This $2.25 billion Swedish startup thinks it can beat Amazon at payments because of the history of the railway

KlarnaKlarna CEO and cofounder Sebastian Siemiatkowski.

Klarna CEO Sebastian Siemiatkowski has the unenviable task of facing off against Apple, Google, Amazon, and Samsung.

Klarna is the Swedish payments startup cofounded by Siemiatkowski in 2005 that lets online shoppers buy items just by submitting their email. Klarna effectively extends the buyer credit, purchasing the item on their behalf and then emailing them later to follow up with payment details.

The service is hugely popular in its native Sweden and Scandinavia as a whole. In Sweden, Klarna processes an incredible 30% of all sales online and processed $9 billion in 2014. It is valued at $2.25 billion and counts renowned Silicon Valley VC firm Sequoia Capital as an investor. (Sequoia is known as an early investor in Apple, Google, Airbnb, Instagram, and more.)

Having conquered the Nordics, Klarna is now targeting the US and UK where it recently launched. But just as it moves westward, Silicon Valley’s tech giants are all getting into payments.

Amazon is pushing its “Pay with Amazon” button for online retailers, a direct competitor to Klarna. Meanwhile, Google, Apple, and Samsung (not Silicon Valley but of the same scale) are all launching payment products on phones that allow people to automatically pay with cards pre-loaded onto a phone when browsing the web on their mobile — another threat to Klarna.

Is Siemiatkowski scared? Amazon, in particular, has a reputation for grinding into the ground anyone or thing that stands in its way.

“I have huge respect for Amazon I think they’re an amazing company,” Siemiatkowski told BI at the Money2020 Europe conference in Copenhagen last week.

“I do, however, think about these giant companies a little bit differently,” he says. “Something that stuck with me when I read History of Economics was each time a new industry evolves like the railway or whatever, what ends up happening is the conglomerates end up taking over.

“Back in the railway era, railway companies end up controlling everything — logistics, housing, hotels, steel mills. They did everything. What ends up happening over time, however, is it’s hard to be competitive in everything. You can compete with other companies, but you can never compete with the whole market.”

“That is really why I am skeptical of large companies ability — independent of the fact that it’s Apple or Google or Amazon or whoever — I am skeptical of their ability to compete with the whole market. Amazon had their own phone recently. Now it’s gone.”

Siemiatkowski adds: “What I see more and more is you have to be extremely specialised. I even ask myself, are we at Klarna too broad? Two or three years ago we were trying to build our own cloud infrastructure. It was like, seriously? Why? Because it was the standard thing to do.”

On the topic of the cloud, Siemiatkowski admits that Amazon Web Services, Amazon’s cloud computing business, is an example of a side business the e-commerce giant was able to build into a huge success.

“In the end, it is a question of you daring to believe that your vision and the direction you’re taking the company is different and that we are somewhat ahead of the curve,” he says.

On Klarna’s expansion in the US and UK, Siemiatkowski says: “The volumes, in terms of payment volumes, as well as customer numbers, are much, much, much bigger than we expected them to be right now. But of course, the number of merchants is actually low. You still get comments from people in the UK saying where can I actually use this?

Siemiatkowski says Klarna has some exciting partnership announcements in both the US and UK this year and adds: “If you compare our growth rate [in US and UK] we’re far ahead of where we were at this point in Sweden or Germany.”