They incentivize e-tailers by offering higher conversion rates(later) as well as taking the hit for fraudulent payments (often with regular CC billing an e-tailer can be liable for repayments) in exchange for a slightly higher percentage.

Once someone comes to their checkout they hide or at least make the direct payment options well hidden so that by default people buy by taking credit with them.

This credit often comes with shorter than industry standard payment terms so people end up missing payment and being handed over to their in-house collection agency that starts collecting overdue fees.

It's considered digitalized loansharking by many for a good reason.

Ironically it seems that for many smaller e-tailers using Klarna as the payment option seems to heighten the trust of customers so they're more likely to buy (my guess is that we've all been told or told people historically not to enter CC details on random sites and even with stuff like 3D-secure these days everyone is wary)