High BNPL fees a “burden” on the Aussie retail sector, says Klarna Australia boss

High merchant fees for buy-now pay-later services are “a burden” on the Aussie retail sector at a time when that sector is crucial to the country’s economic recovery, according to Fran Ereira, country head for Australia and New Zealand for new BNPL entrant Klarna.

The Reserve Bank is currently considering whether BNPL providers should be able to charge consumers extra to share the costs of the platform — a practice that is not allowed for credit card schemes.

When asked whether that would be preferable, Ereira tells SmartCompany that’s not where Klarna’s focus lies at the moment.

“Rather, we are focused on ensuring Australian retailers and the fintech industry can prosper sustainably into the future,” she says.

However, Ereira says Klarna has been “surprised” at what says describes as the “high BNPL costs many of the retailers we speak to are carrying, particularly when compared with our experience globally”.

“This is a particular burden on a sector that is so critical to our economic recovery,” she adds.

Founded in Sweden, Klarna allows users to split payments into four instalments. However, unlike some of its competitors, it works at any retailer, for any product, regardless of whether the merchant has signed up as a partner or not.

The platform has been operating in Australia for e-commerce purchases since January 2020, launching via a partnership with Commonwealth Bank.

Last week, it took the fight directly to the big dogs in the market, debuting its in-store offering at Bondi Junction’s Westfield shopping centre. But the grand launch came amid a war of words between Klarna founder Sebastian Siemiatkowski and Afterpay co-founder Anthony Eisen

Siemiatkowski took aim at Afterpay’s 4% merchant fees, which account for about 80% of the fintech’s revenues.

“That’s not a payments scheme any more, that’s an extortion scheme,” he reportedly said, calling for a cap on merchant fees across the board.

However, Eisen responded by calling Siemiatkowski’s claims hypocritical. Klarna charges merchants $0.30, plus 5.49%.

“They are not out of kilter with us,” Eisen told the Australian Financial Review.

“And even if they were – why are more merchants choosing us then in the US and Australia?”

Klarna has been operating since 2005 and offers a whole swathe of financial services in Europe. It has some 90 million users in 20 countries, with about 400,000 of those users are in Australia.

In September, it raised US$650 million ($885 million), bringing its total capital raised to more than US$2 billion ($2.72 billion).

The funding gave the business an eye watering valuation of US$10.65 billion ($14.4 billion), reportedly making it the most valuable fintech in Europe.

CommBank has a 5.5% stake in the business, and 50% ownership of the Australian and New Zealand business.

Klarna is a relative newcomer to an already crowded Australian BNPL scene and the cynics among us could argue throwing shade at a giant like Afterpay is simply savvy business. Afterpay is the market leader here, and never far from the headlines.

When asked whether a public stoush with Eisen is good for business, Ereira says the reaction from the Aussie public to Klarna’s offering has been “overwhelmingly positive”.

Competition can only strengthen the sector, she says, and she’s not shying away from a little rivalry.

“Strong and healthy competition is what is good for business — for retailers and for consumers,” she says.