The checkout wars are in full swing with a slate of companies offering services that allow shoppers to pay how and when they’d like. Though payment alternatives are relatively new in the U.S., globally, buy now, pay later and installment plans are becoming standard for purchases made both online and off.
With 60 million consumers using its payment solutions, Klarna is one of the biggest players in the market. While Klarna offers consumers a range of choices that allows them to spread out payments and try before they buy, it’s the company’s ability to support its 100,000 retail partners that has propelled it from an “alternative” to the new norm in places like Germany, where the company said it commands up to 80 percent of checkout in certain verticals.
“The interesting part of solving problems for retailers—part of it is creating the experience, but a lot of them recognize the improvements to the experience they want to make—it is [answering] ‘how do I navigate this technical legacy of all these different systems that I have, and how do I get quickly to market with something that creates a different experience or service for our customer,’” said Klarna’s CEO Sebastian Siemiatkowski.
Klarna often finds itself in the role of consultant, he added, helping create ways for retail partners to adopt new services no matter what shape their technology is in.
“We tell them, ‘No, you don’t need to change all your point-of-sale systems. No, you don’t need to rebuild your e-commerce platform from scratch,’” he said. “There’s ways now to leapfrog into this.”
Here, Siemiatkowski talks overcoming cultural challenges, sidestepping legacy technology and delivering satisfying experiences.
SJ: It seems that Europe is ahead of the U.S. when it comes to e-commerce and m-commerce. What are some of the things retailers in the States need to catch up on in order to provide shoppers with a better experience?
SS: One of the things that surprises me a little bit is if you compare Europe to the U.S., in Europe, where we’re from, originally we were pushing one-step checkouts, one-click type of solutions, prefill. Guest checkout is an absolute must; you can’t just have registration. Everyone speaks about a very competitive retail environment in the U.S., but I’m hearing merchants talking about these things today. I’m still finding 5-step checkouts. It’s mind-boggling. I don’t know why. In Europe it’s just a given. Nobody would ever have those kinds of lengths. We help merchants a lot with that pre-filling. We have a massive cookie network which helps customers go to different merchants and get a one-click, seamless experience.
SJ: That makes it really easy to shop if you’re going from one site that accepts Klarna to another. On the other hand, some consumers can be hesitant to get that convenience if it means providing too much personal information. I think it’s in large part because security issues related to payment make for such big headlines. How do you strike the right balance so shoppers trust you?
SS: The challenge around privacy is really that there’s been a couple of companies who have applied thousands and thousands of engineers to figure out how to use your data to track you with a very boring ad across the Internet. You look at this one item, and now you’re being haunted by it across the Internet. It doesn’t add value for the consumer.
Consumers understand that companies use their data, but you have to use it in a way that actually gives value to the consumer. So, every time we have any idea related to consumer data, the first question we ask ourselves is ‘How is this going to benefit the consumer? What value are we going to create for the consumer?’ If we can prove that there’s value, then maybe we can offer a service that also helps the merchant or ourselves. I think that’s where things have gone wrong.
SJ: You talk about helping merchants but the truth is some of them can’t help themselves. They’re saddled with huge operations, legacy technology and infrastructures that were built for large, physical store chains. It feels like newer, upstart brands and retailers have the edge because they’re built for today’s consumer. How can traditional retailers pivot? Or can they?
SS: I can basically put companies in three categories: [First,] the very most modern e-commerce companies coming now. They’re on Shopify, they can be hundreds of millions of dollars in revenue, and there can be two or three engineers. The engineers are really working on improving that extra mile of customer experience.
[Next,] you have the more traditional e-commerce company that built their own tech stack, and they have their own engineers who built their own experience, and that’s good.
Then you look at the major retailers who want to create an experience, and every feature you want to develop has 55 people involved, every improvement has to go to committees. It’s a waterfall; it’s not agile. Obviously, coming back to the pace at which you’ll be able to adopt, that’s part of the challenge for these legacy players. These big systems have been made for efficiency but it was for a specific world that looked a specific way, and then the world changes and the system isn’t built to adapt.
SJ: Then, how can you help these groups, especially the major retailers you’re talking about?
SS: One of the things we launched is you can go into a store, and apply for promotional financing, but we issue the virtual card on your phone. You add it to your Apple Pay wallet, and you instantly pay it. There’s no integration, no technical setup for the retailer. They can go live in a day. The challenge retailers have is ‘how do I navigate this technical legacy of all these different systems that I have, and how do I get quickly to market with something that creates a different experience for our customer.’ So, a lot of our time is consulting them on their tech stack.
SJ: So, it’s not a tech barrier but a cultural one?
SS: It’s a willingness to experiment. Obviously, we didn’t put it on 100 percent of the traffic from day one. We took it live at 5 percent. We gave them controls to control how they were scaling it up. We helped them with the IT security topics that were raised. We can provide them guidance through this process. Again, we as a company are just there to help them grow their sales. We’re not charging consulting hours, we’re not there to sell them a contract, that’s not our job. We’re there to see how we as a partner can make them grow. I’ve seen more companies doing that and I think the industry is moving in that direction.
SJ: In that sense, you’re kind of offering to retailers what the retailers are attempting to offer consumers: an easy, hassle-free experience. But there are many more aspects to the retailer/consumer interaction than simply the payment piece. How do you help with that?
SS: Chat is a great example. We’ve realized that many times when a customer has an error concerning a purchase, part of the question could be related to the merchant, part could be related to the payment company. What we do, is we’ve started experimenting with integrating chat flows, so there’s a representative from Klarna and the merchant in the same flow. We don’t need to send the customer back and forth between us, but can answer the question at that point instead.
Another great example is email. In email, you get a thread. You get a history, which is very efficient for the merchant, but a boring way to interact with the consumer who is waiting. So, what we’ve created in our chat is every question starts a thread. That thread stays there, so the consumer can go back and continue the chat whenever they like. We can answer instantly, but the customer can leave for five hours, come back, and the chat history is still there.
A lot of our things we develop for our own app and the customer experience that we offer, we always say to the merchants, ‘We have APIs. If you want to use our components in your apps, go ahead.’ They don’t always have to come to us; they can use it for themselves as well, which is how we help them develop and make sure they have a great user experience.
To read more about the need for payment options at retail, read Sourcing Journal’s Consumers, Checkout & Creating Experiences That Resonate report.