Smoooth payments, shopping, and now banking – Interview with Klarna co-founder and CEO Sebastian Siemiatkowski

Sebastian-Siemiatkowski-Klarna

Who would have imagined that Sebastian Siemiatkowski and Niklas Adalberth would go from flipping burgers at Burger King to co-founding one of Europe’s most successful fintechs?

Not them. But according to Sebastian, they had plenty of time to think while working fast food and later, travelling on cargo ships. Match that with an education in economics, and some creative business ideas can surface.

In their twenties the duo teamed up with Victor Jacobsson to create a better way to make e-commerce purchases. The team started out in 2005 cold calling merchants, offering direct payments, installment plans, and pay after delivery options. Now, Klarna is valued at over $2.5 billion, and with a new banking license and the possibilities brought by PSD2, the unicorn is planning to further expand its services.

Earlier this year, Sebastian and his team partnered with Snoop Dogg (renamed Smoooth Dogg, or, the ‘smoothest person alive’), to emphasise the ‘smooothness’ of their products.

But I’ll let Sebastian tell you the rest of the story himself.

What is your background, and what led you to co-found Klarna?

When I was younger I worked at Burger King, flipping burgers and cooking fries together with Niklas, one of the other founders. We used to discuss a lot of different ideas when making Whoppers. Thereafter, we both started studying at Stockholm School of Economics, where we also met Victor, the third founder. During our studies, Niklas and I decided to take a sabbatical year and travel around the world without flying. This was an amazing adventure and I can confidently confirm to you that many days on cargo ships on the huge oceans gives you lots of time to think. It was when we came back to Sweden and I started working in sales that I came in contact with e-commerce and the fundamental problems to sell in a simple and safe way for consumers, and this actually became one of the main drivers behind Klarna.

Neither Victor, Niklas nor myself had any experience in finance when we co-founded the company. We were 20-something-year-olds, probably pretty naive, but I truly believe it was an advantage that we didn’t think the same way traditional bank and finance executives did, we just wanted to solve a problem and we still do.

How was the idea for Klarna formed, and what is its mission?

The initial business idea, offering consumers the option to pay after receiving the goods, actually has some of its roots in the mail order catalogue. We introduced this offering to the market at a time when consumers were hesitant to shop online as it was widely regarded as unsafe, complicated and frustrating. Separating the payment from the purchase solved for that, and invoked trust for the consumer, as you wouldn’t pay for the goods until you knew you wanted to keep them.

Since then much has changed. What has not changed though is that consumers and merchants want simple, safe and smooth online payments which is as relevant today as it was back when we founded the company.

Today, one thing that is becoming increasingly evident is that people find it harder to solve their daily time equation. They are tired of unnecessary friction, complexity and boredom. Nowhere is this more true than when it comes to administering their purchases and finances – and therefore our mission now is to liberate people  from all the meaningless time spent managing their purchases and finances, so they can do more of what they love.

Tell us more about Klarna’s services, and what sets it apart from other fintechs.

Klarna offers innovative payment solutions that makes shopping smooth and convenient for the consumers. We build value-adding relationships with merchants by increasing conversion, average order value and sales while creating a superior consumer experience. We offer a number of different payment types including direct payments, pay after delivery options and installments plans which enable consumers to pay when and how they prefer. We are constantly working on creating a best in class end-to-end shopping experience for consumers, and since we’ve launched our app a few years ago, we’ve also added services such as easier returns, track your parcel and better overview of personal finances and purchases, all managed easily through the app.

Klarna has had a banking license since 2017, and as the entire banking value chain is being challenged, the payments sector has seen possibly the greatest transformation. Klarna has played a role in accelerating that change but now as a consumer-oriented, product driven and technology intensive bank, we will have the competitive edge and tools to truly change traditional retail banking. Our first banking product launched is our Klarna card (in Sweden and Germany), which offers consumers flexibility like no other card on the market, keep your eyes open for more launches of banking like services.

What challenges did Klarna face when first starting up, and how were you able to overcome them?

