Klarna is cutting 10 per cent of jobs as Europe's largest unlisted technology company faces up to the toughest times in its 17 years amid intense scrutiny of its buy now, pay later model.
Chief executive Sebastian Siemiatkowski told Klarna's more than 7,000 employees globally it was the "hardest" announcement the Swedish bank had made.
He called 2022 "a tumultuous year" and blamed Russia's war in Ukraine, a shift in consumer confidence, rises in inflation, a volatile stock market "and a likely recession" for the job cuts.
Klarna is currently aiming at raising new funds below the US$46 billion ($71.1b) valuation it achieved last year. The Wall Street Journal reported its new valuation was about US$30b but people close to Klarna called that speculation while confirming it would be lower than last year's. The company's valuation shot up from just US$11b in September 2020.
Buy now, pay later companies have been met with scepticism from some regulators and investors who believe they encourage younger consumers to take on unsustainable debt — by allowing them to spread out payment for online bills — issues which could be magnified during tougher economic times.
"While crucial to stay calm in stormy weather, it's also crucial not to turn a blind eye to reality. What we are seeing now in the world is not temporary or shortlived, and hence we need to act . . . Based on this, the senior leaders of Klarna have made some really tough decisions. Some of the hardest ones we have ever had to make," said Siemiatkowski.
Klarna earlier this month said it would start providing information to UK credit agencies to allay fears about rising consumer debt using buy now, pay later services. BNPL providers are not currently required to share information with credit agencies, which collect data from banks and other credit providers.
Share prices have tumbled across the financial sector, and some investors have been braced for job cuts, particularly among lossmaking start-ups. Klarna made profits every year from its founding until 2019 but has been lossmaking since then as it expanded rapidly into the US.
AdvertisementAdvertise with NZME.
It has considered a stock market listing for several years but has consistently decided to raise capital from existing investors and some new groups such as Japan's SoftBank rather than doing an IPO.
Siemiatkowski has spent significant time in the UK, telling regulators and ministers that Brexit represented an opportunity for the country to attract more fintechs and banks through smarter regulation, a plea that critics argued just meant watering down.
Klarna's chief executive has told the Financial Times the group aims to become the "Tesla of retail banking", expanding from its northern Europe base to the rest of Europe, the US and Australia as it takes on lenders, credit card providers and the likes of PayPal.
Its net loss in the first quarter of this year was four times higher than a year earlier at SKr2.5b (US$250 million) as credit losses rose by 50 per cent.
Written by: Richard Milne
© Financial Times