Klarna vs PayPal: Choosing the Right Platform for Recurring Payments

One major factor that determines business success is the business’ capability to conduct seamless transactions. Subscription businesses are well-acquainted with the concept of recurring payments. Smooth payment handling is crucial to stay ahead of the competition. In order to facilitate frictionless transactions, businesses require a payment platform which suits their needs.

Today, a variety of payment services are available in the market. Among them are PayPal and Klarna. PayPal is a giant in the online transactions industry, while Klarna offers unrivalled BNPL (buy now, pay later) services. Both of these payment apps lend their own unique services to enhance users’ online purchase experience.

In this article, we’ll compare Klarna vs PayPal. We’ll break down their strengths, pricing structures, and functionality, so you can decide which option is best for recurring payments.

PayPal: An Overview

PayPal is a popular payment platform in the market. As of 2025, it is present in over 200 countries, and supports more than 25 currencies. PayPal connects merchants and users via smooth and secure money transfers. It is trusted worldwide due to a number of features such as two-factor authentication, buyer protection, user-friendly interface, and more.

Here is how PayPal works: Businesses create their PayPal accounts via the platform’s website. They enter their business email address, and other relevant information. After that, they are required to link their bank account with PayPal. Once successfully signed up, businesses are enabled to receive payments. PayPal gives them the choice to utilize its services both online and via app. Businesses can rely on their PayPal accounts for accepting payments, transferring funds, or keeping funds stored away.

Klarna: An Overview

Klarna is a payment processing platform found in Sweden. It is famous due to its BNPL services, and operates in a number of countries, including Europe and the US. It facilitates costly purchases by letting users pay in instalments, or at a later date. Klarna also helps e-commerce businesses manage customer payments. It provides its customers with both one-off payments, and instalment options interest-free. Klarna’s app can also be used by businesses to monitor customer payments, and respond to customer inquiries.

Here is how Klarna works: Businesses sign up with Klarna using its Merchant Portal. They enter the associated business information and then accept the terms and conditions. These terms mention the charges that businesses can be subjected to during their service period.  After successful sign up, access to business account is given. Merchants can then integrate Klarna’s payment solutions with their websites or e-commerce stores. Klarna allows them to process transactions, and manage accounts for customers. Companies can also use their log-in details to the Klarna Merchant Portal in the Klarna app. The app simplifies the management of customer queries, and order monitoring.

PayPal vs Klarna in the Arena of Recurring Payments

Both Klarna and PayPal facilitate recurring payments for subscription businesses. Let’s see how both service providers accomplish that:

PayPal

• Subscription Management: Using PayPal, merchants can create flexible subscription schemes like weekly, monthly or annual.

• Automated Billing: PayPal deducts payments from customer accounts itself when automated payments are enabled. Users do not have to fill in their details each time.

• Pricing Models: It is easy for businesses to attribute various pricing models to their subscription plans. For instance, they can have varying pricing levels, and offer discounts on products or services. They can also provide trial periods for services. 

• Integration: PayPal easily integrates with major e-commerce solutions such as Shopify to make it easy to manage recurring payments. It also easily integrates with subscription management software such as SubscriptionFlow to accept payment in various currencies. 

• Invoice-Based Payments: PayPal also enables companies to send invoices to their clients as payment reminders, in case buyers do not want automated recurring payments.

• Global Reach: Businesses operating internationally benefit greatly from PayPal due to its global availability, and multi-currency options.

• Multiple Payment Options: Customers can pay using PayPal balance, or their linked payment methods. Those include cards, bank accounts, digital wallets, and more.

Klarna

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• Direct-Debit Based Payments: Klarna supports automated recurring payments via direct debit. Payments are deducted directly from the linked bank accounts of customers. Direct debit subscription payments have little failure chances since they are free from card expiration risks. 

• Card-Based Payments: Businesses can also fetch payments via customer credit/debit cards, just as in traditional subscription billing. However, this feature is not as widely available.

• Instalment-Based Payments: Customers are empowered to pay one-time fees in instalments. But, they cannot split recurring payments into smaller parts.

• Automated Payment Reminders: Klarna sends customers automated notifications about subscription renewals, failed payments, and updating the payment method if required.

• Risk Management: Klarna identifies and prevents fraudulent transactions. Doing so, it protects merchants from unfair chargebacks. Additionally, even if customers choose to pay for their purchases in instalments, the platform pays the business upfront. It means that businesses don’t have to wait for customers to complete their payment. Klarna acts as an intermediary, and handles instalments itself. However, this feature is limited to one-time purchases.

Klarna vs PayPal Recurring Payments Comparison

Recurring Invoicing

• Klarna: It does not support fully automated invoicing typical of subscription models. The only type of automated invoicing it offers is BNPL and instalment invoicing. Customers can select from its Pay In Instalments, or Pay Later options, and their invoice is created accordingly. For enabling traditional monthly subscriptions, businesses have to integrate with external software like SubscriptionFlow or payment gateways.

• PayPal: It fully supports subscription invoicing according to flexible billing models.

Automated Billing

• Klarna: It mostly offers subscription billing via direct debit, and has limited support for other options.

• PayPal: It supports automated billing through different payment methods. You can set up the billing schedule according to your preferences, such as weekly, monthly, quarterly etc.

Custom Invoices

• Klarna: Invoices offer very limited customization, as they follow Klarna’s standard format. 

