What Is Klarna? How BNPL Works for Your Store

Buy now, pay later services (BNPL) like Klarna let customers pay for their purchases over time while the business receives payment upfront.

Offering Klarna or other BNPL options helps you meet customers where they’re at while encouraging higher spend. Seventy-two percent of Americans used BNPL in 2026, up from 52% in 2025, according to a survey from performance marketing agency PartnerCentric. Thirty-two percent of those consumers said BNPL makes them spend more. 

This guide breaks down how Klarna works and what you need to know before adding a BNPL option like Klarna to your online store. 

What is Klarna?

Klarna is a BNPL service that allows customers to purchase merchandise on credit and pay for it over time. 

When a customer pays with Klarna, Klarna deposits the full amount into the merchant’s bank account and collects payment from the customer in installments. Store owners can offer Klarna as a payment option online and in store. 

How does Klarna work?

If you’re on Shopify, you have two ways to add Klarna to your online store. 

In Europe, store owners can integrate Klarna with Shopify Payments. If you’re somewhere else, you can add the Klarna app to your shop and connect Klarna and Shopify with application programming interface (API) credentials.

If you link Klarna with Shopify through an API, your customers will have four payment options: 

• Pay in 4: Klarna splits the purchase into four interest-free installments. The customer covers the first installment at the point of sale and pays the others over the next six weeks. If they incur a missed payment, the customer may owe late fees.
• Pay in 30 days: Klarna gives the customer 30 days to pay for the entire purchase with no interest. The customer can use the Klarna app to pay off the balance earlier or extend the due date for a fee.
• Pay in full: Klarna will charge the customer’s chosen credit or debit card at the time of checkout and will process the full payment. With this option, Klarna acts as an accelerated checkout, similar to Shop Pay.
• Pay over time: Klarna splits the purchase into payments over 3 to 24 months, with an annual percentage rate (APR) of 0% to 35.99%.

Shoppers will have different payment options if you use the Klarna and Shopify Payments integration:

• Pay in 3: The customer pays in three interest-free installments. Depending on the buyer’s credit, Klarna might charge more in the first installment.
• Pay in full: The shopper supplies Klarna with their banking details, then Klarna debits the full purchase amount from their account.
• Pay in 30 days: The customer pays the full amount within 30 days, with no upfront payment and no interest. The 30 days start when you capture the payment, not when the order is placed. Late fees may apply per Klarna’s terms.

Once the customer chooses their installment plan, Klarna verifies the customer’s identity and runs a soft credit check to gauge whether the customer can make payments. This type of credit check doesn’t impact the customer’s credit score, although Klarna can report missed payments to credit bureaus. 

The company uses a proprietary metric called Purchase Power to set the customer’s limit based on the customer’s credit history along with their payment history and outstanding balance with Klarna. 

Once the transaction is complete, Klarna advances the purchase amount to the business. The customer repays Klarna according to their agreed-upon payment schedule. 

Klarna tracks payments, assumes the risk of nonpayment and fraud, and manages refunds in the case of a return or dispute. 

Why do ecommerce businesses use Klarna?

• Increased average order value
• Improved cash flow
• Appeal to millennials
• Integration with POS

Offering payment options from BNPL companies like Klarna can provide several benefits for ecommerce businesses. Some of those benefits include:

Increased average order value

BNPL may encourage shoppers to spend more. Klarna reports that brands using their product see a 40% increase in average order value (AOV).

According to a 2025 study published in the Journal of Retailing, when customers see the lower installment price offered through BNPL, they perceive products to be less expensive than they truly are, and they spend more. 

Improved cash flow 

While customers pay in installments, Klarna pays businesses upfront. This ensures that brands have a steady and uninterrupted cash flow for the business, rather than waiting for payments from customers at different times. 

Businesses using Klarna also receive more orders, which further contributes to a steady cash flow. Klarna reports that brands see a 46% uptick in purchase frequency. 

This might be because BNPL makes products accessible to people who otherwise wouldn’t buy them. In a 2024 review from the Federal Reserve, 55% of US shoppers said they used BNPL because it was the only way that they could afford an item.

Appeal to millennials

If you want to appeal to a millennial audience, BNPL could help. Their generation uses BNPL more than any other.

