Klarna Cooperation Agreement: What it Means for Consumers and Merchants
Klarna, the Swedish fintech company, has been making headlines lately with its announcement of a cooperation agreement with Shopify, the e-commerce platform used by more than a million merchants worldwide. The partnership will allow Shopify merchants in the US to offer Klarna’s “buy now, pay later” payment option to their customers, giving shoppers the ability to split their purchases into four interest-free payments.
So what exactly does this cooperation agreement mean for consumers and merchants?
For consumers, the ability to buy now and pay later in installments can be a game-changer. The option to split the cost of a purchase into smaller, more manageable payments can make it possible to afford something that would have otherwise been out of reach. This is especially important for younger generations who may be wary of traditional credit card debt or unable to obtain credit due to a lack of credit history.
And for merchants, offering Klarna’s payment option can be a way to increase sales and reach a wider customer base. According to Klarna, merchants who offer the “buy now, pay later” option see an increase of 30% in average order value compared to those who don’t. Additionally, Klarna assumes all credit and fraud risk, so merchants don’t have to worry about losses from non-payment or chargebacks.
But it’s not just the partnership with Shopify that has made Klarna a rising star in the fintech world. The company’s unique approach to financing has disrupted the traditional credit card model, which can come with high interest rates and hidden fees. With Klarna, there are no hidden fees and no interest – as long as payments are made on time.
Klarna’s success has not gone unnoticed by investors either. In September 2020, the company raised $650 million in funding, valuing the company at $10.65 billion – making it the highest-valued private fintech in Europe.
However, the “buy now, pay later” model has come under scrutiny from consumer advocates who argue that it can encourage overspending and lead to debt for those who cannot afford to make the payments. It’s important for consumers to carefully consider their finances before taking advantage of this payment option, and to make sure they are able to make the payments on time.
In conclusion, the Klarna cooperation agreement with Shopify is an exciting development in the world of fintech. For consumers, the ability to buy now and pay later in installments can make purchases more attainable, while for merchants, offering this payment option can increase sales. However, it’s important to remember the responsibility that comes with “buy now, pay later” and to carefully consider one’s finances before taking advantage of this payment option.