Klarna Will Bring a 30-Day Pay Later Option to the U.S. Market This Summer

Klarna Inc. is bringing another of its buy now/pay later products to the U.S. market this summer with broader availability later in the year. That’s the word from Jim Lofgren, chief executive of Klarna Inc., the North American arm of the Sweden-based online payments firm.

Lofgren, speaking to Digital Transactions News, says the buy now/pay later product, known as Pay Later, has been in tests with some U.S. merchants and some in the United Kingdom.

Buy now/pay later enables online shoppers to make purchases, such as for apparel, and pay for them at the end of a 30-day period. During that period, the consumer could return items, for example, that might not fit, Lofgren says. The amount due changes to reflect the returned items. “What we’ve done is remove the payment friction,” Lofgren says.

Klarna’s service does that by just asking for the consumer’s name and address. That information is used in real time to make a credit decision, Lofgren says. The ability to tap into vast amounts of data about consumers and unique information about the device a consumer uses, such as geolocation, operating system, and typing speed, enables the technology, Lofgren says.

Klarna, which received its European banking license in 2017, says it uses 180 variables in a Pay Later authorization. “The way we integrate with a merchant means we also directly interact with the consumer,” Lofgren says. “At the moment the consumer is placing the order we get anything from traditional data, but also the IP address [the numerical online location of a browser], how fast you type, velocity, and a number of different elements we can capture,” he says.

Klarna also uses other, unspecified, authentication measures, but these primarily are for larger purchases, Lofgren says. Currently, Pay Later works with a payment service provider such as Stripe or with a third-party e-commerce platform company. Retailers also can integrate directly with Klarna, he says.

Keenly aware of the potential for fraud, Lofgren says while a fraudster may be able to cheat the system once, it is not likely to happen a second time because of the data collected. Klarna, too, assumes the liability for Pay Later transactions. “The fraud and credit risk are fully ours,” Lofgren says.

Retailers constantly evaluate ways to make the online checkout experience a smoother process, especially as more consumers use smart phones and tablets to shop. Pay Later is another way for Klarna to help, Lofgren says.

Early iterations of Pay Later, which already is available with select European merchants, found that consumers weren’t sure a transaction was completed, he says, adding, “Now, when they click there’s an explanation of what’s happening.”