“Klarna has definitely increased my spending through Asos – I’d say it’s risen by 300% since Klarna was launched on the site. James Watkins, 28, from Nottingham, says. The claim stands up when you speak to some of Klarna’s customers who admit they have upped their spending. Klarna reckons it can increase the average online store’s orders by 30% and the average spend by 34%. So, how does Klarna make money if not from interest and surcharges? The answer is merchant transaction fees from retailers. So what happens if you don’t pay? Klarna is open about the fact that non-payment will affect a customer’s credit score and admits accounts are passed to debt collection agencies if unpaid after several months “as a last resort”. Approval depends on a soft credit check (this doesn’t show on your credit report when other lenders run checks), a customer’s credit history, age and other factors. There are no interest, fees or late charges. For cash-strapped millennials, this removes one of the biggest obstacles to online shopping - waiting for returns to be credited. This means you could get a pile of clothes delivered, try them on and return any you don’t like, then only pay for what you keep. Shoppers accepted for Klarna’s pay later service have 14 or 30 days (dependent on the retailer) to pay for their online order. Klarna allows people who shop online at Asos, Schuh, JD Sports, Topshop, and hundreds of other online stores, to “try before you buy”. It launched in the UK in 2017 and recently announced a $20m partnership with H&M. Klarna was set up in 2005 by Swedish entrepreneur Sebastian Siemiatkowski, 37, and is currently valued at about $2.5bn (£2bn). Klarna will notify you when payment is due.” It says Klarna lets you “sit back and relax. At Asos, when buyers reach the checkout, they are asked to pay with a debit or credit card, PayPal, or “pay later with Klarna”.

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