Klarna CEO Sebastian Siemiatkowski announced in a prerecorded video call to employees on Monday that the Swedish "buy now, pay later" (BNPL) company is cutting off 10% of its employees.
As customers have become more financially tight, interest in pay-later items has waned, and advocates in the U.S. began studying the deferred payment schemes last year.
Tech Crunch reported that around 7,000 employees work for the company right now. Around 700 workers will lose their jobs at the fintech company as a result of the 10% labor reduction. It has the ability to affect all domains and offices worldwide.
Some staff in Europe will be requested to quit the company in the coming days in exchange for severance money. Some employees outside of Europe will be forced to leave the organization as well, but the process will change depending on where they work.
The company did not explain the exact details of the layoffs. Instead, Siemiatkowski identifies a number of economic and geopolitical issues that have contributed to today's difficult decision.
$30 Billion Valuation From Last Year's $46 Billion
"When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today," Siemiatkowski said. "Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession."
So what exactly went wrong?
The Wall Street Journal reported last week that Klarna was looking for another $1 billion in investment, valued at $30 billion. Klarna's peak valuation of $46 billion last year has dropped by more than a third.
The Verge mentioned that although BNPL usage grew at the end of last year, the inconsistency of its clients in such a tumultuous market is certainly a contributing factor to BNPL's concerns. The report cited Fox Business which noted that over 30% of BNPL clients struggle to repay their debts, and the current level of inflation doesn't help. If BNPL services aren't paid back, they can't make money, making it a dangerous business.
More Info About Klarna's Business
Klarna presently has 400,000 merchants in its network. The company's primary offering is a payment function that allows you to purchase something now and pay for it in installments later.
Klarna has moved into new markets and developed new products over the years. It has a shopping app that allows you to track delivery, make payments, and save goods for later. The company also offers a payment card you can control from the app in some areas.
Klarna operates as a regulated bank in Europe. Customers can use Klarna to open a bank account and use the service to earn interest on fixed-term savings plans. This allows the company to raise funds directly from retail investors.
