Klarna Reduces Workforce by Half Amid AI-Driven Growth
Klarna, the Swedish buy now, pay later (BNPL) company, is set to reduce its workforce by nearly 50% over the coming years. This move is attributed to the company’s heavy investment in artificial intelligence (AI), which has been central to its strategy for enhancing efficiency.
Sebastian Siemiatkowski, Klarna’sCo-Founder and CEO, has confirmed that the company has already cut its staff from 5,000 to 3,800 in the past year. The firm’s goal is to further trim its workforce to approximately 2,000 employees. This reduction is being driven by AI’s capabilities in customer service and marketing, which have allowed the company to operate with fewer human resources.
We just published H1'24 results:
šWe booked $1.3B revenue in H1 2024 and weāre still growing 27% a year.
šŖEach quarterās results confirm that we made the right investments in the US, despite a lot of people questioning at the time.
Siemiatkowski emphasised that AI’s integration into the company’s operations has not only reduced the need for staff but has also increased productivity and profitability. “Not only can we do more with less, but we can do much more with less,” he told the Financial Times.
Revenue and Profit Boost Amidst Workforce Reduction
Klarna’s recent financial results highlight a notable increase in revenue and profitability. The company reported a 27% rise in revenue to 13.3 billion Swedish krona (Ā£990 million) for the first half of 2024. This growth has been accompanied by an adjusted profit of 673 million Swedish krona ($66 million), compared to a loss of 456 million Swedish krona a year earlier.
The firm’s successful financial performance is partly attributed to its strategic use of AI, which has improved operational efficiencies and contributed to higher average revenue per employee. The average revenue per employee has surged from 4 million crowns to 7 million crowns in the past year.
AI’s Impact on Employment and Industry Concerns
While Klarna celebrates its AI-driven gains, the impact on employment has sparked concerns. The International Monetary Fund (IMF) has previously warned that AI could affect nearly 40% of all jobs and potentially exacerbate inequality. Unions are voicing concerns over mass job losses and are calling for legislative measures to protect workers in the wake of AI advancements.
I tell journalists same as all our employees for months:
– AI allows us to be fewer in total – This means lower cost in total – Employees stay on average 5 years in tech companies – Almost fully stopping recruitment means shrink by 20% / y through natural leave – Savings areā¦
Siemiatkowski acknowledges these concerns, suggesting that it is “critical” for governments to address the broader implications of AI on employment. He argues, however, that progress in technology is inevitable and that companies like Klarna must adapt to stay competitive.
Preparing for an Initial Public Offering
Klarna is gearing up for a significant milestone: its initial public offering (IPO). The company is expected to go public in the first half of 2025, with a targeted valuation between $15 billion and $20 billion. This anticipated IPO is seen as a strategic move to capitalise on the increased interest in AI and technology-driven growth.
Siemiatkowski has indicated that the benefits of AI will be a key selling point for the IPO, which is being managed by major financial institutions, including Morgan Stanley, JPMorgan Chase, and Goldman Sachs.
Conclusion
Klarna’s aggressive AI-driven strategy has led to substantial workforce reductions and significant financial gains. As the company prepares for its IPO, it is positioning itself as a leader in leveraging technology for growth. However, the broader implications for employment and industry practices continue to be a subject of debate, underscoring the need for a balanced approach to technological advancements.
