The company I work for (in e-commerce) just recently started offering/advertising paying using Klarna.
If you don’t know, (and you can probably guess given the context of this post), Klarna is a company that basically just allows users to buy now and pay over the course of a few weeks. “Buy this $100 item now and pay in four installments of $25 over four weeks” or some such. Anyone can get the app and it gives credit card numbers that will buy stuff online or whatever, and then the paying back process is that Klarna bills the customer over the course of a few weeks.
But companies can integrate with Klarna as well. When they do, Klarna makes everything work like it does with credit cards so the company doesn’t have to completely retool to support Klarna as a payment method. And it’s more convenient for the customer than dealing with the app and manually typing in the credit card number they get from the app.
Here’s the thing, though. There’s no interest charged to the customer. I think Klarna makes its money just because companies pay them money for integrations and for the ability to advertise that customers can buy now pay later and such. And at least in the case of my company’s integration with Klarna, Klarna takes all the risk. They’re lending customers money and hoping the customers pay it back. My employer gets the money up front and isn’t out any money if the customer doesn’t pay. And Klarna is huge. They’re holding a whole lot of debt at any one time. And it’s not secured debt or anything. And I don’t think there are credit checks involved.
Really seems like a risky thing. Just like risky mortgages are. If a significant number of customers were to default on their debt at the same time (and not all Klarna purchases are $6 pizzas, some are multiple hundreds of dollars worth of debt), I’d imagine Klarna would be out of business quicker than Enron. Or maybe they’ll be “too big to fail” by that point and they’ll get a bailout.
Either way, it seems like a not-insignificant chunk of the economy is teetering atop the pencil-balanced-on-its-point that is Klarna. I’m not sure if there are a lot of other companies offering similar services, but if so, that just makes the economy seem that much more precarious.
That company and business model is shaddy as hell, although I’ve met some engineers some years ago that seemed pretty competent, but I’ve suffered and learned enough over the years to know that it doesn’t matter if the c-level ppl is all bullshit.
I typically use Zip, which is the exact same thing, I don’t tend to rail against it like most Lemmy seems to do. Maybe they make things a little too easy for those who are terrible with regular credit cards and debt management to begin with, but many around here equate them to loan sharks and Paycheck Lending/Car Title Loans type places and those are absolutely predatory as fuck. Klarna and Zip aren’t even close, they’re closer to credit cards if anything.
Since there’s no interest (on zip there is a 4$ flat fee per order though, dunno if klarna does the same), it’s basically just the classic saving up for what you want, but you get the item right away.
Say you wanted to buy a $100 item, you have the income to save for it 25$ every 2 weeks but not to take the entire load at once, Zip would be the same as saving 25$ every 2 weeks on your paydays, except you get the item right away. And unlike real predatory loan places, like you said it’s all unsecured so if you default on it, eh oh well.
The company I work for (in e-commerce) just recently started offering/advertising paying using Klarna.
If you don’t know, (and you can probably guess given the context of this post), Klarna is a company that basically just allows users to buy now and pay over the course of a few weeks. “Buy this $100 item now and pay in four installments of $25 over four weeks” or some such. Anyone can get the app and it gives credit card numbers that will buy stuff online or whatever, and then the paying back process is that Klarna bills the customer over the course of a few weeks.
But companies can integrate with Klarna as well. When they do, Klarna makes everything work like it does with credit cards so the company doesn’t have to completely retool to support Klarna as a payment method. And it’s more convenient for the customer than dealing with the app and manually typing in the credit card number they get from the app.
Here’s the thing, though. There’s no interest charged to the customer. I think Klarna makes its money just because companies pay them money for integrations and for the ability to advertise that customers can buy now pay later and such. And at least in the case of my company’s integration with Klarna, Klarna takes all the risk. They’re lending customers money and hoping the customers pay it back. My employer gets the money up front and isn’t out any money if the customer doesn’t pay. And Klarna is huge. They’re holding a whole lot of debt at any one time. And it’s not secured debt or anything. And I don’t think there are credit checks involved.
Really seems like a risky thing. Just like risky mortgages are. If a significant number of customers were to default on their debt at the same time (and not all Klarna purchases are $6 pizzas, some are multiple hundreds of dollars worth of debt), I’d imagine Klarna would be out of business quicker than Enron. Or maybe they’ll be “too big to fail” by that point and they’ll get a bailout.
Either way, it seems like a not-insignificant chunk of the economy is teetering atop the pencil-balanced-on-its-point that is Klarna. I’m not sure if there are a lot of other companies offering similar services, but if so, that just makes the economy seem that much more precarious.
Sounds to me like they’re waiting for people to get used to this model for every purchase before they quietly add interest.
That company and business model is shaddy as hell, although I’ve met some engineers some years ago that seemed pretty competent, but I’ve suffered and learned enough over the years to know that it doesn’t matter if the c-level ppl is all bullshit.
https://chaos.social/@leyrer/113667064197803074
I typically use Zip, which is the exact same thing, I don’t tend to rail against it like most Lemmy seems to do. Maybe they make things a little too easy for those who are terrible with regular credit cards and debt management to begin with, but many around here equate them to loan sharks and Paycheck Lending/Car Title Loans type places and those are absolutely predatory as fuck. Klarna and Zip aren’t even close, they’re closer to credit cards if anything.
Since there’s no interest (on zip there is a 4$ flat fee per order though, dunno if klarna does the same), it’s basically just the classic saving up for what you want, but you get the item right away.
Say you wanted to buy a $100 item, you have the income to save for it 25$ every 2 weeks but not to take the entire load at once, Zip would be the same as saving 25$ every 2 weeks on your paydays, except you get the item right away. And unlike real predatory loan places, like you said it’s all unsecured so if you default on it, eh oh well.