Swedish payments provider Klarna targets UK travel sector for growth

Swedish payments provider Klarna targets UK travel sector for growth

A Swedish payments provider which has established so strong a presence in the fashion and automotive sectors that its brand is being used as a verb by customers is targeting travel.

Klarna allows merchants to offer their customers the option to pay for their products through installments and sees travel as the next big vertical in which to establish a presence.

Already used by 3.5 million UK customers on fashion sites like Asos, UK managing director Luke Griffiths says the firm is confident it can make a big splash in travel.

“What we see through our partnership with Asos in the UK is on social media a lot of their clients talk about ‘klarnaring’ the transaction. This is why we are particularly excited about travel.

“Asos customers are also buying flights and holidays and they are now used to this type of transaction with Klarna.

“We believe if you offer this type of experience in travel it will really appeal to the millennial audiences that are already using the service.”

Klarna, which was established 12 years ago, is already well-established in its native Sweden, the Nordics and Germany.

It has been operating in the UK for four years, primarily in the fashion sector with JD Sports and the Top Shop parent the Arcadia Group among its partners, as well as online retailer Asos.

The firm says it has seen accelerated growth over the last two years as it refined its proposition and embarked on high-profile marketing campaigns in major cities like London and Manchester.

Direct debit payment schemes spread out over up to 48 months are relatively new in travel, but Thomas Cook’s launch of a zero-deposit scheme earlier this year has raised their profile.

Griffiths said Klarna is in discussions with a number of UK OTAs and hopes to be able to announce new partners soon. In Europe it works with a many major airlines and Thomas Cook in Germany.

“We are at the point where we think extending into other verticals is really interesting for us. What we see are similar kinds of challenges exist in travel as we have been solving in other verticals.

“That includes giving customers more choice around the way in which they pay for things and spread those costs over a period of time and not being dependent on credit cards.

“That’s where we see in travel in particular an opportunity to solve particular problems – the ability to really give the control to the customer as opposed to being dependent on one funding source.”

Klarna works by integrating its payments technology into the website of the merchant and offering the payment option alongside other conventional methods.

Today, the merchant decides on the payment terms – in travel this is typically an interest fee term of three, six or 12 months – and the customer then clicks on this and Klarna does the rest.

All the risk is then passed on to Klarna which becomes responsible for making sure the payments are made as per the original agreement.

Griffiths says evidence from other verticals is that Klarna can help sites improve conversion rates, as impulsive shoppers are encouraged to buy, and increase basket values.

If a merchant opts for an interest free service on its instalments product Klarna makes its money by charging a merchant fee.

As well as instalment payments offering Klarna also offers an invoice, ‘buy now pay later’, service which is typically used for transactions of around £150 which are cleared 30 days after purchase.

“If you think about the prevalence of credit cards, travel is going through a very similar moment as other verticals in which they are the prevalent form of payments,” said Griffiths.

“We are now getting to the point of being able to offer an alternative really consumer-focused solution.

“It’s really easy to use and a nice experience for the consumer, it’s just we’re going after an industry that’s not been well served in terms of choice.”

Klarna has plans to launch an app in the UK and in the future wants to develop it technology to allow the end user to manage their own payments.

They would do this by paying for items on their own Klarna card and can decided whether it’s a direct debit or credit payment and then whether they want to pay in instalments post-purchase.

Klarna said as well as investing in above the line marketing it also co-funds marketing campaigns with merchants to promote the service to their clients and boost awareness.

A further push is planned for October with partner brands.

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