Ready to check out online? Just enter your email address and a postal code to complete the purchase. The bill will be in the mail.
That is the simple option offered to shoppers on 45,000 e-commerce sites using Klarna, a fast-growing online payments service start-up run from a newly refurbished downtown office here.
Enter a few bits of information and your online shopping generates a flurry of activity at the company. In seconds, Klarna analyses reams of credit sources and online purchasing data to determine whether it will assume the liability for your purchase.
If you are a returning Klarna user, buying during regular working hours or shipping to your usual address, an email and postal code are probably enough. Klarna may even let you pay for the goods up to two weeks after they have arrived in the mail.
But if you are buying at odd hours or sending goods to a previously unused location, expect greater scrutiny. That includes Klarna asking you to pay upfront with a credit card.
The payment system, which for highly rated users is almost as easy as a handshake, has found legions of fans in Europe in the last 10 years. What remains to be seen is whether the company — which is valued at more than $1 billion after amassing almost $300 million in venture financing from the likes of Sequoia Capital — can expand into the United States and elsewhere, where it would compete with larger companies like PayPal that offer a similar service.
To do that, the company needs to prove that its behind-the-scenes technology can accurately detect online fraud when faced with millions of potential new customers. Its backers say that should not be a problem.
“Klarna is like an iceberg because consumers only see about a tenth of what it does,” said Klaus Hommels, a Zurich-based early-stage investor who has backed Klarna, as well as Spotify, the music streaming service, and King, the mobile gaming company, two other successful Swedish tech businesses. “The real secret sauce is how it analyzes credit risk.”
Most payment systems, like PayPal, require users to have money in their account or a credit card on file before they can buy things online. But when a purchase is made using Klarna, the company underwrites the financial risk for retailers until people pay for the goods, either right after checking out or when the product arrives in the mail. Users then pay Klarna,