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If you shop on Asos, Topshop, Made.com or a raft of other sites on the regular you’ll have noticed the baby-pink-hued checkbox that now sits alongside debit cards and PayPal in the checkout: ‘Pay later with Klarna’.

Since founding in 2005 the Stockholm-based company has slowly been bringing its ‘shop now, pay later’ model to the mainstream, giving online buyers the option to receive their goods and pay after a 30-day period, or pay in installments over a series of months without added fees or interest. The business generates most of its revenues through fees from the online retailers that offer its service.

Klarna debuted in the UK in 2016 and currently works with 130,000 merchants globally, with around one million transactions a day running on the platform. It welcomed 26 million new customers in 2018, an average of 55,000 a day.

Following an extensive rebrand in 2017, the fintech has seriously ramped up its marketing efforts. Squarely targeted at a millennial audience, its bright colour palette and ads featuring the likes of Snoop Dog (who is now a shareholder) and comedian Celeste Barber have transformed the business “bottom up” according to its chief marketing officer.

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David Sandstrom has been the marketer at the helm of the brand for the past two years, steering it from what he describes as a “blue and boring to pink and exciting”.  

On joining he was tasked with transforming the company from a “B2B techie business” to one that was more “energetic”. As well as rolling out a seamless app, it’s been working with 72andSunny Amsterdam to do so, focusing on ease of use and convenience.

Sandstrom says Klarna has been pushing the agency beyond its “creative limits” and demanding “more creativity than some of the ‘cooler brands’ [on their roster] probably do,” and it’s paying off.

“If you look at the results we’ve had since then, we’ve managed to build a community of people who love our services and products, but also love the safety, security and smoothness we provide.”

According to its books, year-on-year sales are up 36% to $29bn and two years after securing an EU banking licence, Klarna has been valued at £4.3bn, making it the Sweden’s most valuable fintech start-up. Its existing customer base is also highly engaged, with many big markets seeing an average of over 70% of consumers make multiple repeat transactions.

Promoting 'sustainable' buying

As the very different looking lender gains momentum, however, its business model has sparked fears from debt and money advice charities, which say a growing throng of young, attractive financial brands could spark a fresh debt trap for a new generation of borrowers.

Rival services like Clear Pay (which recently inked a deal with M&S in the UK) have also come under similar scrutiny, while pure digital banks like Monzo and Starling have been criticised for seducing young people with overdraft and loan offers.

With Klarna, if customers fail to pay up after 30 days, their details could ultimately be passed to a debt collection agency. The firm is is open on its website about the fact that non-payment will affect a customer’s credit score and admits accounts are passed to external if unpaid after several months and various warnings “as a last resort”.

However, debt advice firm PayPlan says Klarna’s introduction to credit “does not encourage budgeting and supports the ‘I want it now’ purchase of items people may not be able to afford”.  

Money adviser Jane Clack said the charity had seen a “worrying increase” in the number of young people contacting it for free debt advice. This demographic now makes up more than a fifth of its total client base.

Stepchange, the Money Advice Trust, the Debt Support Trust and Christians Against Poverty recently told the BBC that companies like Klarna need to make terms clearer at the outset.

So how does all this square with Klarna’s desire to be seen as a fun, edgy brand?

“It’s a really important issue to us and we don’t want to spark excess shopping or drive unhealthy consumerism,” says Sandstrom.

Beyond being clearer in its communications, a bit part of this has included encouraging customers to make better choices and be more mindful about what they’re spending their money on.  

“Over the last year, a lot of what we’ve been trying to do is inspire people to buy things that are more sustainable and utilise our products to buy things that they maybe couldn’t afford [initially] that are of a higher quality.”

This has included expanding partnerships with brands that are focused on sustainability in fashion, like H&M and producing content aimed at e-commerce businesses on how to improve their own credentials.

“We want to make people aware that it’s not all about shopping… we want to build experiences and engagement, not just drive sales. So this is a topic that we’re trying to approach in a sustainable and safe way.”

The Apple of Fintech?

As the brand looks towards 2020, physical experiences and targeting specific communities will play a major role in its marketing blueprint. It’s already hosted several pop-ups in London and Manchester, including the House of Klarna where major partners like Asos, Oliver Bonas and Schuh showcased their products and services. Talks on fashion, beauty and lifestyle were also on the agenda.

More recently, the advertiser targeted pet owners in the capital and in New York with a ‘pup-up’ which aimed to show “how how Klarna offers the best shopping experience for people and their furry best friends”. It also teamed up with Ru Paul’s drag race a few months ago to appeal to the drag queen community.

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All this investment looks to help Klarna interact with customers in a more meaningful way.

“I believe it’s hard to build a purely digital brand,” says Sandstrom. “Digital bring a lot of opportunities, but when it comes to helping people feel something for the brand and getting under the skin of what we do there is something magical about [making it physical].”

He adds: “Very few payments or financial brands make people feel something beyond frustration,” citing Apple as his inspiration for crafting experiences that make people connect with Klarna on a more personal level.

“Apple actually makes people feel something when they open a box, I believe that will spread across everything, not only financial services.”

Its ambition for 2020, though, is to no longer be the “alternative” form of payment.

“We’re on a trajectory where during the next year we’re going to be seen as not just an alternative, but actually the standard way of paying and shopping for things both online and offline.”

He doesn’t believe this vision is too far off but admits it means the brand will have to go “bigger and better” on its experience-based marketing in order to become a part of people’s everyday lives.