Klarna
Encyclopedia
Klarna provides payment solutions for the e-commerce sector. About 20% of all e-commerce sales in Sweden goes through Klarna. The company's payment solutions,which are built using the programming language Erlang, are offered by more than 10,000 e-stores across Europe – mainly in Germany, Netherlands, Sweden, Finland, Norway and Denmark. The office in Israel focuses on Research & Development (R&D). Today the company has over 500 employees, most of them working at the headquarters in Stockholm.

Klarna’s core idea is to let consumers pay after delivery of their goods, and thereby create a trustful, friction-free and instant buying process by letting the customers verify themselves using basic personal data. Klarna is a part of the wave of start-up companies developing data-driven financial services.

History

In 2005, the three founders Sebastian Siemiatkowski
Sebastian Siemiatkowski
Sebastian Siemiatkowski, born 1981, is a Swedish entrepreneur and co-founder of the Swedish Internet and online payments company Klarna - operating in Sweden, Finland, Norway, Denmark, Germany and the Netherlands.-References:...

, Niklas Adalberth and Victor Jacobsson won the Stockholm School of Economics
Stockholm School of Economics
The Stockholm School of Economics or Handelshögskolan i Stockholm is one of Northern Europe's leading business schools. Its Masters in Management program is ranked no. 2 in Northern Europe and no. 13 in Europe by the Financial Times...

 annual entrepreneurship
Entrepreneurship
Entrepreneurship is the act of being an entrepreneur, which can be defined as "one who undertakes innovations, finance and business acumen in an effort to transform innovations into economic goods". This may result in new organizations or may be part of revitalizing mature organizations in response...

 award with their idea on how to provide consumers and merchants with safer and simpler online shopping payment methods. The same year, the company Kreditor was founded (which in 2009 was re-named Klarna).

In the end of 2007, venture capital firm Investment AB Öresund invested in the company.

Three years later after starting up in Sweden
Sweden
Sweden , officially the Kingdom of Sweden , is a Nordic country on the Scandinavian Peninsula in Northern Europe. Sweden borders with Norway and Finland and is connected to Denmark by a bridge-tunnel across the Öresund....

, Klarna started selling their services in Norway
Norway
Norway , officially the Kingdom of Norway, is a Nordic unitary constitutional monarchy whose territory comprises the western portion of the Scandinavian Peninsula, Jan Mayen, and the Arctic archipelago of Svalbard and Bouvet Island. Norway has a total area of and a population of about 4.9 million...

, Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...

 and Denmark
Denmark
Denmark is a Scandinavian country in Northern Europe. The countries of Denmark and Greenland, as well as the Faroe Islands, constitute the Kingdom of Denmark . It is the southernmost of the Nordic countries, southwest of Sweden and south of Norway, and bordered to the south by Germany. Denmark...

. In 2010, Klarna also entered Germany
Germany
Germany , officially the Federal Republic of Germany , is a federal parliamentary republic in Europe. The country consists of 16 states while the capital and largest city is Berlin. Germany covers an area of 357,021 km2 and has a largely temperate seasonal climate...

 and the Netherlands
Netherlands
The Netherlands is a constituent country of the Kingdom of the Netherlands, located mainly in North-West Europe and with several islands in the Caribbean. Mainland Netherlands borders the North Sea to the north and west, Belgium to the south, and Germany to the east, and shares maritime borders...

.

In May 2010, San Fransisco-based Sequoia Capital
Sequoia Capital
Sequoia Capital is a Californian venture capital firm located on Sand Hill Road in Menlo Park, California. The Wall Street Journal has called Sequoia Capital "one of the highest-caliber venture firms", and noted that it is "one of Silicon Valley's most influential venture-capital firms"...

 entered as investors. In connection with the investment, Michael Moritz
Michael Moritz
Michael Moritz is a Welsh-American venture capitalist with Sequoia Capital in Menlo Park, California in Silicon Valley, and a former member of the board of directors of Google Inc.-Life and career:...

 became member of Klarna’s Board of Directors, this was the first time Moritz entered a European company board.
Later the same year, venture capitalist Klaus Hommels
Klaus Hommels
Klaus Hommels is a seed and early-stage venture capitalist based out of Zurich, Switzerland. He has founded his own venture capital fund by the name Hommels Holding through which he has been investing mainly in Internet businesses. He has been involved in successful internet investments such as...

, who had previously invested in Skype
Skype
Skype is a software application that allows users to make voice and video calls and chat over the Internet. Calls to other users within the Skype service are free, while calls to both traditional landline telephones and mobile phones can be made for a fee using a debit-based user account system...

 and Spotify
Spotify
Spotify is a Swedish-founded, UK-headquartered DRM-based music streaming service offering streaming of selected music from a range of major and independent record labels, including Sony, EMI, Warner Music Group, and Universal. Launched in October 2008 by Swedish startup Spotify AB, the service had...

