Klarna doesn’t want to be a ‘Buy Now Pay Later’ brand
Swedish bank Klarna was pivotal in the birth of the booming Buy Now Pay Later (BNPL) category. But with competition in the sector heating up, its chief marketing officer is keen to ditch the BNPL association and show the company’s bigger ambitions to be a global retail bank and one-stop-shop for e-commerce.
Klarna has faced intense scrutiny since it launched its BNPL offering. Much of chief marketer David Sandstrom’s role at Klarna is myth-busting criticisms lauded at the brand. “The first myth that irritates me is that we are just Buy Now Pay Later – we do so much more than that,” he says. Sandstrom references products such as its recently-launched credit card, automated checkout and app functions geared to make mobile shopping easier to navigate.
Klarna wants to prove it is more than its Buy Now Pay Later reputation
Klarna’s utopia is a completely seamless e-commerce customer experience, and Sandstrom wants it to be part of the process at every touchpoint.
“We built the company on making the e-commerce market work better, and every single strategy and service is part of that,” he explains. “Our consumer research shows that online shopping is incredibly lonely. There is no peer-to-peer recognition, no quick advice or voting on an outfit – we want to build that.”
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Klarna has set out its stall to be the company that can enable shoppable content to thrive. “This step into shoppable content is a way to make the market function better and we are extremely excited about that,” he says. Acknowledging the west is trailing behind Asia on its journey to embracing shoppable, Sandstrom believes with Klarna’s easy purchase functionality it can be the brand leading the acceleration of shoppable.
Long term, Sandstrom says he’s looking at developments in China for ‘super apps’ that combine inspiration with shopping, and managing payments and returns. “That to me is the future – the pure one-trick ponies won’t survive,” he says.
Klarna also wants to become the world’s first global retail bank. The company has been aggressive in its international expansion having entered 10 new markets in the past two years, bringing the total number of territories it operates in up to 16. But these rapid growth plans have left Klarna shouldering $470m in losses in Q4 2021, largely in credit defaults, which for now it is shrugging off as a by-product of building the brand.
“There is going to be two or three players that create an everyday spending retail bank that is globally accessible because retailers need it,” Sandstrom says. “We want to be one of those.”
Complexities around regulation and cultures when entering new markets have previously been a barrier to creating a global retail bank, says Sandstrom. Offering Germany as a recent example, Sandstrom notes the country is generally less trusting of digital banking, so it partnered with eBay to introduce its product. “The reason there is no global bank is that it’s freaking hard, like beyond hard,” he remarks.
As it expands, Klarna is welcoming regulation. To protect the reputation of BNPL Sandstrom says it “needs the shady competition to be closed down.”
Changing the narrative
Klarna has a history of using its marketing to challenge its critics. “We want to set the record straight, we don’t have anything to hide. Yes, we’ve probably made mistakes – we are a tech startup trying to change one of the most predatory industries in the world. We want to face those criticisms head-on,” Sandstrom says.
For its 2021 The Drum Awards-winning campaign ‘Discover the Truth,’ Klarna identified seven myths that were gaining the most traction and reclaimed them, creating mythical murals that quashed the negative claims.
For starters, Sandstrom says, it’s “factually incorrect” that Klarna is only for young people. Spend data suggest 40-54s was the fastest-growing demographic for the company in 2020, and now accounts for the second-largest segment of spend.
Then there’s the common assumption that the Klarna ‘millennial pink’ branding is to attract women. “Young women are smart. If you think women are going to come to our brand because it’s pink, it’s pretty derogatory,” he lambasts. Sandstrom says he picked pink simply because blue is the color associated with traditional banking.
Finally, and arguably most importantly, he wants to dispel the myth that Klarna is ethically worse than credit.
“If we look at Buy Now Pay Later it’s no different to credit. You are just splitting your payments. The only difference is the retailer is picking up the interest tab, not the customer,” he says. “To say we encourage shopping but Amax, Chase and the others don’t, well, that’s very strange to me.”
Sandstrom says Klarna is in the best position to disrupt the traditional banking system as consumers turn away from credit cards and move to debit cards after years of “feeling cheated and screwed.”