Klarna doubles losses but eyes profitability: ‘Buy now-pay later’ giant claims revenues are up 22%
Klarna has insisted it is on the ‘path to profitability’ – despite losses more than doubling to £652million.
The ‘buy now, pay later’ (BNPL) provider, which has been criticised for enticing young people into debt, said revenues jumped 22 per cent in the year to date to £1.2billion.
Despite the cost-of-living crunch, credit losses were down from 0.8 per cent of money lent to shoppers in the second quarter of the year to 0.7 per cent in the third quarter, it added.
Optimism: Klarna – which was founded by Sebastian Siemiatkowski (pictured) has been criticised for enticing young people into debt
But still the firm was in the red in the first nine months of the year, as administrative expenses jumped to £1.1billion from £751million a year earlier.
Sebastian Siemiatkowski, the boss and co-founder, said: ‘Klarna has made huge progress on our path to profitability, which we expect to hit on a monthly basis in the second half of 2023.’
He said the Swedish business, famous for its pink branding, was seeing ‘massive growth’ in the US.
But eyebrows have been raised over its future, as swathes of banks and even technology companies such as Apple are launching their own BNPL services.
Earlier this year, when it last tried to raise money, Klarna’s value was slashed by 85 per cent to £5.6billion, down from £38.3billion just 12 months earlier. In May, it axed 10 per cent of its workforce, or around 700 people.
Klarna allows customers to split the cost of purchases into instalments, or pay for a product bought online after it arrives.
It works with shops from fast fashion retailer Boohoo to home improvement firms, and even food delivery services such as Deliveroo.
Critics have lambasted it for encouraging users, especially younger shoppers, to buy more than they can afford and pay it off at a later date.
But Klarna says it is a better alternative to credit cards, as customers are not charged for paying late.
BNPL is now set to be regulated by the City watchdog.
This summer, the Treasury said it would set out legislation next year to bring BNPL providers under the remit of the Financial Conduct Authority. Klarna has welcomed the move.
Siemiatkowski founded Klarna during business school in the early 2000s with his friends Niklas Adalberth and Victor Jacobsson, and was ranked number 951 on the Forbes billionaires’ index at the start of this year with a net worth of £2.7billion.
He no longer features on the list, following the crash in Klarna’s value.