Klarna, a leading “buy now, pay later” fintech, has cut more than 1,000 jobs as part of a strategic shift towards artificial intelligence, with more cuts expected ahead of a potential initial public offering.
The Swedish fintech, which booked a loss of SEK2.33bn (£173m) in bad loans in the first half of 2024, attributed the cuts to efficiency gains driven by the adoption of artificial intelligence. “Our proven efficiency has been enhanced by our investment in AI, resulting in lower operating expenses and improved overall profitability,” Klarna said.
Klarna, which has offices in London and Manchester, has operations globally in Europe, the Americas, Australia and New Zealand. While the company declined to disclose the number of employees in the UK, it confirmed that the job cuts would be spread evenly across its sites.
AI is already playing a significant role in Klarna’s operations, particularly in customer service, where its chatbot technology has replaced the equivalent of 700 employees. Klarna’s workforce has shrunk from 5,000 last year to 3,800, and is expected to fall to around 2,000 in the coming years.
Sebastian Siemiatkowski, the company’s founder and CEO, has suggested the company could go public next year, though there has been no firm commitment. London is a possible venue for the IPO, though New York remains the most likely option.
Klarna’s credit losses rose 39% year-on-year, partly due to a 16% increase in the total value of transactions to SEK523bn (£39bn). The closely watched credit loss ratio rose from 0.37% to 0.45%, although the company insists the trend is “stable” and linked to its rapid expansion in the US.
Despite the rise in credit losses, Klarna reported significant financial improvements, with pre-tax losses in the first half of 2024 down 86% to SEK262m (£19.4m). The company highlighted its near-breakeven performance in the second quarter as evidence of progress.
Klarna, once Europe’s most valuable fintech, took a hit in 2022 when a funding round slashed its valuation to $6.7 billion from a previous peak of $45.6 billion.
Under non-repayable loan arrangements, Klarna finances purchases on behalf of consumers, offering them up to 60 days of interest-free credit. The company bears the risk of borrowers defaulting, and charges late fees to consumers who default. Repeated delinquency may result in reporting to credit agencies, debt collection, or, in rare cases, debt sale.
With 575,000 registered merchants in 45 countries and 31 million monthly users worldwide, Klarna remains a dominant force in the BNPL market, but its rapid transformation points to the growing influence of AI in reshaping the future of financial services.
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