, joined the board of Klarna.

During 2010, Klarna increased their revenues with over 80% to 54 Million USD (~400m SEK). In early 2011, The UK magazine The Telegraph
The Daily Telegraph
The Daily Telegraph is a daily morning broadsheet newspaper distributed throughout the United Kingdom and internationally. The newspaper was founded by Arthur B...

 listed Klarna as one of Europe’s 100 most promising young tech companies.

In May 2011, Klarna acquired the Israeli company Analyzd, with business acitivity on markets in Europe
Europe
Europe is, by convention, one of the world's seven continents. Comprising the westernmost peninsula of Eurasia, Europe is generally 'divided' from Asia to its east by the watershed divides of the Ural and Caucasus Mountains, the Ural River, the Caspian and Black Seas, and the waterways connecting...

, Israel
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...

 and the U.S. Analyzd are specialized in risk management and online payments and its founders have previously worked for PayPal
PayPal
PayPal is an American-based global e-commerce business allowing payments and money transfers to be made through the Internet. Online money transfers serve as electronic alternatives to paying with traditional paper methods, such as checks and money orders....

.

In 2011, Klarna announced a new service for mobile applications which would allow consumers to purchase goods inside mobile apps without providing any sensitive data. The goal with the service is to reduce the friction during the buying process for consumers when shopping through apps.

Erlang

Klarna’s code base is written in Erlang
Erlang
Erlang may refer to:* Agner Krarup Erlang , a mathematician and engineer after whom several concepts are named** Erlang , a unit to measure traffic in telecommunications or other domains...

, a programming language
Programming language
A programming language is an artificial language designed to communicate instructions to a machine, particularly a computer. Programming languages can be used to create programs that control the behavior of a machine and/or to express algorithms precisely....

 designed by Ericsson
Ericsson
Ericsson , one of Sweden's largest companies, is a provider of telecommunication and data communication systems, and related services, covering a range of technologies, including especially mobile networks...

 which supports hot swopping in order to make fault-tolerant and non-stop running applications. Owing to Erlang
Erlang
Erlang may refer to:* Agner Krarup Erlang , a mathematician and engineer after whom several concepts are named** Erlang , a unit to measure traffic in telecommunications or other domains...

, Klarna is able to run their services almost without any down-time. According to Erlang Factory, they’ve only had 30 seconds of downtime
Downtime
The term downtime is used to refer to periods when a system is unavailable.Downtime or outage duration refers to a period of time that a system fails to provide or perform its primary function...

 in 3 years running Erlang
Erlang
Erlang may refer to:* Agner Krarup Erlang , a mathematician and engineer after whom several concepts are named** Erlang , a unit to measure traffic in telecommunications or other domains...

 which results in more than 99,9999% system availabilty. .

Not only Klarna has seen interest in the advantages of using Erlang the past couple of years. The programming language is a key part of Facebook
Facebook
Facebook is a social networking service and website launched in February 2004, operated and privately owned by Facebook, Inc. , Facebook has more than 800 million active users. Users must register before using the site, after which they may create a personal profile, add other users as...

’s chat function, and Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...

 used Erlang for the high-frequency trading
High-frequency trading
High-frequency trading is the use of sophisticated technological tools to trade securities like stocks or options, and is typically characterized by several distinguishing features:...

 programs.

Risk model

Klarna takes both the fraud- and credit risk for the merchants. To be able to take these risks, but still provide a high consumer acceptance rate, Klarna has developed an extensive risk model. Various different kinds of data from the checkout process are received and analyzed by Klarna’s algorithms. Location, time of purchase and even if the e-mail address is copied or typed in are examples of data that can signal fraud.

Products

Klarna offers payment solutions, mainly for e-commerce businesses. Klarna has two main products, Klarna invoice and their part-payment solution Klarna account. Klarna mobile is a third product that yet is only available in Sweden. The
mutual idea for all Klarna’s payment solutions is to give customers the opportunity to shop instantly
but pay afterwards when the goods have been delivered, in order to make it easier and safer to
shop online.

Klarna invoice

With Klarna invoice, customers are given credit but can shop without using a credit card. The buying process differs slightly between countries. In Sweden, where Klarna was founded, the only thing the customers have to provide the e-store with is their unique identifying number, similar to SSN
SSN
SSN may refer to:*Scoil an Spioraid Naoimh, a primary school in Cork City Ireland*Secure Service Network, a network behind a firewall or IPS containing systems which can be accessed from both the internal and external networks, but cannot reach the internal network*Streaming Sports Network, an...

. In Germany, the customer is instead asked only for basic personal data such as date of birth, gender, address and e-mail.

