What: BoF sits down with Klarna CEO Sebastian Siemiatkowski to discover innovations in the path to purchase.

Why is it important: Buy Now, Pay Later options, which are set to grow at a 28% compound annual growth rate globally over the next five years.

The below news is a condensed version of a sponsored feature paid for by Klarna as part of a BoF partnership.

Founded in 2005 with a mission to offer a more flexible payment solution for shoppers online, Swedish tech company Klarna has rapidly evolved its scope and strategy to become a leading global retail bank, payments and shopping service. Today, it serves 90 million active consumers partnering with over 250 000. It counts H&M, Ganni, Charlotte Tilbury, Macy’s, Acne Studios and Sephora among its roster of clients.

BoF: What insights can you share on evolving consumer attitudes to payments?

Sebastian Siemiatkowski: The ongoing shift away from traditional credit cards and towards debit has been accelerated and further amplified by the pandemic. Credit card applications have dropped 50% while over USD 100 billion worth of credit card debt has been paid off.

Additionally, we’re tracking how the pandemic has accelerated the shift to contactless. Shoppers really love the Apple Pay and Google Pay experience, and we have launched a number of in-store initiatives, including virtual cards for digital wallets. This has facilitated alternative payment options within physical stores while also [answering] consumer demand for access to contactless solutions.

BoF: How is the relationship between Klarna and its merchant partners evolving?

Sebastian Siemiatkowski: I generally think about retail in two different pieces. One is around discovery and curation, while the other piece is purely the product and brand. When we are trying to help retailers, it’s about presenting their customers with useful, curated options. Historically, if you think about the Amex Platinum Card, part of the idea was the [customer] would go into a restaurant and the owner would think, “It’s a Platinum Card, so I need to ensure I offer my best wines and food.” At Klarna, we can help our retail partners curate more efficiently with the consent and interest of the consumer in mind.

BoF: How is customer data shared and actioned between Klarna and its partners?

Sebastian Siemiatkowski: At Klarna, data must be approached from a customer-centric perspective first, which then benefits our retail partners. When we process a transaction today, Klarna sees the SKU (stock keeping unit) data and full digital receipts, which allow us to create a much richer experience for consumers post-purchase. We can provide customers with additional value, such as target offers relevant to past purchases. It can [translate] into an increase in sales for our partners.

One further data aspect is our Wish List functionality on the Klarna app, where we allow customers to save their favourite items from across the internet. If a shopper has saved a pair of shoes, they will be linked to offers on the item or an indication on where to purchase if it has gone out of stock. The customers feel like their data is working on their behalf and that is valuable to our retailers.

BoF: What payment solutions and technologies should luxury brands prioritise?

Sebastian Siemiatkowski: In luxury fashion, we are seeing the most traction with our product offerings that allow customers to pay in three or four interest-free instalments, depending on the market they are in. Where we see a big opportunity is with our Try Before You Buy offering, where consumers pay nothing at the time of purchase and pay everything 30 days later. We’re seeing it in China, with Buy Now Pay Later accounting for 50% of Alipay’s total volume, and we have seen Amazon already beginning to experiment with [this solution] as part of the Amazon Prime Wardrobe offering.

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