According to PartnerCentric, 76% of millennials use BNPL, compared to 69% of Gen X, 68% of Gen Z, and 55% of baby boomers. Klarna reports similar numbers: Their average user is 36 years old, and 61% of Klarna’s users are between 26 and 45. 

Integration with POS

Klarna integrates with point of sale (POS) systems like the one from Shopify. When you add Klarna to your Shopify POS, customers will pay on their own device with a QR code or link. This allows businesses to offer Klarna as a payment option for customers shopping in-person.

Considerations for offering Klarna

Here are potential downsides to consider if you plan on offering Klarna in your online store:

Transaction fees

Shop owners pay a transaction fee to Klarna each time a customer uses the payment method at checkout, similar to a credit card processing fee. 

Klarna doesn’t advertise its fees and they may depend on your business and which payment option the customer selects. In the US, these fees may range from 3.29% to 5.99% plus 30¢ per transaction, according to reports from third parties like Stripe and Chargeblast.

Chargeback fees

In addition to transaction fees, sellers may be on the hook for chargeback fees if a customer files a dispute. This is similar to how banks and credit card companies may collect chargeback fees for disputed orders. 

Dispute handling with Klarna depends on your integration path. 

Merchants using Klarna through the payment processor Shopify Payments in the supported European markets follow the Shopify Payments dispute processes, which involves a chargeback fee that varies by country and currency. 

Merchants using the Klarna app in the US pay $15 per dispute. If your dispute rate rises above 1.5%, the fee goes up to $30. 

Payment availability

As a seller, you won’t have control over which Klarna payment options customers can use. And since the payment option a customer chooses can affect the transaction fee you pay to Klarna, that also means you could end up with fees on the higher end of what you expected.

Klarna automatically determines which payment options each customer sees at checkout, based on factors including store location, customer location, and eligibility.

Alternatives to Klarna

• Shop Pay Installments
• Affirm
• Afterpay
• Pay Later

Here are a few other BNPL options on the market:

Shop Pay Installments

Shopify’s BNPL service, Shop Pay Installments, integrates with both your online store and POS system and payouts take one to three business days. Merchants using Shop Pay Installments can experience up to a 50% increase in average order value.*

Store owners in the United States, Canada, and the United Kingdom are eligible to offer Shop Pay Installments for purchases between $35 to $30,000 USD and CAD and between £50 to £30,000 GBP.

Shop Pay Installments works with the BNPL service Affirm, which collects customer payments and manages payouts. You’ll pay one transaction fee on each sale. You won’t pay additional fees for refunds, and you won’t pay third-party fees. Contact Shopify to learn the specific Shop Pay Installments rate for your business. 

Affirm

Affirm gives shoppers the choice to pay in four interest-free installments, or pay over the course of 3, 6, or 12 months (or even longer) with interest. This gives shoppers the option to utilize smaller monthly payments.

You can install the Affirm pay‑over‑time messaging app to your Shopify store to calculate customers’ payments. You can also utilize Affirm’s service by using Shop Pay Installments.

Afterpay

Afterpay, which is owned by the same parent company as the money transfer service Cash App, has repayment options over six weeks, six months, or 12 months. The six-week payment plan is interest-free for customers, while the longer ones carry financing rates. Similarly to other BNPL providers, Afterpay pays merchants upfront. 

Follow Afterpay’s developer guide to add it to your Shopify site. Afterpay has a Shopify app, too. Note that Afterpay is only available to Shopify store owners in the United States.

Pay Later

Pay Later is PayPal’s BNPL product. Merchants pay a 4.99% plus 49¢ transaction fee per order and are paid upfront. 

Pay Later offers customers two payment options. Pay in 4 covers purchases up to $1,500 and encompasses four biweekly payments that are interest-free. Pay Monthly involves three to 24 monthly payments on purchases between $49 and $10,000 and carries a fixed APR of 9.99% to 35.99%.

Learn more about adding Pay Later to your Shopify store by creating a PayPal business account or contacting the PayPal sales team. Install the Pay Later Messaging app to advertise the option to customers on your ecommerce site.

*These statistics are based on internal Shopify data. The sample size consisted of 281 merchants using Shop Pay Installments with varying financial packages. Individual results may vary.