Dive Brief:

• Klarna Group’s workforce shrunk by 21% in each of the past two years as the buy now, pay later behemoth increasingly turned to artificial intelligence to support its operations, the company disclosed Friday when it filed to sell public shares. As of the end of 2024, 2023 and 2022, Klarna had 3,422, 4,352 and 5,527 full-time employees, respectively, the filing said.
• “The reduction in the number of full-time employees resulted from our strategic decision to reduce our overall headcount and drive operational efficiency by leveraging AI in our business and focusing on what really matters to our mission,” the company said in the filing. “We expect the number of employees to continue to decrease in future periods.”
• Klarna Group turned profitable last year with $21 million in net income on a 24% jump in revenue to $2.8 billion, the buy now, pay later payments provider said in the filing.

Dive Insight:

Klarna had 93 million active users and 675,000 merchants in 26 countries, as of the end of last year, according to the filing. The payments company filed a confidential registration in November with the Securities and Exchange Commission for review ahead of its initial public offering on the New York Stock Exchange, where it plans to trade under the symbol KLAR.

The business was founded 20 years ago in Stockholm by Sebastian Siemiatkowski, Niklas Adalberth, and Victor Jacobsson, becoming one of the first BNPL companies. Today, Klarna is one of the most prominent names in a sizable field of BNPL rivals including Affirm, Afterpay and Sezzle.

Its competitors also include banks in the payments realm, such as card-issuers like JPMorgan Chase and Citibank, as well as neobanks such as Revolut. The traditional card network companies are also competitors, including Visa, Mastercard and American Express. Digital payment firms Block and PayPal are also rivals.

The company disclosed in the filing that it reorganized last May in a share-for-share exchange to redomicile its parent company in the United Kingdom, from Sweden, registering its principal office at a London address. Klarna Holding and Klarna Bank are indirect subsidiaries of Klarna Group.

Nonetheless, the company’s operations remain predominantly situated in mainland Europe, with the largest offices, by square footage in Stockholm, Berlin and Giessen, Germany, respectively. Its U.S. headquarters in Columbus, Ohio, is relatively small at 15,602 square feet, compared to 244,308 in Stockholm.

That seems to be reflected in the workforce as well, with at least 2,130 employees, or 62% as of the end of last year, based in Sweden and Germany. (The company didn’t disclose exactly how many workers are in each region, but it said that many were associated with European labor unions or worker councils in those countries.)

Klarna pointed to AI as key to its business, saying that 96% of employees as of last August used the generative form of artificial intelligence in some way in their work. 

“We believe that society will experience vast changes that will be powered by AI,” the company said in the filing. “Accordingly, we are utilizing AI to transform commerce. We harness AI for the benefit of consumers, merchants and our employees. AI makes us more productive and efficient.”

The installment payments market has grown steadily in recent years – especially among younger consumers – as a form of credit for many people without access to traditional credit card products. The BNPL model offers interest-free financing, or, typically, interest rates that are lower than traditional credit.

The company said its network gives consumers and merchants access to payment and advertising software across Europe, North America, Australia and New Zealand.

Klarna seeks to raise at least $1 billion in the IPO and is targeting a market valuation for the company of more than $15 billion, Bloomberg News reported March 6, citing unnamed sources.

The company’s profit last year compared to a $244 million loss in 2023, on sales of $2.3 billion.

Klarna touted its recent investments to scale its global revenue growth, specifically in the U.S., but it also noted the growth stateside contributed to net losses. Klarna said it “reached an inflection point” in 2023, which led to significant operating margin improvements.

The company’s gross merchandise value rose 14% to $105 billion last year, according to the filing. 

“Our GMV has consistently grown faster than the broader market,” Klarna said. “Our flexible and personalized products, trusted consumer brand, global distribution and proprietary scalable infrastructure are the foundations enabling us to become our consumers’ everyday spending and saving partner, available everywhere and for everything.”

Last month, Klarna and JPMorgan Chase announced a partnership to extend Klarna’s BNPL offerings to the bank’s business clients.

As of 2023, the consumer retail and travel spending in Klarna’s markets was $18 trillion, with half of that in the U.S., the company said in the filing, citing a third-party consulting firm’s market opportunity study. Klarna says its addressable market is the $450 billion payments revenue opportunity connected with that spending.

While Klarna earns most of its revenue from transaction fees it charges merchants, it also derives revenue from consumer fees as well as from advertising services sold to merchants. The BNPL provider taps its trove of consumer data to let merchant clients target their ads.

Klarna said its advertising revenue increased from $13 million in 2020 to $180 million last year, and it believes it is “uniquely positioned” to address the $475 billion global digital advertising market opportunity, excluding China.

“Additionally, we are well positioned to build a leading presence in strategic adjacencies such as retail banking services, given our trusted relationships with consumers, our experience and our existing banking services in select regions, where we held $9.5 billion of consumer funds,” at the end of last year, Klarna said in the filing.