Last updated: August 2025

Klarna's instalment products cost UK Shopify merchants 5–6% per transaction. Pay by Bank via Fena processes payments at a fraction of that cost. Here's how to reduce Klarna dependency, protect margins, and keep the checkout experience customers expect.

Klarna works — but it's expensive, and the cost compounds

Klarna has earned its place in UK ecommerce. The instalment options genuinely improve conversion for merchants selling in the right price range, the customer experience is polished, and the brand recognition among younger UK shoppers is high. There are good commercial reasons why it appears in a large proportion of UK Shopify checkouts.

The problem is the fee structure. Klarna's instalment products — particularly Pay in 3 — carry some of the highest per-transaction fees in mainstream ecommerce. At approximately 5.99% plus a fixed amount, a £100 sale through Klarna Pay in 3 costs the merchant around £6 in payment fees alone. For merchants where Klarna accounts for 20–40% of checkout volume, the cumulative cost is substantial — and it scales directly with revenue in a way that becomes harder to absorb as the business grows.

The strategic response for most UK Shopify merchants isn't to remove Klarna — it's to reduce the proportion of transactions that run through it. Pay by Bank via Fena makes this possible by providing a payment method that costs a fraction of Klarna, provides a genuinely good customer experience, and can be positioned at checkout in a way that naturally reduces Klarna volume without removing the option for customers who specifically want it.

Quick summary

• Klarna's instalment products typically cost UK Shopify merchants between 4.99% and 5.99% per transaction plus a fixed amount — significantly more than card processing and far more than Pay by Bank

• The premium reflects the credit and fraud risk Klarna absorbs, but for merchants whose customers don't need financing, they're paying for a service their customers aren't using

• Pay by Bank via Fena typically costs between 0% and 1% per transaction, with no chargebacks and same-day settlement — the cost difference over meaningful volumes is substantial

• The most effective strategy combines both: Pay by Bank as the primary low-cost option for full-price purchases, Klarna retained for customers who specifically want instalment options

• Positioning Pay by Bank prominently in the checkout flow — before cards and before Klarna — naturally shifts volume without removing options or harming conversion

• The annual saving for a merchant with significant Klarna volume can be substantial: for a store doing £150,000 monthly revenue with 30–35% Klarna volume, shifting half of that to Pay by Bank can save tens of thousands of pounds per year

Why Klarna fees are as high as they are

Understanding the Klarna fee structure helps merchants decide when it's worth paying and when it's not.

Klarna's instalment products involve Klarna extending credit to the customer. When a customer uses Pay in 3, they pay Klarna in instalments — Klarna pays the merchant upfront and takes on the credit and repayment risk. This credit function is expensive to operate: credit risk assessment, fraud prevention, bad debt absorption, and customer repayment management all have costs that Klarna recaptures through merchant fees.

The approximate UK merchant fee structure for Klarna products looks like this:

Pay in 3

— around 5.99% plus a fixed per-transaction fee. This is the most commonly used Klarna product and the most expensive. The high fee reflects the credit risk and the 30-day+ exposure between merchant payout and customer repayment completion.

Pay in 30 Days

— around 4.99% plus a fixed amount. Slightly less expensive than Pay in 3 but still significantly above card rates.

Slice It (longer-term financing)

— around 3.99% plus a fixed amount. The fee is lower but this product is less commonly used.

Pay Now

— around 2.49% plus a fixed amount. This is Klarna's standard payment product without instalment functionality. The fee is lower but still higher than card processing and substantially higher than Pay by Bank.

For merchants whose customers are using Klarna because they genuinely want to split payments — because the AOV is high enough that paying upfront is a real barrier — the conversion benefit of Klarna justifies the fee. For merchants whose customers are using Klarna because it appeared first at checkout and it's a familiar brand, the conversion benefit may be much smaller than the fee cost suggests.

The margin impact at scale

The commercial case for reducing Klarna dependency is most visible when you model it at scale.

Consider a UK Shopify merchant generating £150,000 in monthly revenue, with Klarna accounting for 35% of checkout volume. Monthly Klarna volume is approximately £52,500. At an average fee of 5.99%, monthly Klarna fees are around £3,145. Annually, that's approximately £37,700 paid to Klarna in processing fees.

Now model what happens if half of that Klarna volume — customers who would naturally choose an alternative if it were available and clearly presented — shifts to Pay by Bank via Fena at 0.5% per transaction. The Klarna cost on the remaining 17.5% drops to approximately £1,570 per month. Pay by Bank fees on the redirected volume add approximately £131 per month. Total monthly payment cost on this volume: approximately £1,700 — down from £3,145. Annual saving: approximately £17,000.

If 50% of Klarna volume shifts, the saving is meaningful. If the shift is higher — which it can be with good checkout design and clear messaging — the saving grows accordingly. The key variable is how much of your current Klarna volume represents customers who genuinely need instalments versus customers who are simply using what appeared first.

What Pay by Bank offers instead

Pay by Bank via Fena processes payments directly from the customer's bank account to the merchant's account using UK open banking infrastructure. No card network. No Klarna credit mechanism. No intermediary holding funds.

For the merchant:

substantially lower processing fees, no chargebacks on Pay by Bank transactions, and same-day or faster settlement compared to Klarna's 7–14 day settlement window. Lower fees mean more of each sale stays as revenue. No chargebacks mean lower operational overhead and no exposure to card network dispute thresholds.

For the customer:

the payment is authenticated within their own banking app using their existing credentials — biometrics or PIN. There are no card details to enter, no debt being taken on, no credit check. The experience is fast, secure, and familiar for the growing proportion of UK shoppers who use their banking app regularly.

