Target market determinations.

What is a TMD?

A TMD describes the group and categories of customers that the product is targeted at and any conditions around how the product is distributed to customers. It also describes the events or circumstances where Klarna is required to review the TMD.

Why is a TMD required?

A TMD is required in order to make sure customers are at the centre of Klarna’s approach when designing and distributing products and payment methods to consumers. The below demonstrates how Klarna has assessed the design, availability, review and improvement of the product in question.

Pay in 4 TMD

Product	Pay later in 4 instalments (Pi4)
Target Market	Customer base Pi4 is targeted at consumers who want to purchase goods and services online or in-store, and for which the consumer would like to defer and split their payments into four installments. It is a short term deferred credit option that allows consumers to spread the cost of what they love to buy, and try them out first prior to having to pay the full price. Consumers may have an objective of using a short-term, low value credit facility to assist with managing their cash flow and unexpected expenses between pay cycles. Eligibility Pi4 can only be accessed by individual consumers who: Are at least 18 years old. Are capable of entering into a legally binding contract. Have an Australian residential address, as Klarna is intended for customers living in Australia. Have been properly identified in accordance with applicable anti-money laundering rules. Have provided a valid email address and phone number for us to communicate through. Have a financial situation which meets Klarna’s credit assessment criteria based on internal Klarna information and third party data. This excludes customers in recent hardship, bankruptcy and customers who have too much outstanding debt with Klarna. Meet the Klarna product usage criteria, such as not having too much outstanding debt, inappropriate usage of Pi4, or previously not repaying a Klarna purchase. Customers who do not fulfill the above criteria are assessed as not suitable to use Pi4. Classes of consumers that are excluded from the target market Pi4 is not designed for customers who: Intend to utilize a long-term, high-value credit product. Require a product offering unlimited instant expenditure. Dislike the idea of only relying on digital services. Currently have overdue orders with Klarna. Key features of Pi4 Allows the customer to split a purchase in four fortnightly installments, with approximately one fourth of the purchase price paid upfront. The first installment may vary slightly from the other three installments based on rounding when the purchase is divided into four, this will only be by a matter of cents. The downpayment feature allows a customer to purchase an item outside of their credit limit, by allowing them to pay some of their purchase upfront. The amount paid on the first installment is a combination of the regular payment should they have taken up an amount within their credit limit and the excess value of the purchase. No interest or fees apply. However, Klarna may charge a late fee if the customer is late on an installment. A customer who has a payment outstanding will be blocked from making a subsequent purchase. A failed payment attempt will also impact their spending limit. Customers can, through the Klarna App, manage their post purchase experience, with features such as; i) Changing funding source, ii) Paying off installments early, iii) Extending the installment plan for a small fee , and iv) Reporting problems and returns. Customers can contact Klarna’s Customer Service to discuss their repayment plans if they are having trouble repaying. Why Pi4 is likely to be consistent with the objectives, financial situation, and needs of the Target Market Pi4 allows the Target Market to fulfill its objective of deferring their purchase of goods or services with safety and confidence by borrowing only the amount necessary to buy the goods or services. The flexibility to pay off installments early or extend them provides an additional layer of safety in the event a customer’s financial situation changes. Customers can only use Pi4 if they are accepted by Klarna’s credit and identification criteria. Klarna’s credit criteria are monitored monthly to ensure product's appropriateness for the target market. Klarna is aware that customers may experience financial hardship, and therefore has an easily accessible hardship program.
