Klarna Business Model: The Art of Unbundling A Value Chain

The Klarna business model focuses on the value proposition of “Buy Now, Pay Later”. Klarna, the Swedish fintech giant, has transformed the way consumers shop online by offering a seamless and flexible payment experience. Klarna has become a household name in the e-commerce industry, partnering with thousands of merchants and serving millions of customers worldwide.

Gary Fox

Klarna Business Model Canvas

Klarna Business Model: The Art of Unbundling A Value Chain

The Klarna business model focuses on the value proposition of “Buy Now, Pay Later”.

Klarna, the Swedish fintech giant, has transformed the way consumers shop online by offering a seamless and flexible payment experience.

Klarna has become a household name in the e-commerce industry, partnering with thousands of merchants and serving millions of customers worldwide. In this article, we’ll delve into Klarna’s fascinating business model, exploring its history, ownership, and the strategies that have propelled it to success.

How Does Klarna’s Business Work

The Klarna business model is built around offering a range of payment solutions for online shoppers and merchants. Its core product is the “Buy Now, Pay Later” service, which allows consumers to split their purchases into interest-free instalments or defer payment for a later date. Klarna pays the merchant upfront, while the consumer repays Klarna over time, making it an attractive option for both parties. Klarna also offers traditional payment methods, such as direct payments and post-purchase invoicing, catering to various customer preferences.

Key Facts About Klarna

. Company name:



Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson

Launch date:


Year founded:


Company CEO:

Sebastian Siemiatkowski


Stockholm, Sweden

Number of employees

5,500 (2023)

Ticker symbol

privately held company

Annual revenue

SEK 981 billion

Profit | Net Income

SEK 23.5 billion

Market Cap

privately held company

Useful Links

Facebook 2
Tik Tok
Social Media 2
Social 2

A Brief History

  • 2005: Klarna is founded in Stockholm, Sweden, by Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson.
  • 2007: Klarna launches its invoice-based payment service in Sweden, allowing customers to pay for their online purchases after receiving the goods.
  • 2010: Klarna expands its services to Germany, Austria, and the Netherlands, marking the beginning of its international growth.
  • 2011: Klarna receives a banking license from the Swedish Financial Supervisory Authority, enabling it to offer a wider range of financial services.
  • 2014: Klarna launches its “Smoooth” campaign, emphasizing its focus on providing a smooth and frictionless payment experience for customers.
  • 2015: Klarna expands to the United States, entering one of the world’s largest e-commerce markets.
  • 2017: Klarna acquires BillPay, a German payment service provider, strengthening its position in the European market.
  • 2019: Klarna becomes the most valuable fintech startup in Europe, with a valuation of $5.5 billion following a $460 million funding round.
  • 2020: Klarna experiences significant growth during the COVID-19 pandemic, as more consumers turn to online shopping and seek flexible payment options.
  • 2021: Klarna raises $1 billion in a funding round led by SoftBank, valuing the company at $31 billion and making it one of the world’s most valuable fintech companies.
  • 2022: Klarna faces challenges amidst a changing economic environment, leading to layoffs and a revised valuation of $6.7 billion in a funding round.

Who Owns Klarna

Klarna is a privately held company, with ownership distributed among its founders, employees, and various institutional investors. As of 2021, the company’s largest shareholders include Sequoia Capital, Silver Lake, SoftBank Vision Fund, and Dragoneer Investment Group. Klarna’s founders, Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson, also retain significant stakes in the company. Despite its rapid growth and numerous funding rounds, Klarna has chosen to remain privately owned, allowing it to focus on long-term strategic goals and maintain its innovative culture.

Mission Statement

“We make shopping smoooth. And we do it with flair because shopping is fun. Every day, we help customers, businesses, and the economy thrive.”

How Klarna Business Model Works

The Klarna business model revolves around making online shopping easier, more accessible, and more enjoyable for consumers while helping merchants increase sales and customer loyalty. The company achieves this by offering various payment solutions catering to different customer preferences and purchasing habits.

At the core of the Klarna business model is its “Buy Now, Pay Later” service, which allows customers to split their purchases into interest-free instalments or defer payment for a later date. This flexible payment option encourages customers to make larger purchases and helps merchants increase their average order value. Klarna assumes the credit risk and pays the merchant upfront, while the customer repays Klarna over time, typically in four equal instalments or within 30 days.

By eliminating the need for customers to enter their payment details each time they make a purchase, Klarna reduces friction in the buying process and improves merchants’ conversion rates. The company’s advanced risk assessment algorithms and fraud detection mechanisms also help ensure a secure and reliable payment experience for all parties involved.

