Commentary on Klarna’s Banking License

Swedish business Klarna cuts out card companies at the point of online payment and instead sends buyers an invoice post-purchase – effectively extending to them a line of credit. They initially reasoned that if one of the biggest barriers to online purchase, a clunky and complicated checkout process, could be eradicated, it would result in more sales. Their reasoning turned out to be sound and the company is currently worth in excess of $2b.

Now, Klarna has just become the largest European fintech company to be approved for a banking licence. Their chief executive and founder, Sebastian Siemiatkowski, openly said of the announcement that he wants Klarna to play a large part in disrupting and reshaping the retail banking industry.

Daniel Döderlein is the founder of another Scandinavian fintech, Auka*. Auka’s business model revolves around helping the same retail banks Klarna wants to disrupt. Daniel says this announcement will compound the heat European retail banks are already feeling in the lead up to PSD2 and that banks everywhere in the world should also be in damage control mode.

“Klarna has done what most banks haven’t managed. That is: they created a simple solution to an everyday problem.

What Klarna sells is simpler online payments and they now have in excess of 60 million customers. Businesses using the solution even accept a higher commission charge because they know customers won’t abandon their shopping carts due to a cumbersome payment experience.

Now that they have so many customers, a shiny new bank licence and soon, direct access to accounts when PSD2 takes effect, they’re perfectly primed to become a preferred credit provider.

Combine those factors with Klarna’s vast and growing network of both consumers and merchants and it’s clear they are on track to become the next Visa. Except money is offered as a line of credit and the card networks, as well as the banks who still make a big revenue from online transactions, are out of the loop.

What we’re seeing right now is a land grab, with the likes of Apple, Google, Facebook, Amazon, WePay, Ant Financial and disruptors, like Klarna, buying up big. Simplified nationwide payments are the last frontier for retail banks wishing to stay relevant.”

Author: Dylan Jones

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