The EconomistNovember 14th 2020 Finance & economics 652 Littlesurprise,then,thatexportprices
for American corn and soyabeans have
sailedabove$220and$470atonne,re-
spectively,upbyabout60%and50%from
their52-weeklows.Butbullsshouldnotbe
tooconfident.China’sbuyingmayebbifit
seeksa differenttradedealwithAmerica’s
president-elect, Joe Biden. Agricultural
commoditiesmoveinmuchquickercycles
than,say,metals,pointsoutAakashDoshi
ofCitigroup,a bank.Itissimplertoplant
extrabeansthanitistostartminingfor
bauxite. Higherprices nowmay prompt
farmerstoplantmorelater;a spellofgood
weathercouldboostsupplyfurther.
Still,pricesmayholdupintheshort
term,forbetterorworse.InAmerica,says
MrDoshi,“demandisimprovingwellfrom
thecovid-19troughinthesecondquarter.”
Dryweather fromLaNiñaisinterfering
withplantinginBrazil.A spatmayprompt
ChinatobanimportsofseveralAustralian
crops(seeAsiasection).Russia’sgovern-
mentismullinga quotaonwheatexports.
Forthemorethan100mpeoplewhohave
sunkintopovertythisyear,thatisworry-
ing.Anindexoffoodprices,published by
theUnitedNations,roseinOctoberforthe
fifthstraightmonth.Theindexisnow6%
aboveitslevela yearago. 7“A
s a child,when you see your parents
struggling, it creates a drive,” says Se-
bastian Siemiatkowski, the chief executive
and co-founder of Klarna, an online-pay-
ment-processing firm. His family moved
to Sweden from Poland in 1981, the year he
was born; his university-educated father
was unemployed for long spells or just got
by behind the wheel of a cab. The experi-
ence nurtured a strong ambition “to fix the
economy for the family”.
Today, just shy of 40, Mr Siemiatkowksi
is at the helm of one of Europe’s biggest fin-
tech firms. A funding round in September
raised $650m and valued Klarna at
$10.65bn. Investors include Sequoia Capi-
tal, a venture-capital firm; Visa, a credit-
card firm; and Snoop Dogg, a rapper who
performs as “Smoooth Dogg” in a pepto-
pink ad for the payments firm. Having
gained a foothold in Europe, Klarna has its
sights set on America.
Klarna is one of several “buy now, pay
later” (bnpl) services that have grown rap-
idly in recent years. Its attraction, for both
online retailers and their customers, is
simplicity. Instead of entering their card
details at checkout, shoppers sign up to
Klarna’s app with their email and delivery
address, and leave payment to be made in
14 or 30 days. Klarna pays the retailer in the
meantime, bearing the risk that shoppers
do not pay—something few other fintechs
do—while charging the merchant a fee.
Customers are recognised when they
use the app again, without needing to re-
enter their details. Algorithms use publicly
available credit information and details of
the size, type and timing of the purchase to
calculate the chance of fraud, and offer ex-
tended-payment plans, for a charge.The ease of the process hugely increases
the “conversion” rate—the share of cus-
tomers who go ahead and buy an item after
putting it into their virtual basket. That is
why Klarna attracts retailers like bees to a
honeypot. It has signed up 200,000 sellers
in 17 countries and captured 10% of the e-
commerce market in northern Europe.
Etsy, an online marketplace for arts-and-
crafts items, signed up on October 26th.
Last year Klarna’s revenue jumped by al-
most one-third to Skr7.2bn ($840m) as the
value of wares sold through it rose by 32%.
Merchant fees are the main source of its in-
come; it also runs checkout infrastructure
for some retailers. Late fees from custom-
ers make a smaller contribution.
It was Klarna’s success in Britain—
where it has almost 10m customers andthis year has opened some 95,000 accounts
a week—that made it reckon that it could
conquer America, where online-payments
firms have typically struggled to gain mar-
ket share. It began 2019 with its splashy
“Smoooth Dogg” campaign and poured
funds into its operations in New York, Los
Angeles and Columbus, Ohio, ahead of its
launch in America. The firm now has 9m
customers there, and will probably go pub-
lic there in the not-too-distant future.
It is expanding in other ways, too. Back
in Europe, it obtained a banking licence in
2017, and has launched new products in
some countries, such as a credit card. It has
opened a tech hub in Berlin’s trendy Mitte
neighbourhood that employs 500. This
helps explain why last year Klarna ran its
first loss since it was set up in 2005. “Profit-
ability is for later,” says Mr Siemiatkowski.
Demand is certainly on Klarna’s side.
According to Kaleido Intelligence, a re-
search firm, bnplwill grow to $680bn in
transaction value in 2025 worldwide, from
$353bn in 2019, driven by young, credit-
hungry shoppers. Covid-19 has only accel-
erated the rise in online shopping.
Still, the business model brings risks.
One comes from some shoppers’ worsen-
ing finances. Klarna reported a net loss of
Skr522m between January and June, a sev-
enfold increase from the net loss of Skr73m
in the same period last year. Credit losses
almost doubled to Skr1.2bn, more than 25%
of revenue compared with 19% in the first
half of 2019. The industry is also drawing
criticism for encouraging people to over-
spend. “I am concerned about anything
that makes it very easy to sleepwalk into
debt,” says Martyn James of Resolver, a Brit-
ish consumer-rights group. In September
Britain’s Financial Conduct Authority be-
gan a review of the unsecured-credit mar-
ket, which includes bnpl. Having charmed
shoppers and retailers, the firm may have
to win over regulators too. 7STOCKHOLM
A Swedish payments unicorn hopes to crack the American marketKlarnaSmooth shopping
Snoop’s into it