Swedish payment provider Klarna has reduced its workforce from 5,000 to 3,800 employees, replacing many roles with artificial intelligence (AI). This move is part of a strategy to increase efficiency and prepare for a potential IPO.
At Klarna, AI takes over human roles
Klarna, the Swedish financial technology company, is undergoing a significant restructuring as it embraces artificial intelligence to boost productivity and efficiency. The company, known for its “Buy now, pay later” payment method, has reduced its workforce from 5,000 to 3,800 employees, primarily by not replacing workers who leave. Instead, AI-driven tools have taken over many of their responsibilities. Klarna CEO Sebastian Siemiatkowski revealed in an interview with Reuters that this downsizing was achieved without layoffs, simply by halting new hires since September. “The company is gradually getting smaller,” Siemiatkowski explained.
Klarna’s operations in Germany, with offices in Berlin, Munich, Mannheim, and Giessen, have also been affected by this workforce reduction. Employees who leave are not being replaced, except for tech developers, who are still in demand. Klarna’s AI-driven approach is most evident in its customer support, where a chatbot integrated with ChatGPT now performs the work previously handled by 700 support staff, reducing the time to resolve customer issues from 11 minutes to just 2 minutes. The company plans to continue this strategy, aiming to reduce its workforce to around 2,000 employees while focusing on hiring developers.
Klarna’s valuation and plans for an IPO
Founded in 2005, Klarna rose to prominence with its innovative payment solutions and was once Europe’s most valuable startup, with a valuation of nearly $46 billion. However, the company’s valuation plummeted to $6.7 billion just a year later due to rising interest rates and a cautious tech investment market. Klarna is now eyeing a potential IPO in the United States, possibly as early as next year, with a valuation of up to $20 billion. The company recently announced a 93% increase in its gross profit in the U.S. for the first half of 2024, signaling a potential turnaround.
Klarna’s restructuring improves financial performance
At its peak valuation in 2021, Klarna was unprofitable, with 7,000 employees and declining revenues. However, the company has since reported a significant turnaround, achieving an adjusted profit of 673 million Swedish kronor (approximately $66 million) in the first half of 2024. Revenue per employee has surged by 73% over the past 12 months, from 4 to 7 million kronor. This improvement follows a challenging period in 2023 when Klarna posted a loss of 2.5 billion kronor, after a massive 10 billion kronor loss (around $930 million) the year before.
The shift to AI and workforce reduction is part of Klarna’s strategy to become profitable and IPO-ready. The company also announced plans to sell its checkout payment business for approximately $520 million and reported millions of new customers and 68,000 new merchant partners in recent months. Siemiatkowski expressed confidence to the financial newspaper Handelsblatt, stating, “We will definitely be profitable this year. The only question is how big the profit will be.”
