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Is using Klarna a good idea?

Klarna is the most popular 'Buy now, Pay later' service. It lets shoppers “try before they buy” and gives them 14 or 30 days to pay for their online order.

It's taken online shopping by storm, and now has 10 million users in the UK alone!

The reason for its success?

There are no interest, fees, or late charges.

Basically, the seller pays.

So why would an online store give away shares of their revenue to have payments processed?

Because, as the company states, having Klarna as your payment solutions leads to:

- a 44% increase in orders (i.e. conversion rate)

- a 68% increase in order volume.

This is because Klarna greatly reduces the friction at the checkout process.

So is everyone winning?

In theory this is great. It means you can get a pile of clothes delivered, try them on, return any you don’t like, and only pay for what you keep.

But something else is also going on...

The main concern

"Buy now, Pay later" schemes incentivise overspending, as a quick look at Twitter reveals.

Fast-fashion brands are the most likely to recommend Klarna, encouraging young shoppers to spend money they do not have, to support sales of their product. (FT, 2020)

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