The following is a Q&A between Sebastian Siemiatkowski, Co-Founder and CEO of Klarna and Michael Halloran of The FinTech Blog.
MH: How was the business started for those who don’t know Klarna’s story?
SS: Klarna was founded by three classmates including myself from Stockholm who wanted to make it safer and easier to shop online.
The checkout process at the time was so complicated, and packed with lots of frustrating steps that led to people dropping out and not completing their purchases.
There has got to be an easier way, we thought. So without any prior fintech experience, we founded the company and joined an incubator. With a little bit of seed money from an angel investor, they managed to build a first version of the product and have grown to become one of the world’s largest and fastest growing payments companies.
In 2011, Sequoia Capital invested in Klarna and the company has been on an international expansion quest since then. Today, Klarna has operations in 18 countries and launched in the US late last year. More than 65,000 merchants partner with Klarna, and close to 50 million users have used the service.
MH: Tell me about decision to come to the US
SS: Klarna has always grown together with the merchants that use our services, and the decision to expand beyond Sweden came after merchants asking us to do so.
The same is true with the US, where many European merchants asked to have the same integration in the US, and US merchants asked for help with solving payments in Europe.
The US ecommerce market is huge and presents major growth opportunities for Klarna.
MH: Any lessons learned in terms of growing in so many new markets?
We’ve made mistakes in every single new market we’ve gone to, but we learn and hopefully do not repeat the mistakes. Every market is unique in the regulatory requirements, the consumers preferences and the merchant setups.
And the key lesson is that you can’t take what works in one market and just assume it’s going to work in the next. We need to tailor our product to every new market.
MH: Tell me about today’s big news you’re announcing. The Wall Street Journal calls you the company that wants you to get rid of your credit card – but you’re actually launching your first US credit product.
SS: Yes. Today, we are excited to announce the launch of Klarna’s real-time consumer financing solution for the US e-commerce market.
Klarna is launching our flexible solution together with leading players in ecommerce, like BigCommerce, Shopify, Magento, Cybersource, Demandware and OpenCart.
Signing up to finance a purchase over time, historically, has been optimized primarily for an offline environment. The online equivalent, however, has often been an ordeal.
For online consumers wishing to finance a purchase, redirects to other websites, lengthy forms, unclear information and unnecessary complexity are often the norm.
Klarna’s solution takes users less than a minute (all done on the merchant’s site!):
- Add what you’d like to buy to the cart.
- Choose Klarna at the checkout to pay over time.
- Enter basic top of mind information.
- Know instantly if you’re approved.
- Complete the purchase.
You can check out a video on this at klarna.com/us.
MH: It’s pretty exiting news. You seemed poised to grow and I saw you’re looking to hire a Head of Product in the U.S. Why the decision to be based in Ohio?
SS: As naive Swedes we would naturally have looked at SF or NYC to start with. But it turns out that the US is more than that, and thankfully our US team pointed us to alternatives.
Columbus was great for many reasons, but primarily because the talent pool is both deep and wide with Ohio State and lots of financial institutions having their offices there.
There are a lot of great merchants and we have a great partnership with the State and City. We’re about 100 people in the US right now and the vast majority are in Columbus.
MH: Can you say more about your people and culture, since our readers are often looking for new opportunities in FinTech?
SS: Engineering is our biggest division globally, but the majority of that team is based in Stockholm. We also have a big hub in Tel Aviv.
In the US, we’re right now more focused on the operational side of the business, although we do have a small product, engineering and UX team in Columbus. Klarna is at the core a product driven organisation and the role of UX/Design can’t be overstated. It affects everything we do, and our product team work together with all parts of the business.
MH: What was key to your growth, beyond innovation re: no login and password?
SS: We have one of the best regulatory and compliance teams in the world and that has been instrumental to our success. To give an example, Klarna will be the only company in the world to be able to do issuing globally – and that’s both a Product and compliance achievement.
MH: Will Klarna go to China?
SS: Nope. US & other parts of Asia are better opportunities for us, with their old and slow moving banking system. Alipay is too good. They haven’t yet cracked the European and Global markets.We hope to be able to work together with them to support that growth.
MH: What will impact of Brexit be on Klarna and FinTech in Europe?
SS: Brexit is a terribly sad thing in total, and it increases complexity for merchants and consumers across Europe. For Klarna, ironically, that’s actually a good thing, because we can help merchants and consumers solve that complexity.
MH: From a technical standpoint, what’s Klarna view on Erlang vs Python or Node.Js?
SS: We started Klarna on Erlang, but are already working with the other frameworks you mentioned and believe they can co-exist.
MH: What’s Klarna’s take on blockchain?
SS: We’re following closely, and it will have fundamental implications on not just finance and payments but broader areas as well. But it’s not quite there yet.
MH: Looking ahead, what’s your point of view on psd2/xs2a?
SS: PSD2 will be as fundamentally important to payments in Europe as Apple’s decision to open up their app ecosystem to third party developers. It will herald a wave of new innovation to European consumers.
MH: Thanks for sharing an update on Klarna and its mission to transfer an industry that’s been slow-moving with some of your fans who read The FinTech Blog.