In addition to its core payment solutions, Klarna offers various complementary services, such as customer financing, shopping inspiration, and post-purchase support. These value-added features enhance the customer experience and help Klarna differentiate itself from competitors and build lasting relationships with both consumers and merchants.

Key Features of Klarna’s Business Model

  • “Buy Now, Pay Later” service: Allows customers to split purchases into interest-free installments or defer payment, making online shopping more accessible and affordable.
  • Smooth checkout process: Eliminates friction in the buying process, improving conversion rates and customer satisfaction.
  • Advanced risk assessment: Utilizes AI and machine learning to assess customer creditworthiness and prevent fraud, ensuring a secure payment experience.
  • Merchant partnerships: Collaborates with a wide range of merchants across industries, helping them increase sales, customer loyalty, and average order value.

How Klarna Makes Money

Key Financial Metrics for 2023

  • Gross Merchandise Volume (GMV): SEK 981 billion, up 17% year-over-year.
  • Revenue: Totalled SEK 23.5 billion, a 22% increase from the previous year.
  • Net Result: Showed an improvement, with losses narrowing to SEK 2.5 billion from SEK 10.4 billion in the previous year, reflecting better operational efficiency and cost management​
  1. Revenue Streams: Klarna’s revenue is primarily derived from two main sources:
    • Transaction and Service Revenue: This includes fees collected from merchants for facilitating transactions through Klarna’s payment solutions. In 2023, this segment saw a growth of 29% year-over-year.
    • Interest Income from Consumer Loans: Although Klarna offers interest-free payment solutions, it also earns interest from consumer credit where applicable. In 2023, interest income saw a slight decrease, which aligns with Klarna’s strategy to focus more on fixed-term, interest-bearing loans rather than revolving credit​​.
  2. Geographic Performance: Klarna reports its performance segmented by key markets, notably emphasizing the growth in the United States:
    • United States: In 2023, Klarna’s US operations turned a profit for the first time, showing a gross profit of SEK 1.4 billion. This represents a significant shift as Klarna expands and solidifies its foothold in North America​​.

Klarna Business Model Patterns

Klarna Business Model Canvas

The Klarna business model canvas highlights all nine sections of the business model.

Klarna Business Model Canvas

The Alibaba Business Model

Customer Segments Of The Business Model Canvas

Customer Segments

The Klarna business model includes the following as key customer segments:

  • Online shoppers: Consumers who value flexibility and convenience in payments
  • Millennials and Gen Z: Tech-savvy generations more open to alternative payment methods
  • Merchants: Online retailers seeking to increase sales and customer loyalty
  • Value Proposition Of The Business Model Canvas

    Value Propositions

    The Klarna business model focuses on the following value propositions to meet the needs of its various customer segments:

  • Flexible payment options: “Buy Now, Pay Later” and installment plans
  • Smooth user experience: Simple, frictionless checkout process
  • Increased sales for merchants: Higher conversion rates and average order values
  • Reduced risk for merchants: Klarna assumes credit risk and pays upfront
  • Channels


    The Klarna business model uses the following channels to reach and engage with its customers:

  • Merchant partnerships: Integration with online retailers’ checkout pages
  • Mobile app: Klarna’s own app for managing payments and discovering deals
  • Website: Informational resources and customer support
  • Email and SMS: Transactional notifications and promotional offers
  • Social media: Engagement, support, and targeted advertising
  • Key Relationships Of The Business Model Canvas

    Customer Relationships

    The Klarna business model uses aims to develop and maintain its customer relationships using the following methods:

  • Self-service: Automated onboarding and account management
  • Personalized support: Dedicated assistance for high-value merchants
  • Community building: Encourage user-generated content and social proof
  • Loyalty programs: Rewards and incentives for frequent users
  • Key Activities Of The Business Model Canvas

    Key Activities

    The Klarna business model focuses on the key activities essential to deliver value to its customers, generate revenue, and maintain its competitive position in the market:

  • Payment processing: Facilitating transactions between shoppers and merchants
  • Risk management: Assessing customer creditworthiness and preventing fraud
  • Product development: Creating new features and payment solutions
  • Merchant onboarding: Integrating new retailers and supporting their needs
  • Customer service: Providing timely and effective assistance to users
  • Key Resources Of The Business Model Canvas

    Key Resources

    The Klarna business model harness the following as key resources:

  • Technology infrastructure: Secure, scalable, and reliable payment processing systems
  • Data and analytics: Customer insights and risk assessment models
  • Human capital: Skilled employees in technology, finance, and customer service
  • Brand and reputation: Strong brand recognition and trust among customers and merchants
  • Regulatory licenses: Banking and payment service provider licenses
  • Key Partners Of The Business Model Canvas

