Reduce Klarna Fees on Shopify UK with Pay-by-Bank (2025 Guide)

Q: How much does Pay-by-Bank cost compared to Klarna?

Pay-by-Bank usually costs 0% to 1%, offering 70–90% savings compared to Klarna’s instalment fees.

Q: Does Pay-by-Bank replace Klarna?

No. Merchants keep Klarna for instalments but promote Pay-by-Bank as the primary low-fee method to reduce overall payment processing costs.

Q: Is Pay-by-Bank secure?

Yes. It uses secure bank authentication and complies with UK Open Banking regulations.

Q: Does Pay-by-Bank eliminate chargebacks?

Yes. Pay-by-Bank payments are direct bank transfers, which means chargebacks do not exist.

Q: Will offering Pay-by-Bank reduce my conversion rate?

No. Merchants typically see strong adoption when Pay-by-Bank is placed first in the checkout flow.

Q: Can I offer discounts for Pay-by-Bank payments?

Yes. Many merchants offer incentives like 2–5% off because Pay-by-Bank fees are much lower than other payment methods.

Q: Is Pay-by-Bank easy to integrate with Shopify?

Yes. Most Open Banking providers offer direct Shopify integrations that can be activated quickly.

Q: How does Pay-by-Bank improve cash flow?

Pay-by-Bank settles instantly, whereas Klarna may take 7 to 14 days to release funds.

Pay-by-Bank / Blog / Reduce Klarna Fees on Shopify UK with Pay-by-Bank

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Klarna Shopify Fees: What UK Merchants Actually Pay
Klarna Fees Reduce Merchant Margins
The Solution: Add Pay-by-Bank on Shopify
Cost Comparison: Pay-by-Bank vs Klarna vs Shopify Payments
Best-Performing Checkout Structure
How Pay-by-Bank Works on Shopify
Example: Klarna-Heavy Store Saves Thousands
When Not to Replace Klarna

Klarna has become one of the most widely used payment methods on Shopify UK due to its instalment options, high adoption among younger shoppers, and its ability to improve checkout conversion. However, Klarna also brings some of the highest payment processing fees in ecommerce. As competition increases and margins tighten, UK merchants need a way to reduce their dependency on expensive payment methods without harming conversion.

This guide explains how Klarna fees work, why they are so high, and how adding Pay-by-Bank can significantly reduce costs while maintaining a seamless customer experience.

Key Takeaways:

Klarna offers strong conversion benefits on Shopify UK, but it also carries some of the highest payment processing fees in the ecommerce sector.
Most merchants pay between 4.99% and 5.99% on Klarna instalment products, which can remove a significant portion of their margins.
Pay-by-Bank provides a low-cost alternative with typical fees between 0% and 1%, delivering 70–90% savings compared to Klarna.
Placing Pay-by-Bank first in the checkout flow reduces Klarna volume without harming conversions, while eliminating chargebacks entirely.
Combining Pay-by-Bank for everyday purchases and Klarna for instalments offers the best balance of cost efficiency and customer choice for Shopify UK merchants.

Klarna Shopify Fees: What UK Merchants Actually Pay

Klarna promotes convenience and improved conversion, but the tradeoff is a fee structure that is substantially higher than traditional card processing.

Klarna Merchant Fees on Shopify UK

Klarna Product	Typical UK Merchant Fee	Description
Pay in 3	~5.99% + £0.20	Most used option with highest fees
Pay in 30 Days	~4.99% + £0.20	Higher than traditional card rates
Slice It (Financing)	~3.99% + £0.20	Costly for high-value product carts
Klarna Pay Now	~2.49% + £0.20	Still higher than Pay-by-Bank

Why Klarna Costs More

Merchants pay a premium for:

Customer financing and credit risk
Chargeback protection
Fraud screening
Access to the Klarna shopping ecosystem
Longer settlement cycles

Did you know? The result is improved conversion but significantly higher cost per transaction.

Klarna Fees Reduce Merchant Margins

Example: A £100 transaction using Klarna Pay in 3 incurs roughly £6.19 in fees.

For merchants with margins of 20 to 30 percent, Klarna can remove a large share of net profit. When Klarna accounts for 20 to 40 percent of checkout volume, total gateway costs rise substantially.

The Solution: Add Pay-by-Bank on Shopify

Ready to Reduce Klarna Fees on Your Shopify Store?

Wallid enables low-cost Pay-by-Bank payments that eliminate chargebacks, cut processing fees by up to 90%, and give Shopify UK merchants a faster, high-trust checkout experience.

Book a Free Demo

See how Open Banking payments help you protect margins and reduce Klarna dependency without harming conversions.

Pay-by-Bank, enabled by Open Banking, allows customers to pay directly from their bank account without using cards. It offers:

Instant settlement
No card fees
No chargebacks
Strong fraud resistance
Faster, bank-authenticated checkout

Cost Insight: Cost: 0 to 1 percent per transaction, delivering 70 to 90 percent savings versus Klarna.

