Challenges
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:
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.
- Sector
- Shopping/Finance
- Role
- Senior Product Designer, leading the discovery process and design vision of the product
- Project time
- 7 months
- Low traction
Resistance on credit products. Suspicion on how microloans and interests affect the user’s finances.
- Card biased consumers
In the US and UK, online payments are synonymous to card payments. A so strong bias that the consumer does not even notice different options during the checkout.
- Market competition
PayPal was the biggest competitor. Other credit products like Affirm were facing the same constraints and already testing alternatives.
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.
01
People understand easily card payments.
Entering a card during the checkout helps users to understand better how their purchase payments would be collected.02
Debit cards are preferred in relation to credit cards.
Adding advantages and addressing “credit” products backed by debit cards seemed very interesting to the participants.03
No major misunderstand about the functionality.
Even being a completely new payment method in the UK, people could understand how it works and its potential values. In Sweden it was perceived as an evolution of the current Slice it, giving the buyers confidence to pay on time due to the automatically payment collect.
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:
- “Is the purchase finished?”
In a card biased market, the users only understand if a purchase is finished when they enter their card information and get it charged.
- “What’s an invoice?”
Invoices are not known in the US as an online payment method. Not understanding how invoices work it’s very hard for the users to figure out how to pay for their purchases.
- “Why did I receive this?
Costumer service started to face many complains regarding products user received in their houses whithout knowing they really bought them.
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.
01
People in the US are really into the card payments.
And while we provide a good solution for their needs, nobody knows about it and almost no-one wants to try it at the checkout stage, when the decision for the purchase is already made. Hence, we need to put more effort into explaining the value of it in the earlier stages.02
People seem to shop more on bigger screens.
Mobile is mostly for buying, not shopping. We should test more on desktop, especially with regards to onsite messaging. The hypothesis is that people might be more attentive to promotions there.03
People trust reviews and other user-generated content (product pictures and videos) and use those for decision-making. There could be some opportunities for us to promote our products with those.04
Information about the return process is important in the context of Pay Later. People see returns as a hassle, especially when they have to send the items back by post. Making sure it feels easy could make a selling point for Pay Later.05
The onboarding component for Pay Later (on the right) and it worked and was greatly appreciated by everyone. Entering a card during the checkout helps users to It provided a good overview of the method, people understood what they gain from using it and how it works. Several people mentioned they liked it over traditional “How does it work” link.
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 __________?
- Consumers
- It gives to the user 30 days to decide if keep or not their goods;
- The payment is automatically collected after 30 days, so they don't need to worry about the payment;
- It gives more confidence to the user in buying clothes and other goods that need to be tried;
- It uses the card as payment method, what is the most used, reliable and common payment method in US;
- The user only pays for what they keep.
- Merchants
- Higher acceptance rate, so enhance in sales;
- A more flexible payment method, increasing their sales;
- • Klarna takes care of all fraud related risk.
- Klarna
- Another payment alternative in the market, that helps to cover more merchants and user necessities;
- Ability to provide higher AR with retained risk level, i.e. leading to higher volumes.
- Higher pay rate compared to the regular Pay later.
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.
1. Checkout
Product widget inside the merchant checkout.
1.1. Carousel functionality
To this product, we implemented for the first time this functionality. The objective is to clarify the product to the users and onboarding them about the product itself, its values points, helping the decision making.
We are using a controlled transition, with a step by step loading, with the objective the engage the user and notice all the elements necessary to move forward with their purchase, starting with a smooth fade-in transition of the card inputs and then the carousel.
Our expectation here is to cover the main users’ questions at this point, pushing to more conversion and also decreasing the misleadings, when the users use our payments methods without knowing what are the next steps.
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