    Key Partners

    The Klarna business model relies on a diverse network of key partners for specialized expertise, resources, and capabilities to enable to deliver its value propositions:

  • Merchants: Online retailers who integrate Klarna’s payment solutions
  • Payment networks: Visa and Mastercard for processing card transactions
  • Credit bureaus: Experian and TransUnion for credit risk assessment
  • Investors: Venture capital and private equity firms providing funding and guidance
  • Technology providers: Cloud computing, cybersecurity, and software development partners
  • Revenue Streams Of The Business Model Canvas

    Revenue Streams

    The Klarna business model generates the following revenue streams:

  • Merchant fees: Percentage of each transaction processed through Klarna
  • Interest income: Earned on customer balances from deferred payments and financing
  • Late payment fees: Charged to customers for missed or delayed payments
  • Cost Structure Of The Business Model Canvas

    Cost Structure

    The Klarna business model incurs the following as the main costs associated with its operations:

  • Transaction costs: Fees paid to payment networks and processors
  • Credit losses: Expenses from defaulted customer payments
  • Technology infrastructure: Maintenance and development of payment systems and software
  • Personnel costs: Salaries and benefits for employees across all functions
  • Marketing and sales: Promotion of Klarna’s brand and acquisition of new customers
  • The Future of the Klarna Business Model

    Competitive Landscape: Klarna faces significant competition from other BNPL firms like Afterpay, Affirm, and PayPal’s “Pay in 4” service. These companies offer similar services, leading to a lack of differentiation in the BNPL space. Major payment processors and credit card companies, including Visa and Mastercard, are also entering the BNPL market, leveraging their vast networks and established relationships with banks and merchants. This expansion by traditional financial entities could dilute Klarna’s market share.

    Regional Challenges and Opportunities: Klarna’s operations span across Europe, North America, and Australia, with plans to expand further. However, different regions present unique challenges:

    • Europe: The European market is seeing tighter regulatory frameworks around BNPL services, aimed at protecting consumers from over-indebtedness. The UK, for example, is moving to regulate BNPL products under the Financial Conduct Authority, which could increase operational costs and affect profitability.
    • North America: While the market is large and growing, it is also highly competitive with players like Affirm and PayPal. Klarna will need to innovate beyond traditional BNPL offerings to capture and retain users.
    • Australia: As one of the early adopters of BNPL, Australia is seeing market saturation and regulatory changes that could impact Klarna’s growth.

    Technological Innovations and Challenges: Technology remains a double-edged sword in Klarna’s strategy. On one side, advancements in technology allow Klarna to enhance user experiences and streamline operations. On the other, they must continuously invest in cybersecurity measures to protect consumer data, a critical concern given the financial nature of its services. Additionally, emerging technologies like blockchain and cryptocurrencies could disrupt traditional BNPL services by offering new forms of payment that bypass conventional financial systems.

    Investor Sentiment and Financial Health: Investor confidence in Klarna has been strong, as evidenced by its valuations in successive funding rounds, making it one of Europe’s highest-valued startups. However, as the market matures and profitability pressures increase, investors may scrutinize the sustainability of Klarna’s growth more closely, especially given its reported losses. Achieving profitability and demonstrating a clear path to sustained financial health will be crucial for maintaining investor confidence.

    Opportunities for Growth: Despite these challenges, opportunities abound for Klarna:

    • Expansion into New Markets: Emerging markets with low credit card penetration and high mobile usage represent significant opportunities for Klarna. Tailoring products to meet local needs while navigating regulatory landscapes will be key.
    • Partnerships and Diversification: Klarna can leverage partnerships with retailers and other financial institutions to offer a broader range of services, such as savings accounts, insurance, and investment products, diversifying its revenue streams.
    • Technology-Driven Solutions: Investing in AI and machine learning could enhance personalized shopping experiences, improve risk assessment algorithms, and reduce fraud, setting Klarna apart from competitors.

    Conclusion: Klarna’s future, while promising, is fraught with challenges. The company’s ability to innovate, adapt to regulatory changes, and penetrate new markets will determine its long-term success. Diversification of services and continuous technological enhancement will be pivotal in maintaining a competitive edge in the fast-evolving BNPL sector. Without significant differentiation and adaptation, Klarna risks losing ground to both new entrants and established financial services companies expanding into its territory.

    Join The Ecosystem Community​

    Enter your email address to register for our fortnightly newsletter to get the latest research and updates on ecosystems. Topics include strategies, case studies, sustainability and circularity, as well as key actionable insights you can use.

    BDL Inline