- 1 When should I think about integrating Klarna in Shopify?
- 2 The weaknesses of buying on account
- 3 The role of Klarna in Shopify
- 4 Which steps are necessary for the integration? How long does the integration take?
- 5 What requirements do I have to bring with me for use? What do I have to consider?
- 6 How high are the costs?
- 7 Conclusion: What is our experience with Klarna so far?
Klarna in Shopify: Buy on account – that may seem a bit retro for some and almost like a relic from bygone times. However, it is still one of the most popular means of payment for customers in Germany today. With the Swedish payment service provider Klarna there is now a possibility to offer purchase on account also conveniently on Shopify. But is Klarna worthwhile for me? What do I have to consider the integration? What will this cost me? What do experienced Klarna users say? I would like to discuss these questions in more detail below and hope to help you with your judgment on the purchase on account with Klarna. Because of so much anticipation: It is not worth it for everyone.
When should I think about integrating Klarna in Shopify?
If you believe current studies, the payment option “purchase on account” is still one of the most popular and popular payment options of the Germans. Especially with older buyers, there is no payment option that gets more trusted. So if you run a Shopify shop in Germany, which mainly counts older people among its target group, then Klarna could be very exciting for you.
Because one of the main reasons for a purchase cancellation in the checkout is in addition to unexpected additional costs and excessive shipping costs, especially the selection of (non-existent) payment options. More online shoppers than you’d expect do not have a Paypal account yet or are reluctant to use a credit card when making an online purchase and therefore stop buying early. Habit, mistrust of the shop or discomfort about data security also play a role – all points that speak for the offer of purchase on account. Not offering this payment option in your shop could possibly bring you big profits.
Is this the case with you? A quick look into your Shopify Dashboard can provide the first answers and insights: Do many of your shop visitors still jump in the step between checkout process and purchase (for reference: Good online shops have a break rate in this step of less than 30%)? Then it could indeed be due to the lack of payment option. It is advisable to ask targeted inquiries for outliers to gain qualitative insights. This is very easy by automated e-mail sequences for buyouts (in the German area due to the lack of double opt-ins, but for legal reasons) or by using the survey tool from Hotjar.
In our case, prior to offering buy on the account, we were struggling with a churn rate within the checkout process of over 50%. Surveys and targeted inquiries from dropouts have confirmed the presumption that the reason for this was the non-offering of purchase on account. Later tests and the introduction of Klarna in Shopify have confirmed this assumption and helped us dramatically increase our conversion rates.
|When does buying into account qualify as a payment option?|
The weaknesses of buying on account
While buying on the account is very popular with customers, this is less the case with merchants. Because buying on bills carries a higher risk and a greater effort: The dealer must go in advance and only then receives the money for the service – the opposite of Paypal or credit card. In addition, there are possible delays in payment from the customer and a high manual administration effort for the merchant. Fraud and payment defaults are also topics that are more frequently incurred when buying into the account.
|Advantages for dealers||Disadvantages for dealers|
|Higher conversion rate||High manual effort|
|Higher reputation & trust in shop||High risk & risk of payment default|
|Dealer goes in advance|
|Possible late payment|
The role of Klarna in Shopify
This is where Klarna in Shopify comes in: As a payment service provider, Klarna handles the entire coordination of the invoice dispatch, payment receipt, and dunning dispatch. The great manual effort is taken from you as a dealer. It feels almost as easy as a customer payment via Paypal or credit card. At the same time, Klarna takes over the “fraud protection” and also possible payment defaults. Whether the customer pays or has to be no longer your concern. Two of the great weaknesses of purchase on the
account as a payment option is eliminated by Klarna. With more than 45 million customers who have already ordered via Klarna and 65,000 online shops in 18 countries, Klarna is considered one of the biggest players in the market and is also TÜV certified. Other players like Paymill, Billpay or Billsafe offer this service in Germany. Klarna, however, is the first to work fully integrated with Shopify, making it available to all merchants.
Tasks of Klarna in Shopify:
|Performs Fraud Protection|
|Send the bill|
|Checks & Coordinates the receipt of payment|
|Send reminders & reminders to customers|
|Takes over possible payment defaults|
Which steps are necessary for the integration? How long does the integration take?
The integration and setup of Klarna in Shopify are very simple and uncomplicated. Klarna guides you through the process well and handles all technical setup components. All in all, the process took us a week and can be summarized in the following steps:
Step 1: Contact Klarna
You contact Klarna via the contact form or by phone, mentioning that you are Shopify Shop owner and want to integrate Klarna purchase into the account in your shop.
Step 2: Obtaining Contracts & Documents
Afterwards, you receive the contracts, which you fill out and send back to Klarna via scan according to some information about your shop.
