The end of Klarna’s easy money is bad news for BNPL | MarketingwithAnoy

Sebastian Siemiatkowski, den co-founder and CEO of Klarna, looks a little frayed down the barrel of his webcam, while he explains via Google Meet why everything is fine on fintech despite more and more madness warnings of a looming recession.

Klarna is a European heavyweight, currently the block’s most valuable private tech company. Since its launch in 2005, the Swedish unicorn has become synonymous with “buy now, pay later” (BNPL), a type of debt popular with Generation Z that allows customers to share the cost of their online purchases over several months. The company claims to have 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 number of existential threats. The company’s workforce still disagrees layoffs that affected 10 percent of its staff and new ones regulation which 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 faith in the sector in the face of a potential recession. “BNPL is relatively new. They want to understand how we are able to cope with that storm,” said Libor Michalek, chief technology officer at another BNPL provider, Affirm. Wall Street Journal reported that Klarna tried to raise money based on a valuation of $ 15 billion, which would mean that it believes the company is worth $ 30 billion less than last year. Klarna declined to comment on what it called “speculation.”

Siemiatkowski credits changing investor sentiment for the turbulence and a new strategy that will slow down their plans to grow. “Six to nine months ago, investors were like, ‘Growth is the only thing that matters, just focus on it,'” Siemiatkowski said, adding that this was the reason for the layoffs. changed within the last six months. Investors will now see profitability. They want to understand how we get to profitability right now. “

Focus on short-term profitability will be a fluctuation in the strategy for Klarna. The company’s net loss peaked at SEK 2.5 billion ($ 254 million) in the first quarter, four times higher than in the same period last year, when it aggressively expanded 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 company,” he says. .

Increased competition also weighs 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 trading partnerships until they were fired as part of the layoffs described concerns in the company that the market was becoming more and more crowded. “We always tried to improve our competitors or at least stave off them, because if our competitors also have a presence with our dealers, then we know we’re going to lose market share,” they say.

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