Klarna plans to halve workforce, replacing over 1,000 jobs with AI

Klarna, the Swedish fintech giant known for its “buy now, pay later” services, is making headlines with its ambitious plan to nearly halve its workforce.

The firm has already cut its workforce from 5,000 to 3,800 in the past year and wants to reduce that to 2,000 employees by using AI in marketing and customer service.

This move comes as Klarna prepares for a potential initial public offering (IPO), targeting a valuation between $15 billion and $20 billion.

Klarna’s CEO, Sebastian Siemiatkowski, has been vocal about the transformative power of AI.

“Not only can we do more with less, but we can do much more with less. Internally, we speak directionally about 2,000 [employees]. We don’t want to put a specific deadline on that,” he stated.

The company has already seen significant improvements in revenue per employee, which has surged from $400,000 to $700,000.

Klarna has already seen a marked improvement in productivity, with revenue per employee increasing from $400,000 to $700,000. In customer service, AI has taken over tasks previously handled by 700 human employees, reducing the average resolution time for customer issues from 11 minutes to just 2 minutes, all while maintaining high customer satisfaction scores.

Financial performance and IPO preparation

Klarna disclosed its workforce reduction strategy alongside its interim financial results, which revealed a 27% increase in revenue, reaching 13.3 billion Swedish krona (£990 million). The company also reported a swing to an adjusted profit of 673 million krona, compared to a loss of 456 million krona in the previous year.

“Our proven scale efficiencies have been enhanced by our investment in AI, which has driven down operating expenses and improved gross profits,” the company stated.

As Klarna prepares for a stock market listing, which could occur as early as the first half of next year, it is aligning with financial advisers such as Morgan Stanley, JPMorgan Chase, and Goldman Sachs.

The company’s strategy to be a leading adopter of AI technology positions it favourably in a market increasingly dominated by AI-driven firms like Nvidia and Microsoft, potentially making Klarna’s stock more attractive to investors.

Concerns over job losses

The shift towards AI has sparked concerns about job losses. Unions have raised alarms about the potential for mass redundancies due to the growth of AI, calling for legislation to protect workers.

The International Monetary Fund (IMF) warned earlier this year that AI could impact nearly 40% of all jobs, likely exacerbating economic inequality.

In response to these concerns, Siemiatkowski has indicated that Klarna will reduce its headcount through “natural attrition,” effectively implementing a hiring freeze where staff are not replaced when they leave.

While this may increase the workload for remaining employees, Siemiatkowski argues that AI will compensate for the reduced workforce, potentially even offering higher pay for those affected. He acknowledged the need for government intervention to address the impact on workers but emphasised that there is no “stopping progress” for companies like Klarna.

As Klarna continues to integrate AI into its operations, the company aims to set a precedent for how fintech can harness technological advancements to drive efficiency and profitability.

Siemiatkowski stressed the importance of staying ahead in the AI evolution, particularly for Europe and democratic nations.

Despite the impressive financial gains, Klarna faces increasing credit losses, which rose by 22% in Q2.

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