Swedish fintech giant Klarna launched its shopping app in Australia just before the coronavirus hit. General manager Fran Ereira explains how it faced the challenge.

• Swedish fintech Klarna launched its shopping app in Australia at the end of January – just before the global coronavirus pandemic.

• The company says it has seen 160,000 app downloads in Australia since its launch.

• Fran Ereira, general manager for Klarna in Australia, talked to Business Insider Australia about what it has been like launching through the coronavirus pandemic, and how consumer and business behaviour has changed.

• Visit Business Insider Australia's homepage for more stories.

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Depending on which way you look at it, launching an online payments platform in Australia immediately prior to the global pandemic, which took a sledgehammer to the economy and shook up the country's shopping habits could be either a good thing or a truly terrible thing.

That is the story of Swedish fintech Klarna, which launched in Australia in partnership with the Commonwealth Bank at the end of January. Though it pitches itself a little more expansively, its Australian offering – through an app available on iOS and Android – is essentially a buy now, pay later (BNPL) service, putting it up against local challengers like Afterpay and Zip.

The coronavirus, which has rocked the Australian retail sector, obviously threw a spanner into Klarna's plans to make a big entry and rapidly expand.

"We're still really positive and ambitious about what we can achieve," Fran Ereira, general manager for Klarna in Australia, told Business Insider Australia. "What we've really done is just shifted, I guess, what was our original launch plan to really respond to what we're hearing from consumers and retailers."

Since its launch, Ereira said, more than 160,000 Australians have downloaded the Klarna app, which serves as a central online shopping hub where customers can browse various stores, bookmark items, track price changes, and pay for purchases in instalments.

That figure isn't quite where the company would have wanted to be by now, but Ereira remains positive. "We launched and then didn't really get to educate Australia on on who we are because we got hit by the pandemic," she said. "I think to be able to maintain a bit of continuity around that is really promising for us."

Klarna isn't the only company in the sector rocked by the pandemic despite what would look like a boon for online shopping and delivery.

In April, Afterpay – which has seen its share price seesaw throughout the crisis, inviting predictions of doom and destruction from analysts, which became irrelevant mere weeks later – announced it would tighten its lending requirements and skew its offering towards "low-risk" shoppers in order to keep the business healthy in the face of the coronavirus.

Peter Gray, co-founder of Zip, told Business Insider Australia the pandemic would be a trial by fire for BNPL companies unable to differentiate themselves from the big dogs.

“Most of the challengers are going head to head with Afterpay’s model, but they don’t the strong customer base, they don’t have strong repeat transaction behaviour and they don’t have a differentiating factor,” Gray said. “So it feels like they’ll struggle and either have to consolidate or simply fall away.”

Ereira says Klarna's app experience is what differentiates it from the legion of other challengers elbowing their way into the market.

"Our app is all around engagement," she said. "It's all about letting people browse – it's almost like bringing the retailer's showroom to you. Customers can create wish lists and collections within the app, and they can add price drop notifications to bring them back into the ecosystem. For us, what we see as the greatest opportunity is this ability to actually engage with them."

Without massive app download numbers to prove the efficacy of that strategy, Ereira points instead to another key metric: engagement. "Consumers are spending like 30 minutes in the app actually interacting with it, and that says something," she said. "I think what's more important with stats is the level of engagement we're seeing."

Of course, it's worth remembering that when we're talking about global fintechs, Klarna is no small fish to begin with. It has an enormous footprint in Europe, where it operates as a deposit-taking bank, and it handled over $35 billion in ecommerce sales globally in 2019. This puts it in a much more favourable position in a crowded market than many BNPL upstarts.

How consumer and retailer behaviour has changed through the pandemic

Ereira said Klarna has observed changes in consumer behaviour through the coronavirus pandemic, which have been quite consistent across the world.

"There's clearly a very flat market in terms of the spending on apparel, footwear and accessories," she said. "But where we've seen significant increases over what would typically been considered average is in verticals like furniture, musical instruments, electronic sporting goods and craft-related items."

Australia as a market has always lagged to some degree when it comes to taking their shopping online, and Ereira said the surge in online purchasing had led a number of retailers to change their practices.

"What we've seen is that those retailers that didn't have the infrastructure and the focus on the online channels have recognised really quickly that it is so important," she said.

"I think that there are a lot of people who have great sites that have really optimised those sites during this time," she added.

"And then I think there were a lot that obviously didn't have the requisite solutions that have have quickly pivoted to find those solutions, because they know how important that is and how important it's going to be to our future."