The customer who pays via Pay by Bank isn't making a compromise — they're using a payment method that's arguably more secure and less friction-heavy than card entry, without the deferred payment obligation of Klarna. For the right customer segment, it's the preferred option. The merchant's job is to make it visible and well-explained enough that those customers find it.

How to structure your checkout to reduce Klarna dependency

The strategy isn't to remove Klarna — it's to ensure Pay by Bank is positioned to capture the volume that doesn't actually need Klarna's credit functionality.

Payment method ordering.

The position of payment methods in the checkout list influences which one customers choose, particularly for first-time buyers who are less anchored to a specific preference. Placing Pay by Bank first — before cards and before Klarna — naturally increases its selection rate without removing any options. Customers who specifically want Klarna still find it; customers who are indifferent choose based on what's presented first.

Clear messaging at the payment step.

A brief explanation of what Pay by Bank is — "Pay directly from your bank account, instant and secure, no card needed" — reduces hesitation among customers who are unfamiliar with it. Customers who understand what they're choosing convert; customers who are confused by an unfamiliar option abandon.

Incentivising Pay by Bank where the margin supports it.

Because Pay by Bank fees are a fraction of Klarna fees, the margin headroom to offer a small incentive for Pay by Bank use is real. A 2–3% discount for paying via Pay by Bank, or free express shipping, can shift volume meaningfully while still being cheaper than Klarna's fee on the same transaction. Not every merchant needs to offer an incentive — in many cases, good positioning and clear messaging is sufficient — but where conversion data shows opportunity, the incentive economics work.

A/B testing checkout order.

Testing different payment method orderings against each other — with Pay by Bank in the primary position versus secondary — gives you real data on how much volume shifts and what the net conversion and revenue impact is. This removes the guesswork and lets the data determine the optimal configuration for your specific customer base.

When Klarna remains the right choice

Reducing Klarna dependency doesn't mean making it inaccessible to customers who genuinely benefit from it.

Klarna's instalment products are most commercially justified for merchants where the average order value is high enough that instalment options materially affect the purchase decision — typically in the £80–£400 range where a customer might hesitate at full price but will proceed on a three-payment basis. They're also most effective for customer demographics that are accustomed to BNPL as a payment method — typically younger shoppers who've grown up with the option and factor it into how they manage purchases.

If your AOV is in this range and your customer demographic matches, Klarna should stay in your checkout. The goal is not to eliminate it but to ensure that the customers who aren't using Klarna for its credit functionality — who would pay in full anyway, and are choosing Klarna because it's prominent — have an obvious, well-presented alternative that costs you less.

The combination that works for most UK Shopify merchants: Pay by Bank via Fena as the primary low-cost payment option for full-price purchases, Klarna retained and clearly available for customers who want instalments. Both options serve their customer segments; the payment mix optimisation happens at the margins, reducing Klarna's share of full-price transactions.

Implementing Pay by Bank via Fena on Shopify

Adding Pay by Bank to your Shopify checkout through Fena is straightforward. Fena connects as a payment gateway through Shopify's payment provider settings. The integration adds Pay by Bank as a checkout option that appears alongside your existing payment methods. No rebuild of your checkout flow is required — it's an addition, not a replacement.

The effective implementation involves: positioning Pay by Bank prominently in the checkout method list, adding clear brief copy explaining what it is, and monitoring your payment method mix in Shopify Analytics after launch to understand how volume is shifting. Fena provides support through the integration process and can help you assess whether your checkout positioning is optimised for your specific customer base.

Frequently asked questions

What are Klarna's fees for UK Shopify merchants?

Klarna's instalment products typically carry fees between 4.99% and 5.99% plus a fixed per-transaction amount for UK merchants. Pay Now is lower at approximately 2.49% plus a fixed amount. All Klarna products carry higher fees than card processing and substantially higher fees than Pay by Bank.

Why are Klarna's fees so much higher than card payments?

Klarna's instalment products involve Klarna extending credit to the customer and absorbing the repayment and credit risk. The fees reflect the cost of credit risk assessment, fraud prevention, bad debt exposure, and customer repayment management — none of which apply to standard card processing or Pay by Bank.

How does Pay by Bank compare in cost to Klarna?

Pay by Bank via Fena typically processes at 0–1% per transaction, compared to 5–6% for Klarna instalment products. For a £100 transaction, the difference is approximately £5 per sale. Across meaningful transaction volumes, this compounds significantly.

Does adding Pay by Bank reduce Klarna conversion?

It can reduce the proportion of transactions going through Klarna — which is the intended outcome — without reducing overall checkout conversion if Pay by Bank is well-positioned and clearly explained. Customers who want Klarna still find it; customers who were using Klarna by default rather than by preference switch to the more prominent Pay by Bank option.

Should I remove Klarna if I add Pay by Bank?

No. Klarna serves a genuine purpose for customers who want instalment payment options, particularly for higher-value purchases. The effective strategy is to retain Klarna for those customers while reducing its share of full-price transactions by making Pay by Bank the primary payment option.

Does Pay by Bank via Fena eliminate chargebacks?

Yes, on Pay by Bank transactions. Because payments go through open banking rails rather than card networks, the card chargeback mechanism doesn't apply. There are no chargeback fees and no card network dispute thresholds to manage on this payment volume.

How quickly does Pay by Bank settle compared to Klarna?

Pay by Bank via Fena settles same-day or faster. Klarna's settlement window depends on the product — Pay in 3 and Pay in 30 Days typically settle on longer cycles, meaning funds from Klarna transactions take considerably longer to reach the merchant's account.

Can I offer a discount for customers who pay by bank?

Yes, and the economics typically support it. Because Pay by Bank fees are a fraction of Klarna's, even a 2–3% discount for Pay by Bank use reduces the merchant's net payment cost compared to the same transaction going through Klarna.