Stores like Klarna:
Nowadays, the buy now pays later market is flooding with competition, so the major competitors of Klarna in this vast market are Affirm, Sezzle, Afterpay, Laybuy, Quadpay, split it, ViaBill, GoCardless, J2store, Sunbit, four, future pay, partial.ly, PayPal credit, and Zebit. They all offer something different from each other, so making the right decision can be overwhelming sometimes.
How does Klarna work?
Klarna is a buy-now-pay-later store where the customer can buy the product they want and pay the full price of the product in 3 installments. So if a store has a tie-up with Klarna, you will need to go to that payment if you already have an account in it and select the payment option. If the total price of the product is $1,000, then you will need to pay only $250 for the product and the rest of the amount you will need to pay in the next 6 weeks, with each installment due in 2 weeks. The loan is interest-free, but if you miss an installment, they will charge you late fees.
What are the other payment plans offered by Klarna?
They also offer payment in 30 payment plan, in which there is no interest but the customer must pay their money in 30 days; there is no such thing as an installment; you can pay how much you want when you want, but the total amount must be paid by the deadline or late fees will be applied.
They also provide you with a payment plan where they check your credit score and, depending on that, you get the interest rate and the loan amount. The higher your credit score, the lower your interest rate and insurance premiums.
Klarna and its competitors’ late charges
Klarna: the late fee charged by Klarna is $7 if the installment is not received on time. They take money directly from your account every 2 weeks for their normal plan, but if they are unable to do so on an installment date, then they charge the late fees. Affirm: they don’t charge any late fees to their customers, which is kind of surprising, as then anyone can take the companies’ undue advantage. Sezzle: they don’t charge late fees the moment the transaction fails, but they give the customer an additional 2 days, but if the installment is still not paid, then they charge $10 as the late fee. Afterpay: they charge the highest of the late fees in the whole market. They charge around 25% of the capped order value, which can be a huge amount if the loan is large, like $4000 or so. Laybuy: they charge $10 as a late fee to the customer if he/she fails to pay the installment within the extra 24 hours, and they also charge an additional $7 if the installment isn’t paid till the next week. Quadpay: the late charges of this company vary from state to state, but they are in the range of $5-$10. So the late charge depends on the customer and its location. Split it this way: they charge no late fees to their customers. Via bill: they charge the late fees of around $29-$40 depending on the number of installments, which means that if the customer has paid the first two installments on time and has missed out on this one, then they will charge a lower fee as he/she is established as a valid customer. PayPal Credit: $28-$39 is their late fee range, but if the customer account contains less than $2, then the late charge is $5. Sun bit: they charge late fees after 10 days, which is the most days given by any company in addition to the installment date. But after that, they charge $10 as a late fee.
What are the interest rates charged by the companies?
Klarna does not charge any interest fees on the normal plan. They only charge interest on the large payment plans, which is like a loan. Affirm: they charge around 0-30% interest rates on all the plans, depending upon your credit score. They charge the interest, so the better your credit score, the lower the interest rates. Sezzle & Afterpay: they both charge no interest on the normal plan, and they do charge interest on the payment plans. Laybuy and Quadpay both don’t charge any interest on the normal plan, only on the payment plans. Split it: they charge around 0-3% interest on the normal plan, depending on the credit score of the customer. Via Bill: They charge no interest on the normal plan. Sun bit charges the highest amount of interest on the normal plan, with a range of 0–36%. So, if the person has a low credit score, he or she will end up paying a third of the total amount as interest on the full amount borrowed. Which is bad for the customer. PayPal credit: they charge everyone the same 20% interest rate.
What are the term lengths or installments for each company?
Klarna: they give 6 weeks for the return of the payment in 4 installments, where the customer is required to pay at least one installment every 2 weeks. Affirm: They give loans to their customers in the range of 3 months to 3 years. As they take an interest, the customer can make a plan according to his/her needs and then pay them interest every month. Sezzle and Afterpay both give around 6 weeks for their customers to pay the loan. Laybuy: they give their customers the option to pay in 4-6 installments, where each installment will need to be paid in 2 weeks. They give their customers 2 months to pay the loan, and then the customer can pay however much they want, whenever they want. Split it and PayPal credit: they both don’t have any specific time limit for their customers and it changes from shop to shop. If the shop manager in New York gives 2 months to pay, then the shop manager in Los Angeles might give 6 weeks. Sun bit: as this company also charges interest, as far as I know, they charge the highest interest in the market. Therefore, they give their customers 3–12 months for the repayment of the loan.
Klarna’s pros and cons:
They offer financing options without any interest rate, which is one of the best qualities of this company. There are no prepayment fees for the customer when making purchases from their card named the Klarna card. They offer exclusive deals to their customers as well as special deals to cardholders.
They only have a small limit for the loan amount, which is nearly $5-10k. The amount that can be offered to any customer is determined by their credit score. They charge late fees, but they charge only $7 as a late fee. Some companies charge a lot, but some companies charge nothing as a late fee. They do not report if you pay the installments on time to the credit checking department, but they do report if the customer forgets or delays his/her installment, which will affect the customer’s credit score.
Conclusion
So there are many competitors for Klarna in the market right now, but they have ensured a proper market for themselves. They charge a late fee of $7 and take no interest, which is better than most of the companies in this field and also offer good perks to their customers and cardholders. Their major competitors are Affirm, Sezzle, quad pay, afterpay, and PayPal credit. They all offer something different and are always in line to take over the other if the first makes a mistake. You need to come up with some new ways to be in this business, as the market is flooded with companies related to this, and Klarna knows exactly how to do it.
Does Klarna do a hard credit check or a soft one?
They do a soft credit check, so it does not affect the customer’s credit score. Whereas its competitors does a PayPal does a hard credit check on their customer.
What are the big stores that are associated with Klarna?
There is Nike, Microsoft, Samsung, Reebok, and many more companies are assigned to Klarna.
