A Conversation with Klarna's Dan Spencer

How Klarna is disrupting the financial industry with innovative advertising, a strategic partnership with Snoop Dogg & grand plans for in-store activations... Klarna is transforming how we pay.The Swedish bank, founded in 2005, provides game-changing flexible payment solutions for customers and merchants, allowing consumers to pay for their shopping days, weeks or even months after the purchase date. With over 60 million shoppers and 100,000 merchants spread over 14 countries, Klarna’s ‘buy now, pay later’ solution is resonating with a millennial audience. The fintech unicorn relies on its relationship with the consumer. The ‘pay later’ or ‘slice it’ product trusts in the customer to fulfil payment at a time that best suits them and instils far greater purchasing power than previous checkout solutions. Beyond finance, Klarna offers a beautifully ‘smoooth’ post-purchase experience that considers the customer at every touchpoint.It is this trusting, unconceited relationship with the consumer that distinguishes Klarna from the often capital-driven banking world. Klarna’s empowering value proposition truly has the customer’s back.For this month’s A Conversation With..., Matter Of Form is delighted to meet Dan Spencer, Klarna’s Global Partner Manager. He offers insight into the world of banking as it undergoes a seismic technological shift. He spotlights the highs and lows of Klarna’s journey and discusses the bank’s leftfield partnership with the most unlikely of American rap stars.Firstly, what do you envisage for the future of money and payments industry as a fintech enthusiast?Money is moving towards digitisation. One interesting case study lies in one of our Swedish in-store clients: they trade on a cashless and cardless business model. They claim all you need is your phone to plug in a few details when purchasing stuff and are abandoning a card system altogether.How does Klarna disrupt the payment solution market?The main difference between Klarna and other payment tools is how it can be used as a marketing tool in and of itself to drive conversion to our merchants’ websites. The vast majority of payment providers are only visible at the last stage of checkout. We, however, are used by our clients as an upstream. We really look to use the flexibility of our payment method to increase conversion to the merchants’ web and mobile site.“The main difference between Klarna and other payment tools is how it can be used as a marketing tool itself to drive conversions.”When we first launched with ASOS, for example, customers could only access Klarna if they had the ASOS app. It drove downloads for ASOS and was a really cool way of using us as a marketing tool.‘Smoooth’ has become an iconic brand value of Klarna. How did it come about?The idea was to differentiate Klarna from the rest of the payments industry. The vast majority of payment providers have very corporate, very boring, very strait-laced marketing messages. We want to put some colour into it. If you look at our adverts, we've got a swimming dog. We've got a pen going into a piece of jelly. We've got a man with vibrations going through his body. The whole idea is to convey the incredibly smooth purchasing process Klarna offers. Rather than us spell out exactly what we're trying to do, we try to visualise it.How are you faring against competitors in the delayed payment space?We have a real foothold in the UK fashion brand space, so I think it would be difficult for competitors to enter the UK market. There are of course a few entrants, Afterpay or Laybuy as two examples. If they do manage to acquire brands, it will reinforce the whole consumer behaviour of paying in instalments. It will benefit us in the long run if more merchants are offering those services.Competitors also lack flexibility in what they can offer their customers. Generally speaking, they only have the ‘slice in three’ payment option, which puts us in the driver’s seat.Klarna is an obvious success story. With over 100,000 merchants on board, you have scaled up incredibly quickly. How have you been able to manage this process?From a business perspective, Klarna is based on Spotify’s business model which reduces bureaucracy and divulges power to subteams. If you come up with an idea, you go ahead and do it and the business will back you. Our annual company kick off in Stockholm is a really good example of this. Essentially, the entire company (2500 people strong) is pulled together for a mini trade show. All of the subteams line up and showcase their work - we discover what’s going well and not so well, and work out ways we can help each other out. It's an open, autonomous working environment.