Sweden’s Klarna Attributes Reduced Headcount to AI Chatbot Efficiencies

Klarna’s AI-driven transformation: Swedish payments group Klarna has implemented artificial intelligence to handle customer queries, resulting in significant job reductions and improved efficiency.

• The “buy now pay later” company has reduced its workforce from 5,000 to 3,800 positions over the past 12 months, primarily through attrition rather than layoffs.
• Klarna’s AI assistant is now performing the work of 700 employees, reducing average resolution time for customer queries from 11 minutes to just two minutes.
• CEO Sebastian Siemiatkowski expects the headcount to potentially decrease further to around 2,000 employees in the future, though no specific timeframe was provided.

Financial performance and productivity gains: Klarna reported a swing to profitability in the first half of 2023, accompanied by substantial increases in revenue and employee productivity.

• The company achieved an adjusted profit of 673 million Swedish crowns ($66 million) in the first half of 2023, compared to a loss of 456 million crowns in the same period last year.
• First-half revenue rose 27% year-over-year to 13.3 billion crowns, with the U.S. market showing particularly strong growth at 38%.
• Average revenue per employee over the past 12 months increased by 73%, from 4 million crowns to 7 million crowns.

Strategic focus on engineering talent: Klarna is prioritizing the recruitment of engineers while implementing a hiring freeze for other positions.

• The company has not hired for non-engineering roles since September 2022, contributing to the gradual reduction in workforce size.
• Klarna expects to pay significantly more per individual employee as it focuses on retaining and attracting high-skilled talent, particularly in engineering roles.
• This strategy aligns with the company’s emphasis on technological innovation and AI implementation.

Historical context and valuation: Klarna’s current workforce reduction and profitability mark a significant shift from its position during the peak of its valuation in 2021.

• At its peak valuation of $46 billion in 2021, Klarna was unprofitable and employed around 7,000 people.
• The company’s transition to profitability and increased efficiency comes as it positions itself for a potential initial public offering (IPO).

Potential IPO considerations: Klarna is contemplating a stock market listing, with CEO Siemiatkowski suggesting that a 2024 IPO is a possibility.

• While not committing to a definite timeline, Siemiatkowski indicated that an IPO next year “sounds reasonable.”
• The company is considering both U.S. and European listing options, with a slight preference towards a U.S. listing.
• Klarna’s improved financial performance and increased efficiency could make it an attractive prospect for potential investors.

Implications for the fintech industry: Klarna’s AI-driven transformation and return to profitability may have broader implications for the fintech sector and other “buy now pay later” companies.

• The successful implementation of AI in customer service could inspire similar moves by competitors, potentially leading to industry-wide changes in workforce structure and customer interaction.
• Klarna’s ability to achieve profitability while simultaneously reducing its workforce may set new benchmarks for operational efficiency in the fintech sector.
• The company’s potential IPO could serve as a litmus test for investor appetite in the “buy now pay later” space, especially given the current economic climate and increased regulatory scrutiny in the sector.