Klarna: Artificial Intelligence as the Key to Increasing Efficiency and Going Public

Klarna plans to cut almost half of its workforce to position itself more efficiently for the long-awaited IPO. The Swedish 'Buy Now, Pay Later' company saw a significant reduction in net loss from 854 million Swedish kronor ($84 million) in the previous year to just 10 million kronor in the second quarter. Last year, the company already reduced its number of employees from 5,000 to 3,800. In the near future, this number could decline to less than 2,000, as Klarna increasingly relies on the use of Artificial Intelligence in areas such as customer service and marketing. CEO Sebastian Siemiatkowski emphasized that AI enables 'not just doing more with less, but doing much more with less.' Klarna has imposed a hiring freeze for all positions except for engineers and is utilizing natural attrition instead of layoffs to reduce staff. Siemiatkowski argued that the impact of AI on employment is a matter for governments and not companies. The company has already engaged financial advisors for its upcoming IPO, which could potentially take place in the first half of next year. Morgan Stanley, JPMorgan Chase, and Goldman Sachs are in leading positions to take on central roles. However, Siemiatkowski did not comment on speculations regarding the sale of shares by existing investors. By reducing its workforce and leveraging AI, Klarna was able to increase the average annual revenue per employee from approximately $400,000 to $700,000. Despite a 22 percent increase in credit losses to 1.1 billion kronor in the second quarter, revenue rose by 25 percent to 6.9 billion kronor. Klarna was continuously profitable from its founding in 2005 until 2019, when rapid expansion in the U.S. led to significant losses. Last year, the company achieved a quarterly profit for the first time in over four years. Siemiatkowski emphasizes that AI has improved the company’s gross margins and ruled out a return to losses. Through these measures, Klarna hopes to achieve a valuation between $15 billion and $20 billion in an IPO, although the company was valued at $46 billion in 2021. Siemiatkowski summarized: 'Lower overall labor costs, higher cost per individual. I am very pleased to see this paying off.'