Distribution conditions	Pi4 is issued by Klarna. Consumers can access it by: Choosing Klarna as their payment method when they check out on a seller’s website; or Downloading the Klarna App. Pi4 may be distributed in one or both of the above ways via approved third party distributors. Klarna works with two types of distributors: Sellers accepting Klarna as a payment method online or in store who also promote Pi4 directly to their existing customers (Seller Distributors); and Businesses other than Seller Distributors that present the option to pay with Pi4 to their customers, and who may also promote Pi4 (Channel Partners). Operational Controls Klarna applies operational controls to make sure that Pi4 is primarily distributed within the Target Market. These include: All sellers who accept Klarna as a payment method, including Seller Distributors, must pass through anti-money laundering and counter-terrorism financing, and underwriting processes. The seller does not control whether a purchase is accepted - only Klarna does. The Klarna App blocks certain industries, including firearms and weapons, adult services, casinos and online gambling. Legal Controls Klarna implements legal obligations in its agreements with Seller Distributors and Channel Partners who engage in Pi4 distribution activities to ensure that reasonable steps are taken so that their distribution remains consistent with this TMD. Klarna views the above distribution conditions as appropriate and of a nature that makes it likely that Pi4 will be distributed to the Target Market given that: Klarna will technically control, and have oversight of, how Pi4 is promoted and issued, including that: Klarna staff are appropriately trained to discuss the features of Pi4 with customers; Sellers integrating Pi4 and Channel Partners must comply with their obligations under their agreement with Klarna; and Customers must satisfy Klarna’s eligibility criteria;
Reporting requirements for distributors	Distributors are required to: Notify Klarna as soon as practicable, and in any event within 10 business days of becoming aware of a significant adverse dealing in respect of a consumer using Pi4 in a manner not consistent with this TMD. Report to Klarna information about whether the distributor received complaints in relation to Pi4, and the number received. This may be done on a monthly or quarterly basis, depending on the distributor. Each report is due no later than 10 business days after the end of the relevant reporting period.
Target Market Determination Review	Effective date: 5 October 2021 Last review: 1 December 2023 Periodic reviews: At least every 12 months from the initial review. Review triggers: The TMD may no longer be considered appropriate and a review of this TMD must be undertaken by Klarna, as soon as practicable within 10 days of any of the following triggers occurring: Klarna has received a significant number of complaints, related to customer’s use of Pi4 which may outline the TMD may no longer be appropriate for this product, including but not limited to: Complaints relative to financial hardship application Complaints relative to late fees application A significant increase in attempted use of Pi4 by customers who are outside the Target Market: Customers under 18 years old attempting to purchase with Pi4 Customers who have applied for financial hardship program attempting to purchase with Pi4 Customers who have overdue orders attempting to purchase with Pi4 Any event which might suggest Pi4 is not distributed according to Target Market definition: Customers with overdue orders being able to complete a new purchase with Pi4 Customers being able to use Pi4 before completion of the onboarding process Customers under 18 years old being able to use Pi4 A significant increase in unpaid rates for the product. A significant increase in the late fees incidence for the product. A material incident or significant number of incidents has occurred, which relate to the customer’s use of Pi4 and which may outline the TMD may no longer be appropriate for Pi4. The receipt of a product intervention power order or notice from ASIC requiring Klarna to immediately cease retail product distribution conduct in respect of Pi4. A material change of Pi4 or its terms and conditions, which would cause the TMD to no longer be appropriate for Pi4. Any other event or circumstance that Klarna views would materially change a factor taken into account in making the TMD. Given the product life cycle, the above TMD review triggers are monitored at least once per quarter to ensure timely intervention.

