You may know Klarna as a leading global payments and shopping service, but did you know it wasn’t always called Klarna? The company has a fascinating history that dates back to its founding in 2005 in Stockholm, Sweden.
When the three founders, Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson, first founded the company, they chose a different name. That name reflected the company’s original focus and mission before they move into Buy Now Pay Later (BNPL) services.
History of Klarna
Let’s take a trip down memory lane and explore the Klarna’s early days and original name.
Company Founding
Klarna was founded in 2005 by three ambitious entrepreneurs. They shared a vision of simplifying online payments and making shopping smoother for consumers.
The trio met while studying at the Stockholm School of Economics. They entered a business plan competition similar to that of Shark Tank in the US or Dragons Den in other countries with their idea. They ended up winning the competition but there was still a lot of skepticism from many of the sharks.
Rebranding to Klarna
In 2009, the company made a strategic decision to rebrand from Kreditor to Klarna. This name change marked a significant milestone in the company’s history and paved the way for its future growth and success.
What was Klarna’s original name?
Any guesses what the original name was?… It was … Kreditor!
Yep, you heard that right. Kreditor? The name Kreditor comes from the Swedish word for “creditor”. It reflected the company’s initial focus on providing invoice-based payment solutions for online merchants.
As the company expanded its offerings and went global, the name Kreditor didn’t quite work well with a global customer base. It was a bit too “local” and didn’t capture the company’s expanding operations.
So, in 2009, Kreditor rebranded to Klarna. This new name better represented Klarna’s mission of clearing the path for smoother payments and shopping experiences for BNPL services.
Reasons for Name Change
The original name, Kreditor, reflected the company’s initial focus on invoice-based payment solutions. The founders recognized the need for a name that better captured the essence of their business and resonated with their target audience.
The name Klarna, derived from the Swedish verb “klara” meaning “to clear” was chosen for several reasons:
- It reflects the company’s mission of simplifying and streamlining the online payment and shopping experience.
- It’s short, memorable, and easy to pronounce, making it ideal for a global brand.
- It has a positive connotation, suggesting clarity, transparency, and efficiency.
By rebranding to Klarna, the company positioned itself as a modern, innovative, and customer-centric brand that could appeal to a wider global audience.
Growth and Expansion
Since its rebranding in 2009, Klarna has experienced remarkable growth and expansion. Let’s take a closer look at some of the key milestones and geographic expansion that have shaped the company’s journey.
Key Milestones
In 2010, just a year after its rebranding, Klarna processed an impressive €54 million in sales. This early success set the stage for rapid growth in the years to come.
By 2011, Klarna had reached 1 million users, a testament to the increasing popularity of its smooth payment solutions. The company also raised $155 million in funding this year, enabling further expansion.
2014 saw Klarna acquire the German company Sofort, strengthening its position in the European market. The acquisition added 25,000 merchants to Klarna’s network.
In 2015, Klarna became a licensed bank, allowing it to offer a wider range of financial services. This strategic move positioned the company for even greater growth.
2019 was a landmark year for Klarna, as it reached a staggering 60 million users worldwide and 190,000 merchant partners. The company also raised $460 million in funding, valuing it at $5.5 billion.
Geographic Expansion
Klarna’s success in its home market of Sweden quickly propelled it to expand into other countries. In 2010, the company entered the Norwegian and Finnish markets, followed by Germany and the Netherlands in 2011.
By 2013, Klarna had established a presence in Austria and was processing over 20% of all online transactions in the country. Pretty impressive.
The UK market proved to be a significant milestone for Klarna. The company launched there in 2014 and quickly gained traction, with over 1 million UK consumers using its services by 2016.
In 2015, Klarna set its sights on the US market, launching services in partnership with Overstock.com. This marked the beginning of the company’s expansion into North America.
By 2019, Klarna had a presence in 17 countries, including major markets like Spain, Italy, France, and Belgium. The company’s global reach was undeniable.
As of 2021, Klarna operates in 20 countries across Europe, North America, and Oceania. With over 90 million active users and 250,000 merchant partners, the company shows no signs of slowing down.
As of this writing the company processes over 2 million transactions per day.
It’s incredible to think that what started as a small startup in Stockholm has grown into a global fintech powerhouse. Klarna’s growth and expansion is a testament to its innovative spirit and dedication to simplifying online payments and shopping experiences.
