A financial update from Stockholm-headquartered Klarna raised some eyebrows thanks to how it was delivered.
The buy-now-pay-later giant opted to use an artificial intelligence avatar of its boss, Sebastian Siemiatkowski, to deliver a video of its latest earnings highlights.
In the slick video, Siemiatkowski said AI was ‘deeply embedded’ in Klarna’s operations and was ‘unlocking efficiency and record setting growth.’
The group’s latest earnings update noted that the use of AI had led to a 40 per cent reduction in the company’s workforce.
It said the share of its tech-focused staff had risen from 36 per cent in 2022 to 52 per cent in the first quarter of this year.
Klarna added: ‘Ninety-six per cent of employees use AI daily—helping drive a 152 per cent increase in revenue per employee since Q1 ’23 and putting Klarna on track to reach $1million in revenue per employee.
In charge: Sebastian Siemiatkowski is the chief executive of buy-now-pay-later firm Klarna
‘AI is slashing costs across the business, most noticeable in customer service, where costs per transaction have dropped by 40 per cent since Q1 ’23 whilst maintaining customer satisfaction levels.’
Siemiatkowski was keen to highlight that the group’s active customer base had reached 100million, stating this represented the ‘fastest growth’ it had seen in years.
However, it also emerged this week that a growing number of Klarna’s customers were having trouble with the ‘pay later’ part of its operations.
As a buy-now-pay-later lender, Klarna’s customers can snap up a slew of items, including anything from burritos to dresses, in installments.
The company makes its money by charging fees to merchants and to consumers who fail to repay on time.
Nestled on page three of its latest first quarter earnings update, Klarna revealed that its consumer credit losses had risen to $136million, or around £101million, which is around 17 per cent higher than at the same point a year ago.
Neil Wilson, UK investor strategist at Saxo Markets, said: ‘It looks like customers are buying now and not paying later, which is kind of what we are seeing in terms of consumer health dashboards in the US in particular with credit card debt and rising stress evidenced by an increase in the percentage of customers only paying off the minimum balance.
‘It looks like they went a bit big on AI without realising that they probably need real people to control credit losses.
‘Strip away the fintech app stuff and they are just a subprime lender and need a lot of customer services to facilitate the business.’
Some analysts said they believed the upturn in the firm’s consumer credit losses partly stemmed from poorer economic sentiment in the US.
Data this week showed consumer confidence in the US had fallen to the second lowest on record.
Across its operations, Klarna’s total net loss widened to $99million by the end of the quarter, from $47million a year ago. Revenue in the first quarter jumped 13 per cent year-on-year to $701million, or around £621million.
Amid a rising net loss and mounting consumer credit losses, Klarna is now reportedly on a mission to bolster the hiring of humans across its customer service arm, having previously replaced 700 staff with AI.
It remains unclear how many new staff will be hired and where.
This week, Siemiatkowski indicated that the AI job cuts at the company had led to ‘lower quality’ customer service levels. Bloomberg reported that Siemiatkowski said the new workforce would be hired ‘in an Uber type of setup.’
While stressing that AI will remain a key part of the business, Siemiatkowski said this week: ‘Really investing in the quality of the human support is the way of the future for us.’
While raising eyebrows over its recent quarterly net loss and consumer credit losses, the firm’s proposed US initial public offering has also been put on the back burner amid ongoing jitters over Donald Trump’s trade tariffs.
The British government is also gearing up for a renewed clamp-down on pay-now-pay-later firms.
Last year, Klarna was fined over £35million and given a reprimand by Sweden’s financial regulator for breaching anti-money laundering rules.
Sweden’s Financial Supervisory Authority handed the buy-now-pay-later group a 500million Swedish crown fine as it slammed ‘significant deficiencies’ in Klarna’s risk controls.
The watchdog said Klarna’s general risk assessment failed to consider how its ‘products and services could be used for money laundering or terrorist financing’.
Simon Heath, a partner at Heligan Group, told This is Money: ‘It’s been a busy time for Klarna with recent disappointment of pausing a US IPO and doubling of Q1 losses, despite increasing revenues and active users.
‘Additionally, there are sceptics out there that believe there are more fundamental challenges to the business model and potentially critical issues that underlie the decision to pause the IPO.
‘And to compound matters, regulatory bodies are taking a closer look at the BNPL market.
‘Just this week, the UK government has initiated a review of the practices across this market which may add further woe to the Klarna business model.’
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