Pay in 30 days TMD

Product	Pay in 30 days
Target Market	Customer base Pay in 30 days is targeted at consumers who want to purchase goods and services online or in-store, and for which the consumer would like to defer their payments for 30 days. Pay in 30 gives consumers trust and comfort to buy online - even from sellers they have never purchased from before - with the ability to pay only after they receive the goods. It is a short term deferred credit option that allows consumers to defer the cost of what they love to buy for 30 days, and try them out first prior to paying the full price. Eligibility Pay in 30 days can only be accessed by individual consumers who: Are at least 18 years old. Are capable of entering into a legally binding contract. Have an Australian residential address, as Klarna is intended for customers living in Australia. Have been properly identified in accordance with applicable anti-money laundering rules. Have provided a valid email address and phone number for us to communicate through. Have a financial situation which meets Klarna’s credit assessment criteria based on internal Klarna information and third party data. This excludes customers in recent hardship, bankruptcy and customers who have too much outstanding debt with Klarna. Meet the Klarna product usage criteria, such as not having too much outstanding debt, inappropriate usage of Pay in 30 days, or previously not repaying a Klarna purchase. Customers who do not fulfil the above criteria are assessed as not suitable to use Pay in 30 days. Key features of Pay in 30 days Allows the customer to defer the payment of goods and service for 30 days. The customer is not required to pay any amount upfront when completing an order. The customer is required to provide their card details in order to complete a Pay in 30 days order and Klarna will automatically debit the card 30 days after the merchant confirms/ships the order. No interest or fees apply. However, Klarna may charge a late fee if the customer is late on their payment. A customer who has a payment outstanding will be blocked from making a subsequent purchase. A failed payment attempt will also impact their spending limit. Customers can, through the Klarna App, manage their post purchase experience, with features such as; i) Changing funding source, ii) Paying off the due amount early, iii) Extending the payment plan for a small fee , and iv) Reporting problems and returns. Customers can contact Klarna’s Customer Service to discuss their repayment plans if they are having trouble repaying. Why Pay in 30 days is likely to be consistent with the objectives, financial situation, and needs of the Target Market Pay in 30 days allows the Target Market to fulfil its objective of deferring their payment of goods or services with safety and confidence by borrowing only the amount necessary to buy the goods or services. Pay in 30 gives consumers trust and comfort to buy online with the ability to pay only after they receive the goods. The flexibility to pay early or extend the due date provides an additional layer of safety in the event a customer’s financial situation changes. Customers can only use Pay in 30 days if they are accepted by Klarna’s credit and identification criteria. Klarna’s credit criteria are monitored monthly to ensure product's appropriateness for the target market. Klarna is aware that customers may experience financial hardship, and therefore has an easily accessible hardship program.
Distribution conditions	Pay in 30 days is issued by Klarna. Consumers can access it by: Choosing Klarna as their payment method when they check out on a seller’s website; or Paying an integrated seller through the Klarna app Pay in 30 days may be distributed in one or both of the above ways via approved third party distributors. Klarna works with two types of distributors: Sellers accepting Klarna as a payment method online or in store who also promote Pay in 30 days directly to their existing customers (Seller Distributors); and Businesses other than Seller Distributors that present the option to pay with Pay in 30 days to their customers, and who may also promote Pay in 30 days (Channel Partners). Operational Controls Klarna applies operational controls to make sure that Pay in 30 days is primarily distributed within the Target Market. These include: All sellers who accept Klarna as a payment method, including Seller Distributors, must pass through anti-money laundering and counter-terrorism financing, and underwriting processes. The seller does not control whether a purchase is accepted - only Klarna does. Legal Controls Klarna implements legal obligations in its agreements with Seller Distributors and Channel Partners who engage in Pay in 30 days distribution activities to ensure that reasonable steps are taken so that their distribution remains consistent with this TMD. Klarna views the above distribution conditions as appropriate and of a nature that makes it likely that Pay in 30 days will be distributed to the Target Market given that: Klarna will technically control, and have oversight of, how Pay in 30 days is promoted and issued, including that: Klarna staff are appropriately trained to discuss the features of Pay in 30 days with customers; Sellers integrating Pay in 30 days and Channel Partners must comply with their obligations under their agreement with Klarna; and Customers must satisfy Klarna’s eligibility criteria;
Reporting requirements for Distributors	Distributors are required to: Notify Klarna as soon as practicable, and in any event within 10 business days of becoming aware of a significant adverse dealing in respect of a consumer using Pay in 30 days in a manner not consistent with this TMD. Report to Klarna information about whether the distributor received complaints in relation to Pay in 30 days, and the number received. This may be done on a monthly or quarterly basis, depending on the distributor. Each report is due no later than 10 business days after the end of the relevant reporting period.
Target Market Determination Review	Effective date: 1 June 2023 Last review: 1 December 2023 Periodic reviews: At least every 12 months from the initial review. Review triggers: The TMD may no longer be considered appropriate and a review of this TMD must be undertaken by Klarna, as soon as practicable within 10 days of any of the following triggers occurring: Klarna has received a significant number of complaints, related to customer’s use of Pay in 30 days which may outline the TMD may no longer be appropriate for this product, including but not limited to: Complaints relative to financial hardship application Complaints relative to late fees application A significant increase in attempted use of Pay in 30 days by customers who are outside the Target Market: Customers under 18 years old attempting to purchase with Pay in 30 days Customers who have applied for financial hardship program attempting to purchase with Pay in 30 days Customers who have overdue orders attempting to purchase with Pay in 30 days Any event which might suggest Pay in 30 days is not distributed according to Target Market definition: Customers with overdue orders being able to complete a new purchase with Pay in 30 days Customers being able to use Pay in 30 days before completion of the onboarding process Customers under 18 years old being able to use Pay in 30 days A significant increase in unpaid rates for the product. A significant increase in the late fees incidence for the product. A material incident or significant number of incidents has occurred, which relate to the customer’s use of Pay in 30 days and which may outline the TMD may no longer be appropriate for Pay in 30 days. The receipt of a product intervention power order or notice from ASIC requiring Klarna to immediately cease retail product distribution conduct in respect of Pay in 30 days. A material change of Pay in 30 days or its terms and conditions, which would cause the TMD to no longer be appropriate for Pay in 30 days. Any other event or circumstance that Klarna views would materially change a factor taken into account in making the TMD. Given the product life cycle, the above TMD review triggers are monitored at least once per quarter to ensure timely intervention.

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