“If you come up with an idea, you go ahead and do it and the business will back you. It’s an open, autonomous working environment.”What have been some of the challenges you have faced as a fast-growing business? Historically, the biggest challenge we have faced has been getting the name, Klarna, out there. We went straight for the big brands like Asos and Arcadia. This is what we are doing in the US at the moment – aiming directly for the biggest brands possible. It takes hard work but has a mushroom effect: other merchants see our name attached to larger firms and want it. It says a lot about using the power of ‘FOMO’ to grow.A particular challenge when we first entered the UK market was that we only offered a full checkout solution; if you wanted a specific payment method like the pay later product, we had to replace the entire checkout with Klarna’s system. Market adoption was low because British merchants didn’t know our product and therefore didn’t trust us to replace their entire checkout solution.So, the product team in the UK modularised the different payment systems so they could be adopted within the existing payment method. The business was agile enough to change the product offering to suit the regional market.The biggest challenge for us at the moment is that the number of merchants seeking Klarna’s checkout solution is so great that we can’t get to them quick enough – a good problem to have, of course. Beyond building our team with the best people, we’re also building partnerships with platforms like Magento and Shopify. From a technical perspective, this ensures we have the relationships in place with the platforms most merchants are built on. The onboarding process is therefore as smooth as possible. The whole idea is to convey the incredibly smooth purchasing process Klarna offers. Rather than us spell out exactly what we're trying to do, we try to visualise it.How does Klarna disrupt the payment solution market? The main difference between Klarna and other payment tools is how it can be used as a marketing tool in and of itself to drive conversion to our merchants’ websites. The vast majority of payment providers are only visible at the last stage of checkout. We, however, are used by our clients as an upstream. We really look to use the flexibility of our payment method to increase conversion to the merchants’ web and mobile site.“The main difference between Klarna and other payment tools is how it can be used as a marketing tool itself to drive conversions.”When we first launched with ASOS, for example, customers could only access Klarna if they had the ASOS app. It drove downloads for ASOS and was a really cool way of using us as a marketing tool.How are you faring against competitors in the delayed payment space?We have a real foothold in the UK fashion brand space, so I think it would be difficult for competitors to enter the UK market. There are of course a few entrants, AfterBuy or Laybuy as two examples. If they do manage to acquire brands, it will reinforce the whole consumer behaviour of paying in instalments. It will benefit us in the long run if more merchants are offering those services.Competitors also lack flexibility in what they can offer their customers. Generally speaking, they only have the ‘slice in three’ payment option, which puts us in the driver’s seat.On that point, how have you found sourcing talent? Generally, lots of businesses in technology are struggling to find talent. We’re lucky in a sense, because of the way the business is structured: location doesn’t matter. I’m the only member of my team based in the UK. The rest are in Germany and Scandinavia. With offices in London, Berlin, Munich, Stockholm and Oslo, we locate talent across Europe.We hire around 50 people every other week, so it’s a big operation – our HR team is always busy. In fact, we have 1000 vacancies open at the moment across the world. It's insane.So, where do you see Klarna going in the future?The future for Klarna in relation to the UK is definitely moving in-store. There’s still so much revenue that goes through brick-and-mortar stores, so to have the high street on board would be huge for us. We are diversifying into new verticals such as homewares, lifestyle, furniture and sports equipment.We also have a ‘debit/credit/payment’ card coming soon, together with a bespoke app. It’s essentially a current account – a one-stop shop that combines all your ordinary banking activity with Klarna’s usage. Recipients of the card (and users of the app) will be able to choose a chief payment option (ie split payment or deferred payment), view purchases using Klarna’s current account, and track delivery. This is where we can begin to compete with the likes of Monzo and Revolut.“The future for Klarna in relation to the UK is definitely moving to new verticals and in-store.”Being able to amalgamate these tools into one app with a 24/7 chatbot should give the customer more control over what they are spending. It directly links to Klarna being a responsible lender.We can’t leave without talking about Snoop… how did the partnership come about? We reached out to Snoop as part of our ‘smoooth’ branding. The marketing team thought about who they thought was literally the smoothest person in the world. Snoop Dogg was their answer. He was really impressed with the Klarna branding and business model, and so now sits as an investor, shareholder and brand ambassador. He’s even changed his name to ‘Smoooth Dog’.Stay up to date with Matter of Form’s content by signing up to our monthly newsletter. Or, discover more inspiring conversations with the brightest minds in technology.

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A Conversation with Klarna's Dan Spencer