Klarna, the Swedish fintech giant, reports significant workforce reductions driven by AI efficiencies, forecasting further cuts in the lead-up to a potential IPO.
- The company faced SwKr2.33 billion in bad loans in H1 2024.
- AI investments have reduced operating expenses and bolstered gross profits.
- The staff reduction from 5,000 to 3,800 is set to continue, potentially dropping to 2,000.
- CEO Sebastian Siemiatkowski hinted at a stock market listing next year, possibly in New York.
Klarna, a prominent Swedish fintech company, has announced a reduction of 1,000 jobs as it continues to integrate AI into its operations. This move comes in response to SwKr2.33 billion (£173 million) in bad loans reported in the first half of 2024. The company attributes these job cuts to efficiency gains realised through significant investments in artificial intelligence.
Klarna stated, “Our proven scale efficiencies have been enhanced by our investment in AI, which has driven down operating expenses and improved gross profits.” The company, with offices in London and Manchester, operates extensively across Europe, the Americas, Australia, and New Zealand. While Klarna declined to reveal the exact number of UK-based staff affected, the job reductions are expected to be evenly distributed.
AI technology has already made a substantial impact on Klarna’s operations. Specifically, the implementation of chatbot technology has replaced work previously done by approximately 700 employees in customer service roles. This technological shift is part of a broader trend at Klarna, which has seen its workforce decrease from 5,000 employees last year to 3,800. Projections indicate that this figure could drop further to approximately 2,000 employees in the coming years.
Founder and CEO Sebastian Siemiatkowski mentioned the possibility of a stock market flotation next year. Although no definitive plans have been confirmed, New York is currently viewed as the more likely venue for the IPO compared to London.
Klarna has experienced a 39% increase in credit losses year-on-year, partly due to a 16% rise in gross transaction value to SwKr523 billion (£39 billion). The company’s credit loss rate has escalated from 0.37% to 0.45%, a trend deemed “stable” by Klarna and attributed to rapid US expansion. Despite these challenges, Klarna has made notable financial improvements, with pre-tax losses reducing by 86% in the first half of 2024, amounting to SwKr262 million (£19.4 million).
Once hailed as Europe’s highest-valued fintech, Klarna saw its valuation plummet from $45.6 billion to $6.7 billion in 2022. The company offers Buy Now, Pay Later (BNPL) services, providing consumers with up to 60 days of interest-free credit while assuming the risk of borrower defaults. With 575,000 merchants in 45 countries and 31 million monthly users globally, Klarna remains a leading entity in the BNPL market. However, its rapid transformation underscores the increasing role of AI in reshaping financial services.
Klarna’s strategic pivot towards AI and its consequent workforce reduction reflect the profound changes underway in the fintech sector.
