Klarna hopes to launch in America next year

Online payment solutions provider Klarna recently hired its first employee in America and is hoping to launch in the USA early next year, sources told the New York Times. The ambitious move comes after Klarna became available to British shoppers two months ago. Once started in its home country Sweden, Klarna is slowly moving towards global expansion.

Klarna is available to shoppers on 45,000 ecommerce sites and has 25 million customers in 15 European countries. There’s not much known about the predicted move to America, but if Klarna is launching there early next year, it has to face some serious competition from much larger companies like PayPal that offer a similar service.

Klarna, valued at more than 750 million euros, offers a simple payment option: the customer enters his email address and a postal code (sometimes only an email address is enough!) and the purchase is completed. The customer will get the bill in the mail, and Klarna may even let him pay for the goods up to two weeks after they have arrived.

Detecting online fraud
Of course, by offering such a simple solution, Klarna has to know a lot about its users prior to letting them get their online purchase delivered to their homes before even an euro has been paid. “The company analyzes reams of credit sources and online purchasing data to determine whether it will assume the liabily for your purchase”, as the New York Times sums it up. There are dozens of factors Klarna uses to judge risk: do you buy something at 2 PM or 2 AM (the latter would be considered more risky)? Do you order one iPhone 6 or do you buy five of them? Where do you live? How many different delivery addresses do you give? First-time customers must provide a complete address.

Being active in only Europe, Klarna has been able to accurately detect online fraud. But are still able to do this when they are faces with millions of potential new customers? When someone buys something online using Klarna, the Swedish company underwrites the financial risk for the retailer until the customer pays for the goods. When people forget to pay, Klarna is the one being stuck with the debt.

Each country has its own risk algorithms
“Klarna had low-single-digit default rates in the Nordic countries where it started. But when Klarna was introduced in Germany four years ago, the company initially had double-digit default rates”, the New York Times writes. The company uses risk models that had not been adjusted for the credit particulars of German customers, something they now bypass by building risk algorithms for each country where it operates. “We can’t offset all the risk,” says Niklas Adalberth, one of Klarna’s co-founders. “We want to make online payments as simple as using Google.”