“In recent weeks, the online retailer Overstock.com started testing a new checkout service from a Swedish company called Klarna. Through Klarna, people can purchase stuff from Overstock simply by typing their email address, their shipping address, and maybe their phone number—no credit card required.”
“The trick is that when you key in your email address, Klarna almost instantly decides if it can extend you some credit, drawing on public and private data about, well, you. If you qualify, it gives you 14 days (and an additional grace period) to pay your bill. This has proven particularly powerful in places like Germany, where few people use credit cards. But the company has also seen success in other countries where buying habits resemble those in the U.S.”
Following in the footsteps of Bill Me Later (now called PayPal Credit), Klarna is utilizing the ability to instantly approve shoppers for credit to simplify the checkout processes. Additionally, they enable online merchants to accept more traditional payment products such as credit cards. Overstock.com is the first of several U.S. merchants to start using Klarna as they push to expand into non-European market. It will be fascinating to watch their progress.
Overview by Alex Johnson, Sr. Analyst, Credit Advisory Service at Mercator Advisory Group
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