Klarna CEO Sebastian Siemiatkowski speaks at a fintech event in London, Monday, April 4, 2022.
Chris Ratcliffe | Bloomberg via Getty Images
Klarna, the Swedish fintech or buy now, pay later, halved its net loss in the first quarter and saw a dramatic improvement in profits after slashing costs.
The company posted a net loss of 1.3 billion Swedish kronor ($120.7 million), a 50 percent drop from a loss of 2.6 billion Swedish kronor a year earlier.
Klarna reported total net operating income of SEK 5 billion, up 22% year-on-year.
“In the quarter, we delivered impressive growth in GMV and revenue, while we cut costs and credit losses, and invest aggressively in AI-driven products.”
“We are on track to be profitable this year while revolutionizing the way shopping and payments are made through our approach to artificial intelligence.”
Siemiatkowski previously told CNBC that the company plans to be profitable in the second half of 2023.
Klarna attributed the recent reduction in losses to lower customer defaults as a result of improvements in its underwriting business and diversification of other revenue streams such as marketing.
The results show how Klarna is making “significant progress” in monthly profitability, the company said.
Klarna, which now has more than 150 million customers, was assigned a BBB/A-3 credit rating by Standard & Poor’s Global in April with a stable outlook. The ratings agency said at the time that this reflected Klarna’s “ability to defend its strong e-commerce position in key markets, rebuild profitability” and “maintain strong capital buffers”.
There are early signs that Klarna’s deep cost-cutting measures are starting to pay off. The company went on a hiring spree during 2020 and 2021 to capitalize on growth sparked by the Covid-19 pandemic, and was forced to cut about 10% of its workforce in May 2022 in response to investor pressure to scale back operations. Despite this measure, it lost 85% of its market value in a funding round last summer.
Klarna is not alone. Buy-now, pay-later companies, which allow shoppers to defer payments or pay in installments, have been particularly hard hit amid subdued investor sentiment toward technology amid a deteriorating macroeconomic environment.
Artificial intelligence push
More recently, Klarna has turned its focus to AI.company Improve its app with more advanced AI recommendation algorithms to help its merchants target customers more effectively.
Klarna previously rolled out the ability to integrate OpenAI’s ChatGPT into its service via a plugin that allows users to ask the popular AI chatbot for shopping inspiration. The company said it was embedding artificial intelligence into its business to “improve internal efficiency and provide customers with a better service and experience”, such as through real-time translation in customer chats.
The company is now also branching out into facilitating short-term vacation rentals. Earlier this month, Klarna announced a partnership with Airbnb to let customers of the online vacation rental company book vacations and pay in installments.