Why retailers sign up with Klarna

More BNPL entrants would turn merchant fees from a conversion premium into a negotiated checkout commodity. Klarna works because retailers can point to higher checkout completion, bigger baskets, and faster sell through at full price, which makes a 3% to 6% fee easier to defend. But once several near identical buttons offer the same installment plan, retailers gain leverage to demand lower pricing or better placement terms.

• Klarna’s merchant fee is not just payment processing. Klarna pays the retailer upfront, takes fraud and credit risk, and can lift gross profit despite the fee if installment checkout increases conversion enough. That makes BNPL one of the few checkout costs a merchant can tie directly to extra sales.
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• The pressure point appears when merchants can multi home. Klarna research found customer overlap with Affirm and Afterpay, and rising competition already pushed Klarna’s net transaction margin down from about 2.0% in 2017 to 1.5% in 2020. The interview points to the same mechanism, more providers means more retailer pushback.
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• Scale still matters. Klarna remained the largest BNPL network at $105B GMV in 2024, ahead of PayPal Pay Later and Cash App Afterpay on BNPL volume, while its core BNPL merchant fees fell to 57% of revenue as ads, cards, subscriptions, and lending grew. That mix shift is a direct response to a maturing, more price competitive checkout market.
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The next phase is less about adding another pay in 4 button and more about owning demand before checkout. As BNPL pricing gets competed down, the winners will be the platforms that can send merchants shoppers, surface offers in app, and bundle cards, ads, and lending around the transaction. That is how BNPL providers keep margin when simple installment credit stops being scarce.