Klarna's Rising Acquisition Costs

The core problem was that Klarna was paying more and more to win users into a product that was getting less differentiated at checkout. As PayPal, Affirm, and Afterpay expanded BNPL, merchants had more ways to offer installments and more leverage to push on fees. That meant Klarna had to spend heavily on marketing and app distribution to stay top of mind, while its transaction margin compressed and each new user became less profitable than the last.

• Klarna’s merchant value was easy to see in conversion. A retailer could compare baskets with and without Klarna and often justify the fee because shoppers were more willing to buy a $280 to $380 order in installments. But that same visible value also attracted more BNPL rivals, which made merchant pricing more competitive.
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• The rising SG&A per new consumer is a sign of weak network effects in U.S. expansion. If adoption were compounding naturally, each new user would be cheaper to acquire over time. Instead, Klarna faced multi homing, with meaningful overlap between its users and Affirm and Afterpay, so growth required repeated paid acquisition rather than organic lock in.
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• Klarna’s later shift into a shopping app, rewards, debit, ads, and card products shows the strategic response. The company needed revenue streams beyond merchant BNPL fees, because BNPL alone was becoming a thinner margin feature. By 2024, core merchant fees were 57% of revenue, down from 75% in 2020, while ads, interest income, subscriptions, and interchange became more important.
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This points toward Klarna becoming less a standalone lender and more a consumer commerce and payments network. The winning path is to own more of the shopping journey before checkout, where customer attention is cheaper to retain and monetization does not depend only on charging merchants more for the same installment button.