• PayPal: Invoices can be customized according to a company’s brand. Various invoice templates are available to choose from. Due dates can also be customized. 

Payment Methods

• Klarna: Mainly supports direct debit subscription payments. Its strength lies in providing handy instalments, as opposed to periodic subscription charging. 

• PayPal: Offers a great variety of payment methods that customers can choose from. Options include credit/debit cards, digital wallets, bank accounts, ACH, PayPal balance, and more. 

Instalment Payments

• Klarna: It specializes in instalment, and BNPL options, but not for recurring payments.

• PayPal: PayPal offers users instalment plans, and pay later options via PayPal Pay Later and Credit. However, they are restricted to one-time payments only. There is no support for subscription BNPL options at all. 

Multi-Country Support

• Klarna: Klarna operates in selective regions including European and North American countries. 

• PayPal: PayPal is available more widely. It is ideal for international subscription businesses, as they can accept payments in more than 25 currencies.

In a nutshell, PayPal is meant for subscription businesses requiring automated invoicing, multiple payment options, and multi-currency support. On the other hand, BNPL and instalment payments are Klarna’s forte. Klarna is better suited to e-commerce businesses that offer convenient one-time purchases.

Your business can offer both subscriptions and one-time purchases at the same time, and leverage both PayPal and Klarna’s functionalities. At the end of the day, your choice between both the payment service providers depends on your unique requirements. If you want to enable efficient recurring payments, go for PayPal. If you want to offer subscriptions only via direct debit, and can manage with limited automation, you can opt for Klarna as well.

But this is not where it ends. Let’s take a look at PayPal and Klarna’s security features, and fee structures too to help you make the final decision.

Klarna Vs PayPal Security

Both platforms offer powerful security features.

PayPal

• Encryption: PayPal users leverage end-to-end encryption. This means that user data is encrypted throughout the payment processing stage until it reaches the merchant’s account.

• Fraud Monitoring: The platform’s fraud detection technology flags suspicious activity. It protects the users’ financial data from unauthorized access.

• Purchase Protection: PayPal offers customers purchase protection. It means that if the customer does not receive the promised goods, or receives damaged products, then they can use PayPal’s help to file a chargeback.

• Secure Connections: PayPal keeps your data transmissions secure via Transport Layer Security (TLS) and HyperText Transfer Protocol Secure (HTTPs).

• Data-Protection Standards: The payment provider is PCI-DSS compliant, and prevents fraudulent transactions, and identity theft.

Klarna

• Fraud Prevention: Klarna picks up on, and blocks suspicious transactions in real-time through machine learning.

• Encryption: Data encryption techniques like TLS and AES-256 are employed by the platform, which means your data cannot be decoded by intruders.

• Two-Factor Authentication: This features restricts access to unauthorized users even if they manage to enter your correct password.

• Biometric Authentication: Users can set up biometric verification for secure app access. It can be in the form of facial or fingerprint recognition.

• Purchase Protection: Klarna supports customers with filing payment disputes if the product or service is not as promised. In case of instalments, it can halt the payment’s transfer to the merchant account, and helps users get refunds.

Klarna vs PayPal Fee

PayPal

• Domestic Transaction Fee: PayPal generally charges 3.49% of the payment + $0.30 (fixed fee) for each business transaction. But both the standard and fixed fee may vary depending on the method of payment, and country. 

• International Transaction Fee: PayPal takes 3.99% of the payment + $0.30 (fixed fee) per business transaction. But both the standard and fixed fee may vary depending on the method of payment, and country.

• Currency Conversion Fee: PayPal usually charges currency conversion fees because it is an international platform. The fees are approximately 3-4% of the payment amount.

• Instant Transfer Fee: The website charges 1.75% of the entire amount for instant bank transfer.

• Withdrawal Fee: PayPal can charge this fee for instant money withdrawals to the linked bank accounts or credit/debit cards.

Klarna

• Transaction Fee: There are no specific transaction fees, as they are based on each business’s service requirements. Fees may vary from region to region, and are mentioned in the service agreements. Generally speaking, Klarna charges between 3.29% to 5.99% of the total transaction amount. It also charges a fixed fee of $0.30 like PayPal.

• Currency Conversion Fee: Klarna charges a currency conversion fee if your transactions are in a different currency than the default one. The fees vary from currency to currency.

• Chargeback Fee: In situations where Klarna handles a customer’s chargeback, it might charge the business a service fee as well. The amount depends upon the prior service agreement between Klarna and the business.

Have You Made Your Pick Yet?

Since now you have reached the end of discussion, you might have formed a better understanding of PayPal and Klarna, and their unique strengths and advantages over each other. Both the platforms excel in simplifying transactions in their own ways.

If your business operates on an international scale, opting for PayPal would be the better option. That is because PayPal offers unrivalled global transaction capabilities, and supports payments in multiple currencies. It also offers subscription management and flexible pricing models for efficient recurring payments.

On the other hand, if you want to accept subscription payments through direct debit only, then you can opt for Klarna as well. The downside would be the absence of automated invoicing. Klarna is best suited for one-off payments which can be split into instalments, or for pay later options.

After choosing the right payment service provider for your subscription-based business, consider signing up with SubscriptionFlow for seamless integration. SubscriptionFlow facilitates smooth integrations with both PayPal and Klarna, and provides businesses of all sizes with an all-in-one subscription management solution.

Book a demo with SubscriptionFlow today, to manage customer subscriptions, and handle recurring payments like a pro.