Klarna’s Business Model – Buy Now Pay Later (BNPL)
Klarna’s flagship product is its BNPL service, which allows customers to split their purchases into interest-free installments. This flexible payment option has become increasingly popular among online shoppers, especially millennials and Gen Z consumers.
With BNPL, you can enjoy your purchases immediately without worrying about paying the full amount upfront.
Klarna covers the cost for you, and you repay in smaller, more manageable installments over a set period. This approach makes shopping more accessible and affordable, encouraging customers to buy more and boosting sales for merchants.
Klarna doesn’t charge interest unlike credit cards. It’s a short term interest free loan.
Klarna’s BNPL service is user-friendly and easy to understand. When you’re ready to check out, simply select Klarna as your payment method. You have likely seen the Klarna logo while shopping online.
Merchant Partnerships
Another crucial aspect of Klarna’s business model is its strong focus on merchant partnerships. Klarna collaborates with over 250,000 merchants worldwide, including well-known brands and smaller businesses, to offer its payment solutions and enhance the shopping experience for their customers.
So, what’s in it for the merchants? By partnering with Klarna, businesses can benefit from increased sales, higher average order values, and improved customer loyalty. Klarna’s smooth checkout process and flexible payment options make it easier for customers to complete their purchases, reducing cart abandonment and boosting conversion rates.
But that’s not all Klarna also helps merchants reach a wider audience through its growing user base of over 90 million active users. By featuring partner brands in its app and marketing campaigns, Klarna exposes them to a large, engaged community of shoppers who are always on the lookout for new and exciting products.
Klarna’s merchant partnerships are a win-win situation. Merchants get access to powerful payment solutions and marketing opportunities, while Klarna expands its network and strengthens its position as a go-to platform for online shopping. It’s a beautiful friendship, don’t you think?
Klarna’s Market Position
As a leading global BNPL provider, Klarna has solidified its position in the fintech industry. Let’s take a closer look at how Klarna stacks up against its competitors and its impressive market share and valuation.
Competitors
In the competitive world of digital payment solutions, Klarna faces off against several notable players:
- PayPal: The OG of online payments, PayPal has been around since 1998 and boasts a massive global presence.
- Affirm: This San Francisco-based fintech startup offers a similar BNPL service, partnering with major retailers like Walmart and Peloton.
- Afterpay: Hailing from Australia, Afterpay has made waves in the BNPL space, particularly in the US and UK markets.
While these competitors certainly give Klarna a run for its money, the Swedish fintech unicorn has managed to carve out a significant chunk of the market thanks to its innovative approach and strategic partnerships.
Market Share and Valuation
So, just how big of a slice of the fintech pie does Klarna have? As of 2021, Klarna boasts some pretty impressive numbers:
| Metric | Value |
|---|---|
| Active Users | 90+ million |
| Merchant Partners | 250,000+ |
| Countries of Operation | 20 |
| Valuation | $45.6 billion |
In June 2021, Klarna raised a whopping $639 million in funding, propelling its valuation to a staggering $45.6 billion. This makes Klarna the highest-valued private fintech company in Europe and the second-highest worldwide, trailing only Stripe.
But how does this translate to market share? While exact figures are hard to come by, Klarna’s dominant presence in key markets like the US, UK, Germany, and its native Sweden suggests it’s giving its competitors a serious run for their money. In fact, a 2021 report by Worldpay found that Klarna held a 7% market share of the global e-commerce payments market, putting it ahead of competitors like Afterpay and Affirm.
With its sights set on further expansion and innovation, it’s clear that Klarna is well-positioned to maintain its lead in the BNPL space and give traditional payment providers a serious wake-up call. So, the next time you’re shopping online and see that pink Klarna logo, you’ll know you’re in good hands with a fintech powerhouse that’s changing the game one interest-free installment at a time.
Klarna Brand
Klarna’s journey from its original name, Kreditor, to becoming a global fintech powerhouse is a testament to the importance of strategic rebranding and relentless innovation. By adopting a memorable and meaningful name that resonates with its mission, Klarna has established itself as a leader in the BNPL space, transforming the online shopping experience for millions of users worldwide.
Through its user-friendly payment solutions, strong merchant partnerships, and expanding market presence, Klarna has positioned itself for continued growth and success in the competitive fintech world. As you discover the area of online shopping and innovative payment options, keep an eye on Klarna as it continues to shape the future of e-commerce.