An interesting thing to understand about Klarna and other buy-now-pay-later products is that a major part of their profit is the very high merchant fees they charge; retailers have to pay ~2-4x what they do for credit cards if they want to offer Klarna. 57% of Klarna's profit comes from these merchant fees compared to just 24% from loan interest [1].
It turns out it's worth it to merchants because when you're not paying now, you end up buying more than you would otherwise. Order sizes are ~15% higher [2]. Probably similar to how it hurts more to pay with cash than debit because it's so tangible.
I view it kinda similar to gambling apps with their endlessly optimized special offers designed to exploit the human monkey brain.
It turns out it's worth it to merchants because when you're not paying now, you end up buying more than you would otherwise. Order sizes are ~15% higher [2]. Probably similar to how it hurts more to pay with cash than debit because it's so tangible.
I view it kinda similar to gambling apps with their endlessly optimized special offers designed to exploit the human monkey brain.
[1] https://www.fool.com/investing/how-to-invest/stocks/how-does... [2] https://www.uschamber.com/co/good-company/the-leap/klarna-se...