According to TechCrunch, Klarna, the Swedish buy now, pay later (BNPL) business, said in a recorded video message that it is cutting off 10% of its global workforce. The company currently employs approximately 7,000 people, with a 10% reduction affecting nearly 700 of them.
Users can use BNPL services like Klarna, Affirm, and Afterpay to get a product for free or a small fraction of the entire price. Customers can then make incremental payments over a predetermined period of time, however late payments will result in a charge, which is usually interest-free. At the height of the pandemic, when many individuals were short on cash and had nothing better to do than shop online, BNPL enterprises exploded.
In a pre-recorded video message, Klarna CEO Sebastian Siemiatkowski informed staff of the news, citing “the crisis in Ukraine, altering consumer attitude, a jump in inflation, a highly volatile stock market, and a likely recession” as causes. Redundancies. Workers in Europe will receive “joined compensation,” according to Siemiatkowski, but the severance procedure in the United States will “appear different” depending on location.
Klarna’s credit rating has dropped significantly.
The Wall Street Journal reported last week that Klarna is looking to seek a fresh round of capital worth $30 billion, down from $46 billion over a year ago. Affirm, another BNPL business, has seen a 75 percent drop in its stock price this year.
Although BNPL usage surged at the end of last year, one of the reasons why BNPL services are failing is the dependability of its clients in such an unpredictable market. According to a recent research by sfgate, over 73 percent of its clients are Gen Z (those born between 1997 and 2012), and roughly 43 percent of them had missed at least one payment. Meanwhile, according to a Fox Business article, over 30% of BNPL clients are having trouble paying down their loans, and current inflation isn’t helping. BNPL services can only make money if they are paid back, which might make it a hazardous venture.
Despite the downgrade and layoffs, Siemiatkowski informed employees that “Klarna continues to have a strong position in the market” and that he is “relentlessly confident about Klarnas’ future.” Other big giants, such as Meta, Apple, and Snapchat, have slowed hiring, while Netflix has already laid off over 150 people.