We are seeing real success in partnering with physical retailers: Klarna CEO

Klarna CEO Sebastian Siemiatkowski joins Yahoo Finance Live to discuss the company's latest partnership with Simon Property Group, as well as the future of the buy now pay later landscape.

Video Transcript

JULIE HYMAN: Buy now, pay later has become an increasingly popular way to shop, particularly online. And one of the leaders in this space is Klarna. The CEO, Sebastian Siemiatkowski, is joining us right now, along with our Aarti Swaminathan. Sebastian, it's good to see you again. You guys have a new partnership with Simon Property Group. Now, as I said, buy now, pay later is mostly known as being an online phenomenon largely. But in this case, people, it sounds like, in bricks and mortar retailers that are at Simon Property malls will be able to use your service. How is it going to work?

SEBASTIAN SIEMIATKOWSKI: Yeah, no, it's super exciting. And, you know, to be honest, like, I think there's been a lot of digital players that have been trying to get into physical stores. PayPal has tried so many times. Other players have as well. But we're actually seeing real success with it. So we're already live in 60,000 stores in the US, with Macy's, FootLocker, Sephora. Some of them have reported up to 65% increase in average order value when providing our services in the stores.


So we're seeing a lot of traction. That made us super keen on talk to maybe the best and the most successful shopping mall operator in the US being David Simon and Simon Properties. And we're super proud now that we've announced this partnership to roll out our services across their malls. So it's super exciting.

But beyond that, it's not actually only about driving up average order value conversion rate in the store. What's exciting is that people think about us as buy now, pay later. But we actually think about the whole experience. We think about how do we drive more people into the stores. What can we do there? What can we do to improve the experience in the store and create a true omnichannel experience? And then, what can we do to help provide new, innovative payment methods? So quite interesting, actually.

AARTI SWAMINATHAN: Sebastian, I'm curious about the demographic breakdown because I saw a recent survey that said that most of the people who use the buy now, pay later service are millennials, which I thought was really surprising, but not Gen X and Gen Z. So how does this, basically, offering the service in malls, does that sort of help you gain more recognition, perhaps, among older demographics?

SEBASTIAN SIEMIATKOWSKI: Well, I think to some degree. But it's actually, you know, to us, like, you know, all the time, what we've seen-- I mean, as you may remember, we're quite large in Europe as well, where we have in total globally 90 million users. And actually, over time, in all of these markets, the kind of average gender and average-- sorry, the average age and average kind of distribution of our type of customers actually tends to kind of become the same as the normal user, like normal inhabitant of that country.

So it becomes kind of [INAUDIBLE] because buy now, pay later has really been kind of a way for us to unlock people who want to try us out because they find that part of our offering interesting. But there's tons of other reasons why people are using us. It's because it's a one-click experience, or it's because they can get a digital receipt. And they can see the images of the items they actually bought. Compare that to your credit card statement-- you can't tell much from that.

And then, so there's a lot of other reasons why people are using it. And actually, interesting in physical stores, I think one thing that has helped is that we have a no-touch experience, right? So people are getting-- they don't want to touch the terminal. They don't want to touch their card. And the fact that it's all, you know-- it's all based on Apple Pay and Google Pay and kind of no touch is actually another reason why people are using it in-store nowadays after COVID.

AARTI SWAMINATHAN: Yeah, I have stopped carrying around my credit cards. I use Apple Pay all the time now. But there was a recent report from the California Department of Financial Protection Innovation that said that the growth has been pretty explosive. And then there's been a significant surge in unsecured consumer loans. But I'm curious, like, how much more gas is there left in the tank? And are you sort of worried about more regulatory scrutiny as you guys become this big?

SEBASTIAN SIEMIATKOWSKI: Yeah, I think it's not-- you know, it's obviously natural that whenever a new product comes that tries to disrupt and change things, there's going to be interest from regulators. When it's growing fast, people will ask questions. And in the end, we are dealing with credit. So it's important for us as we're a fully regulated bank in Europe, you know, to be a responsible lender and think through, like, who are we borrowing money and so forth.

But there's also a lot of lack of understanding of our products and compare it to a typical credit card. When you go and sign up for a credit card today, you go through a couple of questions, you sign up, and then they tell you to spend your full limit of $5,000 or whatever. And there's really no checks after that. And there's a lot of trying to kind of make you borrow more than you need to.

We believe at Klarna that people should have debit cards, not credit cards, but occasionally, they need access to credit. And when they do, buy now, pay later because it's interest free. It's a much better proposition than your typical credit card. And it's not trying to encourage you to borrow more than you have to.

And finally, the third thing that's really important is we do and assess every time you make a transaction, which is very different from a credit card, where you make a one-time assessment. We assess you on every transaction. We look at how well and how responsibly you're using your credit, and then decide on whether we can extend more credit to you or not. So everything else, our credit losses are 30%, 40% below industry standards for credit cards. And I think it's been proven now that this model is actually more responsible than the traditional models of the credit cards.

BRIAN SOZZI: Sebastian, we just had the folks over from Affirm on. And they told us they're going to start getting deeper into crypto trading. Do you have any interest in getting in that area? And then, secondarily, do you want to become a super app?

SEBASTIAN SIEMIATKOWSKI: Yeah, well, I think first of all, it's like, on the crypto side, that's not a main priority for us at this point of time. Other people seem to be more interested, and we are happy to allow them to do that. You know, as an asset, people can put their money in whatever they like, if they want to put money in crypto as an asset. I'd rather put it in other things. That's OK. People have their own preference. As to technology to solve for a problem, we have not-- we have still struggled to apply it effectively to drop costs or make things more efficient the way we offer our services.

Now, with that said, I think on the super app aspect, I mean, super app is such a wide concept. People are using it, I think, now for everything. Everyone wants to become a super app. But I think it's like, what's clear to us is that when we became successful-- and you got to remember, we came in after Affirm. We came in after Afterpay. And still now, we actually have more merchants among the top 100 than Affirm and Afterpay combined.

So what was it that made merchants go with Klarna? Well, I would say it was the fact that we weren't only focusing about the credit side and offering buy now, pay later, but looking at the full experience. How do we drive traffic to the stores? How do we improve the experience? What can we do post-purchase to reduce operational costs? It's the full thing.

And I think that's what's really seen. And part of that connects to being a super app in the sense of, like, making sure that we can help our customers drive new customers to them. So if you look at our app and you try out the experience, I think you will find similarities to what people refer to as the super app.

JULIE HYMAN: Sebastian, finally, you know I got to ask you. How is the IPO process going? Are you guys getting any closer?

SEBASTIAN SIEMIATKOWSKI: Well, yeah, there's been-- I've gotten that question a couple of times. And no, I think that, like, unfortunately, I'm going to bore you. My same answer as always. Like, look, I think we're more better probably suited to do that than we were a few years ago, but we're in no rush. You know, at some point in time, I would love to create liquidity for our employees. We'd love to get some of our users that really want to own Klarna shares to be able to participate in the success of our company. But there are other priorities right now, so there's nothing imminent. Sorry about that.

JULIE HYMAN: That's OK, no apology necessary. Hopefully, by the time you become a public company, I can get your last name down and pronounce it properly. My apologies. My sincere apologies, Sebastian-- Siemiatkowski?


JULIE HYMAN: All right. I'm working. I'm working on it-- of Klarna. Thank you so much, Sebastian. Good to catch up with you, as well as our Aarti Swaminathan.