Pay in parts at Klarna

• Project goal: Introduce a better product offering with instalments called "Term loans" in Austria and Germany.
• Motivation: Due to more strict market regulations but also errands and at the same time people land in debt without control, Klarna decided to make the product offering more transparent through different initiatives.
• My role and the team: Senior product designer in a team called Term loans: Purchase flow which consisted of 1 product manager, 1 data analyst and 3 engineers.
  
• Activities and tools: Requirements and analysis, flow mapping, high fidelity designs & prototyping, usability testings (with 1 UX researcher), collaboration and workshops with different teams.
  
• Results: Launched a new product offering to 200 merchants (in Austria and Germany) and visited by 85.000 consumers. Errand rate decreased by 17%. Optimisations in different parts of the flow are still in progress.
  
• Project duration: 4 months to gradually launch the MVP
  

Our previous offering at Klarna, with paying in parts, was called credit account. It was called financing 1.0 and was a revolving credit offering that bundles debts from multiple purchases and allows you to do minimum payments. Klarna, has decided that we do not want to offer revolving credit in the future, as it can incentivise people to do minimum payments and take a long time to pay back their debt.

I contributed to designing Klarna’s new financing method, Term Loans. Term Loans let consumers pay for more expensive items in transparent, manageable instalments. The terms are clearly presented upfront, and consumers can set up automatic monthly payments. Term Loans complement other Klarna payment methods designed for smaller purchases. Merchants sponsoring Term Loans can offer 0% financing or reduced interest. In other cases, the consumer pays interest.

I led the design of Term Loans for core markets, starting with Austria and Germany.

A key challenge was designing for markets where I could not observe users directly. To bridge this gap, I reviewed prior research and collaborated with the EU localization team to survey two user groups in Austria and Germany, users of financing products and those who avoid them. This research informed which features would be most meaningful to add to the current financing purchase flow.

Based on survey insights, previous research, and competitor analysis, I shaped the MVP for Term Loans, introducing three main enhancements.

• Introduced the Open Banking flow
  I collaborated with another team and a designer to integrate an Open Banking flow into the Term Loans experience. This flow allows customers to quickly connect their bank account, check eligibility for a Term Loan, and enable automatic payments seamlessly.
• Increased transparency
  I added clear feedback at every step of the purchase flow, explaining why customers should connect their bank account and providing reasons for loan rejection. This ensures customers understand the process and feel confident using Term Loans.
• Improved the post-purchase experience
  I guided design engineers and supported another team in enhancing post-purchase communication across emails and push notifications to ensure customers receive timely updates.
  

After aligning with stakeholders, I created a prototype in German and conducted remote, moderated usability testing with five participants in collaboration with a UX researcher from the EU localization team.

To conduct the usability testings, we used TestingTime to recruit users from Germany and Austria in combination with Google Meets to conduct a 45 min interviews with 5 participants. Everything was documented in a research plan template we use at Klarna. The main flow tested was to make a purchase at Mediamarkt (a washing machine and a dryer), login into Klarna's account and pay/split it with 6 instalments.
We spent 3 days conducting the interviews and then, in collaboration with the UX researcher we analysed our data and prioritised what is possible to change in the first launch. We also met with different stakeholders to present these findings and be on the same page and at the same time, push for specific changes in different teams.

At Klarna, the Term Loans purchase flow involves multiple cross-functional teams, including payment, underwriting, funding sources, open banking, legal, and design system. I coordinated with all these teams to ensure Term Loans launched as a seamless, end-to-end experience for consumers.

We prioritized specific changes for the first launch, focusing on the payment selector (to communicate our offer more clearly), the Connect Your Bank Account screen, and the Review screen. I led the effort to identify these areas, as they were core points that could significantly improve the purchase flow. Our goal was not only to increase conversions but also to build long-term trust in the German and Austrian markets and reduce customer service workload from unresolved issues.

After defining and designing the MVP with key stakeholders and iterating in different weekly critique sessions with other designers, I had to closely collaborate with the developers in my team. Even though we are working in an agile way, with day to day stand ups, I created a weekly meeting with them to align to every detail of the flow; Happy and sad flows, corner cases, error messages, responsive behaviour and so on.
We all benefited from these meetings because we are constantly learning a lot from each other and improving even more our ways of working.

By increasing transparency and providing term loans to the German and Austrian markets, we expected long-term benefits. The assumption was that raising awareness of the product would lead to more informed lending decisions, even if drop-offs initially increased. Our team, together with analysts from other teams, tracked funnel conversions, drop-offs, and errand rates across the end-to-end purchase flow.

We gradually rolled out the solution to 50 merchants in Austria and 150 in Germany. Drop-offs remained similar to the previous solution, while the errand rate (customer service interactions) decreased by 17%. We are now exploring optimizations around IBAN collection, where 26% of purchases under €200 drop off, including potential A/B testing with the funding sources team.