Open banking to restore Klarna margins

Klarna wins merchants by selling conversion, not margin. A retailer adds Klarna at checkout because more shoppers finish the purchase and often buy more expensive items, but the retailer gives up 3% to 6% of the order value and still has to live with thinner profit on each sale. That trade can work when incremental orders are truly incremental, but it is much less attractive when Klarna mostly shifts existing customers into a costlier payment method.

• The basic trade is concrete. Klarna pays the merchant upfront, takes consumer repayment risk, and charges the merchant a commission. That can lift gross profit if conversion rises enough, but it lowers profit per order because the merchant is buying demand with a financing fee.
  2 sacra 3 sacra
• This pressure shows up in Klarna's own economics too. Merchant commissions grew to 74% of revenue by 2020, yet Klarna's net transaction margin still fell from 2% in 2017 to 1.5% in 2020, showing that card fees, funding costs, losses, and competition eat into the take rate on both sides.
  3 sacra
• Open banking matters because it attacks one cost layer. If Klarna can pull money directly from bank accounts instead of routing every payment through Visa or Mastercard rails, it keeps more of the merchant fee. That does not change the merchant value proposition overnight, but it can make the same conversion lift more profitable for Klarna over time.
  1 sacra 4 sacra

The next phase is a shift from being a costly checkout add on to being a cheaper payment rail and shopping network in one. If Klarna can combine direct bank payments, merchant demand generation, and repeat consumer usage inside its app, it can defend merchant fees while improving unit economics in a BNPL market that is otherwise getting commoditized.