Klarna, the prominent buy now, pay later lender, has significantly reduced its workforce by more than 1,000 employees, largely due to the integration of artificial intelligence (AI) into its operations. The Stockholm-based fintech giant, which wrote off £173 million in bad loans during the first half of 2024 as more shoppers defaulted on their borrowings, is poised to cut its headcount even further in the lead-up to its anticipated stock market flotation.
The company, which boasted a workforce of approximately 5,000 just a year ago, has already trimmed its employee count to 3,800. A spokesperson for Klarna indicated that this figure is expected to plummet to around 2,000 in the coming years, although an exact timeline was not provided. This substantial reduction in staff is being attributed to the company’s successful implementation of AI across various aspects of its business.
Klarna has already extensively deployed AI in its customer service operations, with the company estimating that its chatbot is capable of handling the workload of 700 human employees. The integration of AI has not only streamlined customer support but has also contributed to a decrease in operating expenses and an improvement in gross profits.
Despite the significant write-off of bad loans, Sebastian Siemiatkowski, the founder and chief executive of Klarna, remains optimistic about the company’s future. When asked about the possibility of a stock market flotation, Siemiatkowski suggested that an initial public offering (IPO) in the next year “sounds reasonable,” although he stopped short of making a firm commitment. While London is being considered as a potential venue for the IPO, New York is thought to be the more likely choice.
As Klarna continues to expand its presence in the buy now, pay later market, the company’s credit loss rate, which measures losses as a percentage of total merchandise sales, has risen from 0.37 per cent to 0.45 per cent. However, the company maintains that this trend is “stable” and is primarily attributed to its outpacing of rivals in the crucial US market.
With a network of 575,000 merchants across 45 countries and a claimed 31 million monthly users worldwide, Klarna is well-positioned to continue its growth trajectory. The company’s “close to break-even” performance in the second quarter of 2024 is being touted as evidence of its strong progress, with pre-tax losses shrinking by an impressive 86 per cent to just £19.4 million in the first half of the year.
As Klarna navigates the challenges of the rapidly evolving fintech landscape, its strategic adoption of AI and its ability to streamline operations while minimising losses will be key factors in determining its long-term success. The company’s impending stock market flotation will serve as a critical milestone in its journey, as investors eagerly await the opportunity to participate in the growth of this pioneering buy now, pay later lender.
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