvals. Additionally, they do not report credit delinquency to authorities, distinguishing their approach from some other BNPL providers.

In August 2021, Afterpay caught the attention of US-based fintech company Square (now known as Block), which acquired Afterpay for a staggering $29 billion. This acquisition marked a significant milestone in Afterpay’s journey and demonstrated the growing prominence of the BNPL industry.


Headquartered in New York City, USA, Splitit was established in 2021. This platform provides individuals with loans at the point of sale, allowing them to repay the borrowed amount over a specific period based on their preferences.

What sets Splitit apart from many other BNPL services, which primarily cater to B2C sales, is its focus on B2B sales. Splitit’s user base includes businesses and suppliers who benefit from its services.

In addition to its BNPL offerings, Splitit also offers general business credit loans. This feature makes Splitit an attractive alternative for companies seeking business loans, bypassing the traditional route of approaching banks for financing.


Zip, an Australian BNPL company, has its headquarters in Australia. It was established in 2013 and stands out by offering customers zero-interest payments and having a relatively lenient approach to credit checks.

Zip provides flexibility to its users by allowing them to repay their purchases over four installments, which can be made weekly, bi-weekly, or monthly, depending on their preference. However, it’s important to note that the entire amount must be repaid within a total period of six weeks.

SWOT Analysis


  • Increasing Demand: Klarna benefits from the growing demand for its services, particularly in the current economic climate;
  • More Payment Options: Offering a wide range of payment options makes Klarna appealing to potential users, increasing its customer base;
  • Innovative Technology: Klarna’s proprietary banking software provides a significant advantage in terms of technology and sets the platform apart from competitors;
  • Better Risk Protection: Klarna’s operational system ensures enhanced risk protection for both merchants and retailers, instilling trust in the platform.


  • Payment Default: Klarna’s business model places it at risk of increased payment defaults, which can have a negative impact on its financial stability.


  • Untapped Global Market: Klarna has the opportunity to expand its presence in untapped markets globally, especially in regions like Central America and Africa, where it is not yet fully active.


  • Increasing Competitors: The markets in which Klarna operates are becoming more crowded with the entry of new competitors who may offer more attractive deals and features, posing a threat to Klarna’s market share.


Klarna exemplifies how fintech firms are harnessing contemporary technology to revolutionize the relationship between retailers and consumers, offering an alternative to traditional banking services.

The current lack of profitability in the business model is to be anticipated since the company needs to reinvest its profits to fuel expansion and stay competitive. Klarna’s business model has consistently garnered high valuations in recent years, and its future trajectory will be intriguing to observe.