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Marketing Fintech News

Klarna's catch 22: how to encourage responsible spending when merchants need cash?


By Imogen Watson | Senior reporter

July 16, 2020 | 5 min read

As the coronavirus recession looms, the health of the economy depends on shoppers opening their purses. However, in times like these, people need to shop more responsibly. Money lending site Klarna is learning to navigate this fine balance as it looks to encourage smarter spending while supporting its merchants in their hour of need.

Klarna navigates balance of responsible spending versus economy boosting

Klarna navigates balance of responsible spending versus economy boosting

In playful pink, Klarna's offering of ‘Shop now, pay later’ at the e-commerce checkout is hard to ignore. Since it was founded in 2005, the Stockholm-based company has enticed a millennial audience with its light-hearted ads featuring the likes of rapper Snoop Dogg and the internet sensation Celesta Barber, which has catapulted the fintech firm beyond the realm of traditional money lenders.

However, its role in promoting ‘easy credit’ has led it to come under scrutiny, with some criticising Klarna for being too appealing as users as young as 15 rack up debts (although it's strictly over-18s only).

As part of its plans to be seen as a responsible lender, last week it introduced ‘KlarnaSense’ – an initiative to encourage consumers to shop for the right things, at the right time. An extension of its 2019 ‘Mindful Money’ campaign, KlarnaSense advises shoppers to ask themselves three questions before heading to the checkout: Do I love it? Will I use it? Is it worth it?

“We knew Mindful Money was resonating really strongly, so we wanted to accelerate the topic in a meaningful way,” explains AJ Coyne Klarna’s head of UK consumer marketing, who joined Klarna during lockdown from agency-side. “Especially given what’s happening everywhere at the moment in terms of the pandemic.”

While many companies were dealt a bad hand by the pandemic, Coyne admits Klarna was among the cohort that did well.

With retail pushed online, Klarna's senior communications manager Emily Thomas says there was an influx of retailers asking to offer its payment methods. “And then obviously, we had brands hit by coronavirus, like travel companies, ceasing use," she recalls.

And while Klarna has always predominantly appealed to millennials, there was a rise in Gen X users buying via its platform than before lockdown – a testament to the fact that people are adopting online behaviors that typically might not have done prior.


With a coronavirus recession poised to crash, customers are being told their country needs them to save the economy through spending. However, at a time where unemployment looks to skyrocket, society isn’t in the place to part with the cash. Klarna finds itself within this catch 22, whereby it wants to protect its shoppers from careless shopping while looking after the business of its merchants.

“There’s a fine balance,” admits Coyne. “As a brand, we have a responsibility to our consumers in the UK to make sure that we are doing right by them, in these times.

“At the same time, I think it's fair to say we also have a responsibility to our merchants, and to the UK economy to help get retail back on its feet.”

While this may appear counterproductive, Coyne explains that it is, in fact, mutually beneficial. “We believe in brands and the consumer having a better experience with Klarna end-to-end," he insists. "A consumer that hasn't overspent is far better for us in the long-run than someone that has made some wrong decisions so they have to return products back to a merchant supplier.” Therefore, Klarna's long-term strategy is to build consumer awareness around responsible spending.

KlarnaSense 2

While the high street was already in dangerous waters prior to the pandemic, the coronavirus has only exacerbated the downturn to the point where major retailers like Oasis, Cath Kidson and Brighthouse have fallen into administration. With shoppers hesitantly returning to high streets, Klarna hopes its in-store activations will help. Last year, in partnership with footwear store Schuh, Klarna introduced its ‘Pay in 3’ service, whereby customers can pay for their purchases in-store, via the app, so they don't need to go to the till.

As Klarna navigates the fine balance between encouraging responsible shopping while helping its merchants, Coyne says in this “new Covid world, we have huge ambition for Klarna to be a verb/to be part of pop-vernacular."

“I think we have a responsibility to contribute to culture in the UK, and not just hijack it,” he concludes.

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