> If Klarna were actually on the hook for their own money

Aren't they?

> it wold only have to happen a few times before they realize it's not worth it

That's an assumption. Someone did some A/B testing and said this payment flow results in X% increased sales, resulting in Y% more revenue for Klarna, it results in Z% more fraud. I don't even object to this per-se.

If Y is greater than Z, they will do it.

If they are especially awful they will consider that of the Z% of fraud it will result in A% still being paid for and B% being recovered in debt collection. That is awful.