Customer Benefits

Biometric authentication
No card details
No credit checks or debt

Merchant Benefits

Minimal payment fees
No chargeback exposure
Improved cash flow
Reduced fraud

Cost Comparison: Pay-by-Bank vs Klarna vs Shopify Payments

Payment Method	Merchant Fee (UK typical)	Chargebacks	Settlement Time	Savings vs Klarna
Klarna Pay in 3	~5.99% + £0.20	No	7–14 days	None
Shopify / Stripe Cards	1.4%–2.9% + £0.20	Yes	2–3 days	40–60% cheaper
Pay-by-Bank (Open Banking)	0%–1%	None	Instant	70–90% cheaper

Best-Performing Checkout Structure

Merchants do not need to remove Klarna. Instead, the strategy is to reduce Klarna usage by placing Pay-by-Bank in the primary checkout position.

Recommended checkout order:

Pay-by-Bank
Card payments
Klarna

Optimization Tip: This shift often moves 20 to 40 percent of Klarna users to Pay-by-Bank.

Ready to Reduce Klarna Fees on Your Shopify Store?

Wallid enables low-cost Pay-by-Bank payments that eliminate chargebacks, cut processing fees by up to 90%, and give Shopify UK merchants a faster, high-trust checkout experience.

Book a Free Demo

See how Open Banking payments help you protect margins and reduce Klarna dependency without harming conversions.

How Pay-by-Bank Works on Shopify

Install a compatible Open Banking provider.
Enable it through Shopify Admin.
Add clear messaging explaining the benefits.
Optionally provide incentives (2–5% discount, free shipping).

Because Pay-by-Bank fees are minimal, incentives remain profitable.

Example: Klarna-Heavy Store Saves Thousands

£150,000 monthly revenue
Klarna used on 35 percent of orders
Average Klarna fee: 5.99 percent

Monthly Klarna cost: £3,147

Annual Klarna cost: £37,764

After shifting 25 percent of Klarna users to Pay-by-Bank:

Pay-by-Bank fee: 0.5 percent
New monthly cost: £596
Annual savings: over £30,000

Ready to Reduce Klarna Fees on Your Shopify Store?

Wallid enables low-cost Pay-by-Bank payments that eliminate chargebacks, cut processing fees by up to 90%, and give Shopify UK merchants a faster, high-trust checkout experience.

Book a Free Demo

See how Open Banking payments help you protect margins and reduce Klarna dependency without harming conversions.

When Not to Replace Klarna

Klarna is still valuable when: - Customers prefer instalments - Products fall within £80–£400 AOV - Shoppers are primarily aged 18–35 Pay-by-Bank complements Klarna by reducing overall gateway fees.

FAQ

What are Klarna's fees on Shopify UK?

Klarna fees typically range from 2.49% to 5.99% plus a fixed fee, depending on the product (Pay in 3, Pay in 30, Pay Now, or Financing).

Why are Klarna’s fees higher than card payments?

Klarna assumes credit risk, provides financing, manages fraud screening, and offers buyer protection — all of which increase merchant fees.

How much does Pay-by-Bank cost compared to Klarna?

Pay-by-Bank typically costs between 0% and 1%, offering 70–90% savings compared to Klarna’s 4.99–5.99% instalment fees.

Does Pay-by-Bank replace Klarna?

No. Most merchants keep Klarna for instalments but promote Pay-by-Bank as the primary low-fee option to reduce total payment processing costs.

Is Pay-by-Bank secure?

Yes. It uses bank-grade authentication via the customer’s banking app and is regulated under UK Open Banking standards.

Does Pay-by-Bank eliminate chargebacks?

Yes. Pay-by-Bank is an account-to-account payment, meaning no chargebacks exist — reducing disputes and losses for merchants.

Will offering Pay-by-Bank reduce my conversion rate?

No. Most merchants see up to 40% of customers naturally adopt Pay-by-Bank when placed first in the checkout flow with clear messaging.

Can I offer discounts for Pay-by-Bank payments?

Yes. Many merchants offer 2–5% discounts because Pay-by-Bank savings outweigh the cost of incentives.

Is Pay-by-Bank easy to integrate with Shopify?

Yes. Most Open Banking providers have native Shopify integrations that can be activated in minutes.

How does Pay-by-Bank improve cash flow?

Pay-by-Bank settles instantly, while Klarna may take 7–14 days depending on the product type.

Expert Note:
Written by a Wallid Content Specialist focused on UK payments, Open Banking adoption, and Shopify checkout optimization. This article is part of Wallid’s educational series helping merchants reduce payment processing costs, lower Klarna dependency, and implement secure Pay-by-Bank checkout flows that improve margins and customer experience.