Sweden’s Klarna: With U.S. Launch It’s All About Online Payment
‘Friction’
By Sven Grundberg and
Jens Hansegard
Klarna’s use of data in order to create an online payment
system that requires very little user input is very interesting but may also
lead to some problems. This payment
system could provide a great advantage to retailers because as the article in The
Wall Street Journal mentions, more customers abandon their online shopping carts
and never complete the transactions compared to those that do which is known as
the conversion rate. According to the
article, “Klarna’s
current conversion rate is close to 50% on both mobile and desktop devices”[1].
This is much lower than the conversion rate of retailers who use other methods
of payment which is about 67% and this is what I think will make Klarna an
attractive option to retailers in the United States.
I think Klarna’s use of data from many different sources in
order to complete a risk analysis on future customers is very interesting and I
think it is a great way to use big data to mitigate risk. Klarna is not just taking data about the
customer and their past habits but they are also analyzing the risk of the
current purchase to determine if a customer will pay their bill or not. I think this makes it a win-win situation for
both consumers and retailers. The
consumer wins because they are able to quickly complete a transaction and do
not have to pay until they receive the item and the retailer wins because they are
able to increase the number of completed transactions for online
purchases. The risk that the retailer
does take by not receiving payment immediately is mitigated by the risk
analysis that Klarna conducts on the consumer.
The other risk that is not mentioned in this article is stolen
identity. According to the article,
customers only have to enter, “a very small amount of information, such as an
e-mail and delivery address”[1].
This information is pretty widely available so it makes me question how
many times someone has used someone else’s information to order a product. I do not think it is too far-fetched to see a
child using their parent’s email and address to buy a product without their
parent’s permission. I think Klarna’s
response to this issue will be the real deciding factor as to whether consumers
have confidence in the new payment method or if they will continue to use the
old methods of payment.
Overall, this is a great way to use data to benefit both the consumer
and retailers. Retailers are able to
complete more transactions which should increase revenue and consumers have a
more convenient way to complete online transactions and have more flexibility
with paying for items. If the issues are
addressed, I believe that this will be a great payment option for online
retailers to offer their customers and may give Apple Pay and other new methods
of payment more competition as they also enter the market.
Link to the article: http://blogs.wsj.com/digits/2014/09/19/swedens-klarna-with-u-s-launch-its-all-about-online-payment-friction/?mod=ST1
[1] Grundberg, Sven, and Jens Hansegard. "Sweden’s Klarna: With U.S. Launch It’s All About Online Payment ‘Friction’." Digits. Wall Street Journal, 19 Sept. 2014. Web. 24 Sept. 2014.
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