Klarna vs. PayPal: Which Platform Should You Choose?

When it comes to eCommerce, having access to safe, secure payment processing platforms is critical for brands of every size and scale.

With the help of top eCommerce payment processors like PayPal and Klarna, merchants can streamline the buying process and provide an added layer of security for online shoppers. Not only that, but many platforms offer the popular buy now, pay later options to incentivise consumers without impacting the merchant’s bottom line.

But that doesn’t mean all platforms are created equal.

Two of the industry’s most popular players, Klarna and PayPal, offer unique features and benefits for merchants and users alike. Which begs the question…how can you make sure you’re choosing the right option?

In this guide, we’ll take a deep dive into PayPal and Klarna’s features, pricing options, security measures, and everything else you need to know to choose the best eCommerce payment gateway for your brand.

PayPal Vs. Klarna: Comparing Core Features

Apps like PayPal and Klarna both allow merchants to collect payments from consumers quickly and efficiently, even if their features are slightly different. 

From stress-free financing to user-friendly invoicing, here’s how the two platforms compare.

Klarna

Buy Now, Pay Later (BNPL)

The Klarna BNPL features is arguably one of platform’s most alluring tools, allowing shoppers to pay for their purchase within 30 days. For buyers, this feature is dependent on key factors, like availability of the product in question, previous order history, and overall order value.

Split Payments

For items not eligible for the Klarna BNPL program, consumers can still take advantage of stress-free payments using the platform’s split payment tool. This tool allows shoppers to split their purchase up into 4 interest-free payments.

Financing

Finally, Klarna also offers consumers the chance to finance large purchases for up to 36 months. Like most financing plans, Klarna financing options are based on a quick credit check, allowing merchants to offer financing options without needing an in-house program.

PayPal

PayPal Digital Wallet

You can think of PayPal’s digital wallet as an all-in-one online payment solution for eCommerce shoppers. On the platform, users can securely store multiple payment methods, make purchases directly from their wallets, and access their funds across multiple devices.

Invoicing Tools

Merchants who offer services as opposed to goods are often drawn to PayPal's invoicing tools, which allow you to conveniently create and manage invoices and collect payments for your clients all in one place. 

Peer-To-Peer Payments

Another key differentiator is PayPal’s peer-to-peer (P2P) payment option. With this feature, users can send and request money from friends and family members, as well as sellers. This feature also allows users to transfer money directly from their bank account, streamlining the buying process.

Market Reach and International Usage

Perhaps one of the biggest differences between PayPal and PayPal alternatives like Klarna is its overall market reach.

In short, PayPal offers more of a global presence than its competitors, making it ideal for brands that need international support. To date, PayPal is available in more than 200 countries and can be used for more than 25 currencies worldwide.

On the other hand, Klarna is available in just 45 countries, with its strongest presence is in Europe, where the company was founded. Brands looking for a more regional approach to the payment process might find Klarna’s localised tools more appealing, so it’s important to weigh your market reach when deciding which platform is right for you.

Klarna Vs. PayPal Pricing Plans & Costs

Now, let’s get to the real question.

How much does each platform cost?

Since each platform offers different payment features, their pricing structures are slightly different.

For example, the Klarna BNPL feature might make it easier for consumers to make purchases, but it does include additional fees for merchants who utilise it. Some brands find that the benefits of using this feature outweigh the fees, but others might find it too much of an investment for their business.

While Klarna doesn’t publicly disclose its processing fees, sources within the industry have reported that Klarna’s fixed-rate fees are based on the merchant’s location, and the company also recently introduced dispute fees that charge merchants each time a buyer disputes a transaction.

PayPal’s online payment gateway also includes additional fees for merchants, such as processing fees and fixed rates for each transaction. These fees vary depending on the overall volume of the order, but most range from 1.90% to 3.49% on every purchase.

Both Klarna and PayPal’s processing fees can be quite costly for the merchant, and there are other more affordable options for sellers looking to expand their operations without extra costs.

Creating Better User and Merchant Experiences

Online payment gateways aren’t just about securing local and international transactions. They provide better user experiences and streamlined processes for businesses of every size and scale.

To Klarna’s credit, the platform has earned rave reviews for its ability to seamlessly integrate with other apps and platforms, giving brands the freedom to elevate online shopping experiences and eliminate disruptions for shoppers.

Comparatively, PayPal’s broader range of services makes it more appealing to merchants in more countries. Thanks to its marketplace dominance, many eCommerce shoppers already have PayPal digital wallets and other features, making it quick and easy to process their transitions.

Security and Trust

Unlike processing transactions directly from consumers, apps like PayPal and Klarna offer enhanced security and unbeatable protection for their clients.

Here’s how each platform tackles safety and security for eCommerce brands and consumers:

PayPal

• 24/7 Fraud & Identity Theft Monitoring
• Advanced Encryption
• Purchase Protection
• Multi-Factor Authentication
• Zero Tolerance for Phishing
• Secure Customer Databases

Klarna

• Custom Security Settings
• Advanced Encryption
• Multi-Factor Authentication
• Fraud Detection Alerts
• Risk Assessments
• Data Protection

Who Uses Klarna Vs. PayPal?

Of course, features and security measures are far from being the only factor at play when choosing a payment processing platform.

Klarna and PayPal both appeal to different audiences, which can have a huge impact on the success of your integrations. As a newer online gateway processor, Klarna often appeals to younger audiences, which is why so many regional eCommerce brands gravitate towards it.

For larger operations, PayPal’s broad appeal and international reach can give brands a key advantage. Plus, the user-friendly invoicing tools and P2P payments are a great way for freelancers and independent contractors to collect payments with ease.

How To Choose The Best eCommerce Gateway

Ultimately, choosing between PayPal and Klarna is a matter of determining what your business needs. However, there are other affordable options for international merchants to consider.

With innovative open banking solutions like Noda, merchants can process transactions using Noda’s safe, secure API. Noda connects to over 2,000 banks across 28 countries, including the UK, EU, Brazil and Canada.

Noda allows merchants to avoid card networks whatsoever, helping them save on card and chargeback fees. With a simpler bank-to-bank payment process, Noda helps businesses get paid instantly and makes it easy for customers to pay through their trusted local banks in just a few clicks.

Noda also offers features like payment links, bank payouts, card payments, identity verification, and customer data insights – all designed to meet the needs of online merchants. Noda Checkout is easy to integrate with APIs or plugins for popular e-commerce platforms like Magento, OpenCart, PrestaShop, and WooCommerce.

To help you succeed, Noda provides personal support every step of the way. Contact us today for a personalised consultation and a quote that fits your business needs.