Sebastian Siemiatkowski, de Klarna co-founder and CEO, looks a bit frayed through the barrel of his webcam as he explains via Google Meet why everything is fine at fintech, despite mounting outrageous warnings of an impending recession.
Klarna is a European heavyweight, currently the bloc’s most valuable private technology company. Since its launch in 2005, the Swedish unicorn has become synonymous with “buy now, pay later” (BNPL), a type of debt popular among Generation Z that allows shoppers to split the cost of their online purchases over several months. The company claims it has 147 million active users in 45 countries.
But Klarna’s dream — to replace credit cards, which Siemiatkowski describes as “the worst form of credit” — faces a series of existential threats. The company’s workforce is still reeling from the layoffs that hit 10 per cent of its workforce and new regulations that will impose stricter rules on BNPL providers in the UK, one of its key markets. At the same time, BNPL executives told WIRED that investors are losing confidence in the sector in the face of a potential recession. “BNPL is relatively new. They want to understand how we can weather that storm,” said Libor Michalek, chief technology officer at another BNPL provider, Affirm. on June 16, The Wall Street Journal reported that Klarna was trying to raise money based on a $15 billion valuation, which would mean the company believes the company is worth $30 billion less than it was last year. Klarna declined to comment on what it called “speculation.”
Siemiatkowski attributes changing investor sentiment to the turbulence and a new strategy that will curb his growth plans. “Six to nine months ago, investors were like, ‘growth is all that matters, just focus on that,’ said Siemiatkowski, claiming that this was the reason for the layoffs. months has changed. Investors now want to see profitability. They want to understand how we can become profitable from now on.”
Focusing on short-term profitability will be a fall-back strategy for Klarna. The company’s net losses rose to 2.5 billion Swedish kronor ($254 million) in the first quarter, four times higher than the same period last year when it expanded aggressively in the US. “Klarna has been profitable for the first 14 years, but in recent years we have invested so heavily in new products and services, and in new markets like the US we have been dependent on people investing more money in the business. ” he says.
The increased competition is also weighing on the company. Siemiatkowski describes Apple’s decision to offer its own BNPL product as a validation of Klarna’s concept. But a Klarna employee, who worked on partnerships with merchants until they were fired as part of the layoffs, described concerns within the company that the market was becoming crowded. “We always tried to stay one step ahead or at least fend off our competitors because if our competitors are also present with our merchants, we know we are going to lose market share,” they say.