Step 3: Klarna makes preparations
Now you have to wait a few days in which Klarna prepares all necessary steps.
Step 4: Technical support is announced & integration is being carried out
After a few days you will be contacted by the technical support of Klarna and together we will take the necessary measures for the implementation. Here Klarna takes over all technical aspects. We just had to make adjustments in our terms and conditions and deposited Klarnas logos in our shop.
Step 5: Ready to go
Once this has been done successfully, Klarna will be ready for use and appear as a payment option in your checkout.
What requirements do I have to bring with me for use? What do I have to consider?
There are certain things that you, as a shop owner, should know and bring in advance, so that the integration works smoothly:
- It had passages of Klarna in our terms and conditions and cancellation policy to be included, your current terms and conditions and cancellation policies are changed. If you have any potential problems, you should contact Klarna in advance.
- Klarna expects from you as a shop owner that you send out the products directly to the customer (usually every order must be placed within a day on fulfillment).
- Klarna offers the purchase on account only in a double pack with installment purchase. So, even if you do not want to, you also have to include installment purchase as a payment option.
- You have to display the logo of Klarna on your shop page. This is usually possible at Shopify shops at the foot of the shop, where all logos are listed by payment providers.
- Klarna needs the phone number from the customer. Therefore, the phone number entry in Shopify Checkout must be set from optional to mandatory (you should not do this anyway). Some customers have a hard time and are reluctant to give out their phone number. This conversion could therefore in some cases have a negative impact on the conversion rate.
- The payment of the money from Klarna takes place weekly, but always with three weeks delay. This is because Klarna in Shopify gives the customers a 14-day payment period and thus you as a shop owner only after the money can pay off.
- If you have different VAT rates in your shop, it comes with Klarna to difficulties. Integration cannot be guaranteed here in any case. Again, you should contact Klarna in advance.
How high are the costs?
Klarna is much more expensive as a payment provider than other payment providers:
Monthly fee to Klarna: 29 € / month
Transaction costs Invoice purchase: € 1.69 + 3.25% of the order amount
Transaction costs Installment: 3% of the order amount
This is much more expensive than Paypal, Stripe or Sofortüberweisung:
Paypal: 0,35 € + 1,9% of the order amount
Stripe: 0.25 € + 1.4% of the order amount
The fees for Klarna’s purchase on account reflect the much higher manual effort as well as the entrepreneurial risk for Klarna. This is reflected in both the higher fixed price and the percentage charged as costs.
An integration should, therefore, be well considered. For low-margin and low-priced products, one should, therefore, refrain from the integration of Klarna. The same applies if you do not expect a big positive effect on the conversion rate. It would be extremely annoying to you as a shop owner, if customers who pay otherwise with Paypal, now order on account. Not only does the money arrive with you 3 weeks in arrears, it also raises significantly higher costs that push the margin. At the same time, with current legislation and limited access to Shopify’s Checkout, there is little opportunity for clients to choose specific payment options (eg, special fees or discounts when choosing specific payment options).
Conclusion: What is our experience with Klarna so far?
We have been using Klarna in our shop for a little over two months and have had very positive experiences so far. The integration went smoothly and quickly. Also in the daily business, you have no manual effort and can calculate the incoming payments. A thing that anyone appreciates knows, who has set up such a process itself once manually and tested. Klarna is in the sense of payment options such as Sofortüberweisung, Stripe or Paypal in nothing. The cooperation in case of returns is uncomplicated and smooth:
Our conversion rate has increased significantly since the introduction of Klarna. Around 25% of our payments are currently made with Klarna in Shopify. However, the positive effect on the conversion rate was lower than initially expected. Because the Fraud Protection of Klarna is very narrow, rejections of customers by Klarna are not uncommon with us. Also, the checkout process with Klarna is very long: After a customer confirms the order in the final checkout process, it is forwarded to the Payment Gateway of Klarna in Shopify. This is followed by several steps in which information is requested before the customer can finally place the order. A process that probably also leads to crashes due to its length. Unfortunately, Klarna is currently still in beta on Shopify,
Final can, therefore, be said: The integration of Klarna as a payment provider is not a no-brainer but should be weighed in each case. If you are active in the German market and have a mainly older audience, the conversion rates and the cancellation rates indicate that there is a possible lack of the correct payment method and confirm qualitative customer feedback also this assumption, so you should think strongly about the introduction of Klarna in Shopify. In all other cases, you can probably confidently bet on the previous payment providers. So far, however, we have had very good experiences and are grateful that Shopify and Klarna have finally mastered the step of integration after a long journey.