We’ve always known that trust would be a crucial component in our business and in the beginning we believed it would be really difficult to achieve this as we were three young guys without any “real” finance experiences. Therefore, we printed proper business cards on expensive paper, made sure to dress in suits, we even picked telephone numbers resembling switchboard numbers to convince our surroundings that we were big enough to actually have a switchboard. We believed all these things were needed to convince merchants to trust us with all their money. But in the end we learned that our passion and the strong core in Klarna’s business idea earned that trust, not our physical appearance.

Since then we have been fortunate to continuously grow at a rapid pace and I think the greatest challenge has actually been to keep up with the growth of the company. Being the size we are now, it is challenging to keep everyone and everything moving in the same direction.

Klarna has become an exemplary European unicorn; to what do you attribute its success?

The importance of talented and committed people who work towards the same goal is unbelievably powerful. We entered the market with a relevant and robust offering that removed uncertainties from e-commerce at a time when it was most needed, and established trust between and with consumers and merchants alike. This offering is still as relevant today as was then, but we can’t get comfortable nor complacent and we need to keep challenging ourselves, deepen the understanding of consumers and merchants, stay innovative and continually evolve our product offering. The key to this is constantly iterating our offering and making sure that we at any given point to deliver the best possible service or product, and then continue to develop.

How will PSD2 change the landscape for banking in the future, in what you predicted will be a ‘massive disruption‘?

I believe that all prerequisites for massive disruption are there. PSD2 and GDPR will together foster innovation and drive both competition and choice in the market. They will also ensure that the highest standards of consumer protection are upheld as well as empower all European consumers with the ownership of their financial and personal data. We also see that consumers are willing to switch, it is a lot easier to switch, the services are overall better and new players are entering the market, increasing the competition even further. This means that if any player doesn’t provide services of value to the consumers they will switch in a second – and this is something the banking market has never seen before and will cause a lot of stir.

Do you have any comments or observations regarding how the Swedish tech startup ecosystem has changed over the years since you launched?

Well, it has become a lot bigger, which I think is great! There are many innovative ideas, products and solutions out there but in general, I believe it’s becoming increasingly evident that in order to succeed it’s absolutely crucial to provide an unbeaten consumer experience regardless of sector. Competition is getting tougher and tougher with more alternative solutions, and those that will provide the best consumer experience will win. One of the biggest challenges here as the scene is growing is the “war on talent” and I think there are a lot that can be done to improve the current situation.

You made the news earlier this year when the rapper Snoop Dogg invested in Klarna, and became the face of your new marketing campaign. What do you hope to achieve through this partnership?

Smoooth Payments has during the last couple of years been Klarna’s communicative concept and foundation of our strategy, removing friction in the world of payments and demonstrating it in fun and unexpected ways. We wanted to elevate the concept to the next level, and we asked ourselves, “who in the world would personify smoooth the best”? And the answer was obvious, probably the smoothest person alive – Snoop Dogg.  The campaign, which goes under the name “Get Smoooth” is a natural evolution of the smoooth concept. It refers to the fact that whether you’re a consumer, a merchant or Snoop Dogg, Klarna’s products will make your everyday life a lot less hassle free and smoooth. Klarna and Snoop’s smooothness, as well as quirky worlds and visual expression, harmonize perfectly. It is a great way for Klarna to plunge into pop-culture, becoming a global topic of conversation.

What does the future hold for Klarna?

There are a number of exciting things on the horizon. We will continue to position ourselves as a strong consumer brand and offer solutions that support our mission to free humanity from all unnecessary time spent on managing their purchases and personal finance, so that they can do more of what they love. Our product and service offering will keep evolving, we will continue to explore opportunities the bank license gives us, evaluate entering new markets and continue growing on current ones – in short, there are a lot of things going on!

What advice would you give to budding European entrepreneurs who are just starting out?

Get things done and try them out quickly and then iterate, iterate and iterate. We were told many times that our idea would not succeed but we believed in it and here we are today, so don’t give up. And don’t underestimate the value of good advice along the journey.

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