Talk about coming out of “left field”!
A Sequoia investment – especially when led by Moritz (famous for his early investments Yahoo!, PayPal, Google and Green Dot among others) is a BIG DEAL for any financial services company. Indeed, the quote in the Klarna press release expressed his level of interest:
“Klarna has done a fabulous job serving the needs of merchants and consumers in Europe’s e-commerce market,” said Michael Moritz, Partner at Sequoia Capital. “With e-commerce growing rapidly across the E.U., where card based payments are only 1/3 that of the U.S., Klarna has an incredible opportunity to be the most trusted solution in the $40 billion global payments market.”
Did you catch those words – “most trusted solution”? How about “incredible opportunity”? Sort of gets your attention, doesn’t it? Let’s take a look at Klarna does and what Moritz may have seen as he considered making this investment.
Take a look at this page describing the Klarna account. “You choose how much you want to pay each month.” You don’t have to pay until the end of the following month – and then you can pay it off in full or pay a smaller amount. Klarna says that “you can buy as many things as you like and only get one invoice per month.” Sort of sounds like a credit card, doesn’t it. Or, perhaps like Bill Me Later (acquired by PayPal/eBay in late 2008).
It’s a bit more complicated than that…although Klarna presents it as easy to use. When you checkout, you can select either Klarna invoice or Klarna account (see this page). With Klarna invoice, the buyer has up to 14 days to pay – after receiving the merchandise. With the Klarna account option, the buyer chooses how much to pay – from the full amount to something smaller.
So much for the consumer value proposition. How does Klarna move the needle in terms of revenues for sellers? Here’s Klarna’s description of how its invoice option helps merchants increase sales. Here’s Klarna’s description of how its account holders help drive increased sales for merchants because of their preference to pay with Klarna.
Interesting reading. So, what’s all this really about? By appealing to both consumer convenience, safety and flexible terms, Klarna makes its offering attractive to online consumers. With PINs at purchase, Klarna’s perceived as more secure – an important attribute for many European consumers. By helping move the needle for sellers in terms of increased sales, Klarna – as a new payment option for merchants – appears attractive.
Frankly, Klarna remindes me a lot of Bill Me Later – but this time it’s coming out of Sweden – and Europe – where, frankly, credit cards aren’t as prevalent as in the US. Indeed, that can be said for much of the world – which is why Klarna is most interesting!
What do you think?