After filling in the details, Klarna’s system makes a decision whether to approve the customer or not. If the customer is approved, a credit of 10-30 days will be given, depending on the terms for the specific store where the purchase has been made. The goods will be delivered by the store and the customer receives an invoice trough mail, e-mail or SMS.

Klarna account

Klarna account is a part-payment service where the customer chooses the amount to pay and for how many months the payment will due. All purchases made using Klarna, no matter what store, are gathered on the same invoice that is sent to the customer on a monthly basis. The customer can end the installment at any time by paying off the whole remaining amount at one time.

Klarna mobile

Klarna mobile is a payment method specially tailored towards on-demand products, micro-payments and services where the customer need instant access to the goods. The buying process can vary for different types of products but the buyer is always verified by Klarna using the cellphone. Swedish TV-channels TV4 and Kanal 5
Kanal 5 (Sweden)
Kanal 5 is a Swedish commercial television channel established in 1989. It is owned by the media corporation ProSiebenSat.1 Media.After a troublesome 1990s, Kanal 5 launched new strategies in the early 2000s that established it as a popular entertainment channel targeting young people...

, music streaming service Spotify
Spotify
Spotify is a Swedish-founded, UK-headquartered DRM-based music streaming service offering streaming of selected music from a range of major and independent record labels, including Sony, EMI, Warner Music Group, and Universal. Launched in October 2008 by Swedish startup Spotify AB, the service had...

, and on-demand media provider Headweb are some of the largest clients using Klarna mobile.

The service is currently only available in Sweden.

Merchant integration

Klarna provides ready-made modules for easy-installation of Klarna’s products into the store. Klarna provides these open-source modules for free on their integration site, integration.klarna.com. Klarna’s free modules support most of the largest e-commerce web applications such as Magento
Magento
Magento is an open source based ecommerce web application that was launched on March 31, 2008. It was developed by Varien with help from the programmers within the open source community but is owned solely by . Magento was built using the Zend Framework...

 and OsCommerce
OsCommerce
osCommerce is an e-commerce and online store-management software program. It can be used on any web server that has PHP and MySQL installed. It is available as free software under the GNU General Public License.-History:...

. The company also offers an API for advanced integrations in PHP
PHP
PHP is a general-purpose server-side scripting language originally designed for web development to produce dynamic web pages. For this purpose, PHP code is embedded into the HTML source document and interpreted by a web server with a PHP processor module, which generates the web page document...

, Java
Java
Java is an island of Indonesia. With a population of 135 million , it is the world's most populous island, and one of the most densely populated regions in the world. It is home to 60% of Indonesia's population. The Indonesian capital city, Jakarta, is in west Java...

, .NET
.NET
.NET may refer to:* .NET Framework, a software framework by Microsoft* .net, a top-level domain* .net * .NET Passport, an old name for Windows Live ID* .NET Messenger Service...

, ASP
ASP
ASP may refer to:-Electronics:* Analog signal processing, processing electronic signals that represent continuous variables by use of analog circuitry* Anti-skip protection or electronic skip protection, a protection of an audio compact disc playback...

 or Python
Python
The Pythonidae, commonly known simply as pythons, from the Greek word python-πυθων, are a family of non-venomous snakes found in Africa, Asia and Australia. Among its members are some of the largest snakes in the world...

.

The merchants handle all purchases inside Klarna’s web-based back office application Klarna online. When a consumer make a purchase, it will instantly be presented in Klarna online. Klarna takes both the fraud and credit risk for the goods and pays the merchant. When the goods are ready to be shipped, the invoice is activated and sent either by Klarna, or printed and sent together with the goods by the merchant.

Market

In 2010, global e-commerce sales estimated $948 billion. Credit cards holds the position of the most popular payment alternative in both Europe and the US by a market share of approximately 40%. In some European countries where Klarna operates, like Germany and Sweden, invoice is the most popular alternative.

Klarna operates locally in 6 European countries; Sweden, Finland, Norway, Denmark, Germany and the Netherlands. Some of the largest competitors with similar product portfolios in these geographies include Swedish PayEx, German BillPay and Dutch AfterPay. Bill Me Later
Bill Me Later
Bill Me Later is a proprietary payment method offered on the websites of many well-known merchants, including those of Wal-Mart, USPS, Best Buy, Overstock.com, American Airlines, JetBlue Airways, Jewelry Television and Hotels.com. The site, which offers consumers a line of revolving credit through...

 is an American company offering similar products to Klarna. Bill Me Later was aqcuired by PayPal
PayPal
PayPal is an American-based global e-commerce business allowing payments and money transfers to be made through the Internet. Online money transfers serve as electronic alternatives to paying with traditional paper methods, such as checks and money orders....

in November 2008
The source of this article is wikipedia, the free encyclopedia.  The text of this article is licensed under the GFDL.
 
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