Klarna is a leading and globally recognized player in the consumer financing space. It has achieved wide name recognition through ongoing marketing efforts since it was founded in 2005. Unlike most alternative financing providers, it is a regulated banking company headquartered in Sweden with an international headquarters in Columbus, Ohio (USA) and lends directly to consumers. It operates in 14 countries, with differing product options because of local regulations. Its offerings typically target order values under $1,000, with approval rates of approximately 50%. While options over $1,000 are available in some markets, approval rates decline to 37%. Interest rates are 18.9% in EMEA and the U.K., and 19.99% in the U.S.
Afterpay concentrates on the millennial shopper segment and is typically used for lower order values than other installment providers. It can be used in Australia, Belgium, Netherlands, New Zealand, and the U.K. After the shopper applies and is approved for credit, a purchase is broken into four equal installments payable every two weeks. Instead of interest, Afterpay charges an $8.00 initial fee and an $8.00 fee for each payment.
Klarna notably outperforms Afterpay in its impact on conversions and Average Order Value. Klarna also offers products that go beyond Afterpay’s four biweekly installments option, including pay later in full options after 30 days, and financing purchases with traditional monthly payments like a retailer-issued credit card.