It seems we can’t go more than a few days without Europe’s most valuable private fintech, Klarna getting some ink. Whether it’s a massive cheque, a celebrity CEO for the day, a new feature, creating jobs, technical glitches that log users into other users accounts, or students being contacted by debt collection agencies, Klarna is everywhere.
BNPL in a nutshell
In a world saddled with furloughs and financial uncertainty, Klarna's Buy Now Pay Later model is an attractive offer. Simple in concept: instead of coughing up the cash at the till or checkout, Klarna pays the retailer on your behalf and lets you pay them back over the course of a few weeks or months. BNPL does not mean that you're getting any type of discount with your purchase, it's simply a matter of cash flow management.
As an added upside, as opposed to a traditional credit card which is likely to charge interest or fees, if managed correctly, BNPL is a free way of obtaining credit. So if BNPL providers aren't charging you a fee, in the words of Rod Tidwell, "Show me the money." The money lies in a cut Klarna takes from every product they help a retailer sell. The pitch here is that by partnering with Klarna, retailers might have to shell out a cut, but they'll be moving more merch, and bottom line, bringing home more cheddar.
And Klarna's been busy with that pitch. The Swedish fintech counts over 250,000 global retail partners, including H&M, Sephora, Macy's, IKEA, Samsung, ASOS, Ralph Lauren, Abercrombie & Fitch, and Nike, and clocks 90 million global active users with 2 million transactions a day.
A short sidebar
So it would seem that with the BNPL industry pretty much sewn up, where does a giant set its sights next? Well clearly, at becoming the de facto growth partner for merchants. First stop? A comparison shopping service.
As of today, Klarna’s comparison shopping service is live in 21 markets across Europe and offers partner retailers an attractive offer, an increased customer reach, all with ready-to-purchase intent.
In order to give context, let's take a short sidebar into the ad/e-commerce world, namely that of CPC, or Cost Per Click. One tool in a marketer's bag is CPC advertising, and as the name suggests, said advertiser (marketer) pays a publisher, in most cases a search engine (yes, you Google), every time a visitor clicks on their ad. In it's most simplistic formula:
CPC (€) = Advertising Cost (€) / Ads clicked (#)
An example: If I spent €100 on a campaign and received 32 clicks on my ad, my CPC would be €3.125.
The Klarna CSS advantage
Google’s CSS (Comparison Shopping Service) was established in order to diversify the search results for product listing ads (Let’s not forget about that yet resolved €2.42 billion fine the search giant was slapped with back in 2017). A certified CSS partner acts as an intermediary, facilitating the publication of a product listing ad.
CSS providers can essentially make money in two ways, via a monthly hosting fee and/or through a CPC model by charging for clicks. Klarna's offer skips the 20% cut to a merchant's CPC spend (see above), thus giving them the full power of their bid towards gaining the first PLA position and/or placement.
Example: If a merchant is bidding $1 for the top slot, it would only be worth $0.80 with Google, but with Klarna they'd get the full power of the $1 bid. The flat rate for CSS is just the small monthly hosting fee that Klarna charges, but the merchant still manages and pays for their bids.
Now toss into the mix that Klarna will also list a retailer's product listing inventory on its comparison shopping pages; visibility and customer reach are boosted even further, ultimately culminating in conversions.
“We are extremely excited to launch the Klarna Comparison Shopping Service today. With this new product, we enable retailers to list their Google Product Listings Ads more efficiently. Concretely, this means that we offer retailers a more effective and cheaper way to increase their customer reach and convert highly relevant traffic from consumers who are searching for products they want to purchase, thereby maximizing merchants’ return on advertising spend,” says Klarna’s CMO David Sandström. “As a growth partner for our retailers, we are thrilled to be launching even more products and services to support their strategy in the near future.”
Klarna's comparison shopping service is now available in Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Romania, Slovakia, Spain, Sweden, Switzerland, and the United Kingdom.
Klarna has been backed by Sequoia Capital since 2010 and more recently, Silver Lake, Dragoneer, Bestseller Group, Permira, Ant Group, HMI Capital, TCV, NorthZone, Commonwealth Bank of Australia, Merian Chrysalis Investment Company Limited, funds and accounts managed by BlackRock amongst others.