Klarna's Weak Network Effects

The jump in marketing spend showed that Klarna was still buying growth in the U.S., not compounding it through a self reinforcing network. In BNPL, a strong network should make each new merchant and shopper cheaper to acquire over time, because shoppers start expecting the brand at checkout and merchants add it to capture existing demand. Instead, Klarna was still spending heavily to build awareness in a market where shoppers often used multiple BNPL apps and merchants could add rival buttons with limited friction.

• Merchant value was real, but concrete and transactional. Retailers adopted Klarna because splitting a $300 basket into four payments lifted conversion and helped sell full price inventory. That is a sales tool, not the kind of lock in that prevents a merchant from also adding Affirm, Afterpay, PayPal, or another checkout option.
  2 sacra 3 sacra 5 sacra
• The multi homing data matters because it shows the consumer side was not exclusive. In 2019, 18% of Klarna users also used Affirm and 20% also used Afterpay in the U.S. That means the app and brand were not yet strong enough to make Klarna the default installment rail for a large share of users.
  1 sacra 4 sacra 5 sacra
• Later progress helps explain Klarna’s strategic response. By 2023 the U.S. had become Klarna’s largest market by revenue, and by 2025 Klarna was leaning harder into distribution through Stripe, cashback, subscriptions, and banking products. The goal was to turn a commodity BNPL button into a broader commerce network with repeat traffic and lower paid acquisition needs.
  5 sacra 6 klarna 7 klarna 8 klarna

The next phase is about replacing paid consumer acquisition with owned demand. If Klarna can keep pulling shoppers into its app, routing more payments directly, and giving merchants measurable traffic, rewards, and conversion lift, its network gets stronger and marketing becomes more efficient. If not, BNPL remains a feature that merchants can swap in and out, and margins stay under pressure.