The payments market in the U.S. couldn’t be be more competitive, and now yet another player is entering the mix. Stockholm-based Klarna is set to announce its U.S. team ahead of expansion plans into North America, which will begin in earnest at the beginning of 2015.
Klarna, a European giant, which has raised $282.1 million over six rounds of financing, according to CrunchBase, has set the groundwork for its move into the U.S. by lining up a who’s who of U.S. firepower to guide its expansion on North American shores. Investors in the company include Sequoia Capital, General Atlantic, DST and Atomico.
The company recruited Brian Billingsley from Alliance Data as chief executive of North America; former Bill Me Later and PayPal director Carol Hargrave as chief marketing officer; and former Apple payments counsel, Jin Han, as chief legal counsel for North America. Earlier U.S. recruits included chief credit officer Matthew Risley from Treliant Risk Advisors and chief financial officer John Keatley from Green Dot Corporation.
“Can you imagine if 70 to 90 people walked away from the checkout because it’s too cumbersome? That’s exactly what happens online today,” says Billingsley. “Companies spend hundreds of millions, if not billions of dollars, per year to get people onto their site, and then they’re losing them.”
Klarna, like U.S. incumbent Stripe or PayPal, is looking to change that.
Already a powerhouse in Europe through organic growth in the Nordic region (and the acquisition of Germany’s payment service Sofort), Klarna has long been rumored to be eyeing the U.S. market — and now the company is making its move.
Akin to its strategy for growth in the Europe, the company does has its eye on acquisitions here in the U.S., according to Billingsley. “It’s definitely not off the table,” he says. “We have very supportive investors in all of our markets.”
Using Klarna online shoppers enter only have to enter information like an email address and zip code to buy an item. After that, Klarna assumes all the risk from the purchase transaction, pays the retailer, and collects the amount due from the customer within 14 days. In Europe, Klarna has 25 million users and 45,000 retailers. The company is estimating revenues of more than $300 million in 2013 and is used for 200,000 transactions per day globally.
Behind Klarna’s network is a complicated set of anti-fraud technologies that can help the company assume the credit and financial risks that an individual merchant might have to otherwise carry. This means that when a customer buys a product online, Klarna assumes the risks even before a customer has potentially paid for the product. They have a one-click purchase option that they say allows merchants to see on average a 10-30 percent uptick in sales.
The company says that its technology works particularly well online. The average checkout conversion is between 1 percent and 10 percent for typical checkouts on mobile devices, but using Klarna, the company claims conversion rates of roughly 50 percent.
Billingsley says the service slots into a different segment of the shopping experience than payment solutions like the new Apple Pay feature. “We’re focused on buying. And the customer can pay however they want to pay later,” says Billingsley. “Apple Pay will be a way to pay our settlement invoice.”