Card backed payments by Klarna

How to succeed in unknown and aggressive markets like the US and UK, where not only the competition is fierce but especially where credit payments are either uncommon or viewed with suspicion by the customers?
This an overview of how we created and launched two new payment methods tailored for both markets that later were used as pioneers for the next ones.


Based on the data collected since 2015, when Klarna launched their products in the US, and after four months of local research and iteration happened in 2017, were mapped three main barriers:

Assumptions & learnings

First assumption was based on the Klarna’s Slice it product. At this stage were planned two major user-tests in order to understand how the consumers perceive a new credit approach product which uses cards as the backed payment source. 

Slice it by card

@ London, UK

18 participants / 2 variations

A: Card takeover

Here we literally take over the merchant payment and offer straightforward all the possibilities. The interesting part of this concept is the possibility to verify the users credit eligibility before the purchase processing, and show only one installment option if necessary. 

B: Payment integration

In this variation, we offer a new payment method alternative, splitting the understand of the card and this new alternative

First results

Card-based installments plans as an option in an existing card flow are likely to succeed based on users response. An attractive solution for debit cards is mandatory to address a majority of the population, especially millennials.

More testing is needed to prove the concept. A discussion between the test leader and the rest of the Pay later/Slice it team working on incorporating debit & credit cards in the Pay later & Slice it products is needed to determine the way forward.

Slice it in 3

@ Stockholm, Sweden

6 participants / 1 variation

A simpler concept named "Slice it in 3”. Offered as a separated payment method having only one option of installments, 3 in total. 
The idea is to be straightforward about the information displayed, in order to clarify the product functionality, evaluating how it works, usability experience and final understanding.

Key takeaways

There were no major issues with the second concept tested. Several participants expressed minor confusion with the name “Slice it in 3”, but all of them realized that this is about splitting the payments, and once they clicked on this payment method, they figured out the details. One Klarna user participant noted that she hasn’t been requested to provide her card details for slicing the payment before, but she was okay with that.

“Pay later in 3” in UK
“Pay later in 4” in US

An MVP was set after a few minor visual iterations and product adaptations were made in order to cover some market requirements and to face recent competitor’s launches like the product name.

Payments were defined differently in the UK and US due to salary payments in each country: Three payments charged every 30 days in THE UK and four payments charged every two weeks in the US.

This is the current visual after some iterations and A/B tests run throughout the first year in the market.

Pay Later raised

With the new product getting traction, the second step in the strategy was tackling another product problems in the US, Pay Later.

Even not being a regular credit product, Pay Later allows the consumers to buy and pay 30 days after the purchase’s made, but it still wasn't a popular and attractive product due to this three user’s major questions:

Assumptions & learnings

The assumption was to try card backed set-up for the Pay Later. Giving that, a qualitative study was planned with the objective to not only evaluate the impact and user’s understanding about the card feature for the Pay Later purchases but also how the users notice Pay Later in Parts and Pay Later in 30 days placed alongside the regular Card payment.

Study objectives

The study was focused on getting insights into the shopping habits of the customers in the US and addressed several questions on different levels:

1. Do the US customers notice Klarna payment methods? What is their perception of those?

2. Do they understand how Klarna payment methods work?

3. What is their preferred payment method?

4. Will Pay Later with card be perceived better than Pay Later with invoice?

6. Does the specific solution with onboarding slides for Pay Later in KP perform better?

Pay Later by Card

@ Columbus OH, US

8 participants / 3 variation

A: Branded payment names

Branded names were a common pattern for the Klarna products and in this version, we started with this. 
Also, were tested two versions for the same variation, one which we’ve hidden the product explanation inside a modal and a second one with carousel, acting like and onboarding card, added to Pay Later product in order to enhance the user product engagement and help them to understand better its functionality and make a decision.

B: Payment methods inversion

After the first day, based on the interview answers and the test recordings, we only confirmed the card biased behaviour already known. Therefore, for the first participants on the second day, we invert the payment method positioning in order the evaluate if displaying a different payment method than card first could impact the users' payment choice.

C: All card payments

No effectiveness in the second variation when it comes to the participants selecting another payment method than Card.

What we did then, was to add the word card and display more technical and explainable names to the Klarna payment methods. 

Key takeaways

US customers know card payments and don’t know Klarna.

Next step: Product definition

We crossed the study analysis with the tons of data available from years of Klarna in the US and UK but especially with the data collected from Pay later in Parts product, then we ran three major workshops to have a better Pay Later by Card overview and define product’s solution, functionality, and look and feel: Product value points, User journey map, and MVP matrix.

Product value points

Why Pay Later by Card is good to __________?

User journey map

I proposed a new approach to the user journey based on Klarna users touch-points. So now, we are able to find and tackle the users’ needs and find the right opportunities at each moment the users relate to us.

Product-wise, the user journey is literally every step since their first contact with the Klarna ads inside the merchant store, passing through the communications, until their final payment.
To achieve this result, we ran 3 workshops where we gathered every product lead per touchpoint.

Defining the MVP

The MVP was defined based on the user journey and the product value points, the technical effort, and the market necessities timelines.

MVP sumary:

• Target market: US; 

• Pay later by card will be the ‘Pay later’ product in the US market; 

• Consumer makes a purchase without any payment at the purchase point and collect the payment from the consumer’s card in 30 days; 

• Pay Later in 30 days is offered in line with the    merchant return policies (normally 5-7 days for    shipping a product); 

• The consumer provides their debit/credit card details at the time of purchase; 

• No credit sign-up required - exempt product; 

• No late fee reminder or any hidden fees. No interest; 

• Consumer can change the card associated to the purchase any time after it is captured by the merchant; 

• Consumer will be able to pay the due amount earlier than the due date.

Pay later in 30 days

1. Checkout

Product widget inside the merchant checkout.

2. Comms
(Purchase confirmation)

First email and push notification received by the user. The idea is not only comunicate the purchase confirmation but also onboard the user on a never (or not used) payment method.

3. Klarna App: Spending list

4. Klarna App: Pay tab

5. Klarna App: Purchase details

Card backed payments first year results

Pay Later in Parts and Pay Later in 30 days results after the first year.

Pay Later in Parts

1st Klarna payment method in the US and 2nd in the UK.

Pay Later by Card

2nd Klarna payment method in the US.