Klarna, the Buy Now, Pay Later company, achieves 67% reduction in losses and 21% increase in revenue

“Buy-now, pay-later” pioneer Klarna is set on achieving profitability by the summer of 2023.

Klarna’s efforts to reduce costs have resulted in a 67% decrease in losses during the first half of 2023.

The company’s net operating income for the period reached 9.2 billion Swedish krona ($843.5 million), a 21% YoY increase. However, Klarna still recorded a net loss of 2.1 billion Swedish krona, a significant improvement from the 6.4 billion krona loss in the same period last year.

Klarna did manage to record one month of profitability in the first half of the year.

The company’s credit losses, which indicate provisions made for customer defaults, declined by 39% to 1.8 billion krona from 2.9 billion.

Buy now, pay later (BNPL) companies enable customers to defer payments or make purchases through interest-free installments. These firms generate revenue by charging merchants fees for each transaction, rather than customers.

Despite challenges posed by rising interest rates, Klarna’s CEO and founder, Sebastian Siemiatmkowski, expressed confidence in achieving profitability by the second half of 2023. Klarna’s aggressive cost-cutting strategy and workforce reductions in 2022 have already shown positive results.

Siemiatkowski stated, “We were fortunate to make those decisions in May 2022 because almost everyone who left Klarna found new employment. If we were to make those cuts today, unfortunately, that would not be the case.”

Last year, Klarna experienced an 85% decrease in market value, dropping from $46 billion to $6.7 billion. Other industry players, including PayPal, Affirm, and Block, also faced significant declines in their shares due to technology market volatility.

Klarna attributed these challenges to unfavorable macroeconomic conditions such as higher inflation, rising interest rates, and changing consumer sentiments.