Klarna Sofortüberweisung: Pros and Cons and other options

All information about the providers discussed in this article is sourced from the respective providers' websites and is current as of September 9, 2024. Subject to change.

The online retail sector in the EU has seen significant growth, driving demand for convenient, fast, and secure payment methods. In this context, online payment systems based on open banking play a crucial role. For years, merchants in Germany, Austria, Belgium, and the Netherlands have relied on Sofortüberweisung (also known as Klarna Sofort), a popular bank transfer service. However, with Klarna’s acquisition of Sofort and the gradual integration of the service into Klarna’s platform, merchants now face the challenge of rethinking their payment processing systems. In this article, we explore Klarna Sofortüberweisung, its pros and cons, and explain why merchants might want to consider alternatives like Noda.

What is Sofortüberweisung?

Sofortüberweisung is an online payment system originally developed by the German company Sofort GmbH. It allows customers to pay online directly from their bank account without needing additional accounts or registrations with third-party providers. The process is relatively simple: the buyer selects Sofortüberweisung as the payment method, logs into their online banking, confirms the payment, and the transaction is processed in real time.

This method offers benefits to both buyers and merchants, as it is faster than traditional bank transfers and does not require a credit card. It is often preferred by consumers who value security and direct access to their bank accounts.

Why is Sofortüberweisung popular in Germany?

The popularity of Sofortüberweisung in Germany can be attributed to several factors. Firstly, German consumers strongly trust bank-based payment systems. Unlike credit card payments, which are popular in countries like the US, many Germans prefer direct transfers from their bank accounts.

Another reason is the simplicity and security. Since no credit card data needs to be stored or shared, many users feel more comfortable paying with Sofortüberweisung. Additionally, merchants can ship goods faster due to real-time transactions, as the payment is immediately confirmed. This has also contributed to its popularity in e-commerce.

Klarna stops Sofortüberweisung as a standalone payment method

With the acquisition of Sofort by Klarna in 2014, Sofortüberweisung was gradually integrated into the Klarna system. At a certain point, Klarna made it clear that Sofortüberweisung would no longer be available as a standalone payment option. Instead, it was embedded into the larger Klarna ecosystem, which offers a variety of payment options, including instalment payments and "Buy Now, Pay Later."

End date: Sofortüberweisung as a standalone payment method was discontinued in October 2024, meaning merchants had to switch to Klarna or find an alternative by then.

How does Klarna Sofortüberweisung work?

After integration into the Klarna system, Klarna Sofortüberweisung works similarly to before, with some adjustments. Customers can still pay directly from their bank account, but the process is now handled through Klarna.

The payment is still confirmed in real time, meaning the merchant quickly receives confirmation that the funds have been provided. What's new is that Klarna offers additional payment options, such as instalment purchases or invoice payments, increasing flexibility for customers.

How secure is Klarna?

Klarna Sofortüberweisung maintains high security standards to protect customer data. The process uses the customer's online banking, meaning no sensitive bank data is shared with the merchant. Additionally, two-factor authentication and strong encryption methods are employed.

However, there are concerns since Klarna acts as a third party and thus has access to the user's bank account and transaction data. Some consumers may view this as a potential security risk, especially compared to direct bank transfers where no third parties are involved.

What are the costs of Klarna Sofortüberweisung?

For merchants, it is important to understand the cost structure of Klarna Sofortüberweisung. While the use of Sofortüberweisung previously came with relatively low transaction fees, Klarna has adjusted the fee structure. Merchants now pay fees that can vary depending on transaction volume and contract terms. Additionally, fixed monthly costs may apply, depending on the use of Klarna's services.

These higher costs pose a challenge for many small and medium-sized businesses, as they can reduce margins and impact profitability. According to various sources, further price increases may be on the horizon, as Klarna dynamically adjusts its pricing policies.

Pros and Cons of Klarna Sofortüberweisung

Pros

• Fast Processing: Payments are confirmed in real time, speeding up the shipment of goods.
• Customer Flexibility: Through integration with Klarna, customers can also use other payment options, such as instalment payments or invoice purchases.
• Widespread Acceptance: Klarna has established itself as one of the leading payment service providers in Europe, ensuring broad acceptance.

Klarna is available in several countries, including Germany, Austria, USA, UK, Denmark, Finland, Norway, Sweden, Netherlands, Belgium and Switzerland.

Cons

• Higher Costs: Fees for merchants have increased, which can be problematic, especially for smaller businesses.
• Data Privacy Concerns: Some customers may feel uncomfortable sharing their bank data through Klarna.
• Dependence on a Third Party: Integration with Klarna means merchants must rely more heavily on a single payment service provider.
• Restrictions for Certain Industries: Klarna is not suitable for all types of businesses, as it excludes certain industries. Companies offering age-restricted products (e.g., e-cigarettes, alcohol), gaming, or certain financial and legal services cannot use Klarna. A complete list of excluded industries can be found in the Klarna Payments FAQ.

Why Noda is the Best Alternative to Klarna Sofortüberweisung

Given the changes brought about by Klarna, it is worth considering alternatives like Noda. Noda offers a modern open banking payment solution with several key advantages over Klarna:

• Cost Efficiency: Noda offers transparent and competitive pricing structures that are often cheaper than Klarna's, which is particularly attractive for small and medium-sized businesses.
• Direct Bank Integration: Unlike Klarna, Noda acts as a direct connection between the bank and the merchant, improving data security and reducing reliance on third parties.
• Broader Geographical Reach: Noda supports payments in a wide range of European countries, making it particularly interesting for international merchants. Noda provides access to over 2,000 banks in 28 countries, including Germany, the EU, and the UK, and is continuously expanding into new markets.
• Flexible Applications: Noda is suitable for various industries, from e-commerce to services, making it a versatile option.

Conclusion

With Klarna Sofortüberweisung, German merchants have access to an established payment option, but it comes with higher costs and dependence on Klarna. Given these developments, merchants should consider whether Noda represents a better alternative for their payment processing. Noda not only offers a cost-effective and secure solution but also the flexibility to be used in various markets and industries. It is time to rethink payment options and choose a solution that meets the individual needs of merchants.