Buy now, pay later, products like those from Klarna have become very popular during the Covid pandemic.
Noam Galai | Getty Images
Klarna plans to lay off around 10% of its global workforce, making the purchase now, paying later the latest major tech company to announce job cuts.
Sebastian Siemiatkowski, CEO and co-founder of Klarna, made the announcement to his employees in a pre-recorded video message on Monday. The “vast majority” of Klarna employees will not be impacted by the measures, he said, but some “will be told that we cannot offer you a position in the new organisation”.
“If you work in Europe, you will be offered to leave Klarna with associated compensation,” the Klarna boss said. “Outside of Europe, the process for affected employees will be different depending on where you work.”
Klarna will share more information with employees about the changes “very soon”, Siemiatkowski said. The Swedish payments giant has more than 6,500 employees.
Buy now, pay later, products like those from Klarna – which allow shoppers to spread the cost of purchases over a series of interest-free installments – have become hugely popular as Covid has accelerated the adoption of online shopping. But investors worry about the sustainability of the sector’s growth as consumers tighten their purse strings amid rising inflation and rising borrowing costs. Affirm, the largest provider of BNPL in the United States, has lost nearly three-quarters of its stock market value since the start of 2022.
The move comes after media reported last week that Klarna is set to lose a third of its market value in a new funding round. The private company was last valued at $46 billion in an investment led by SoftBank. A Klarna spokesperson said the company does not comment on market speculation.
Siemiatkowski said Klarna’s decision to downsize was “difficult”, but necessary to keep the company “focused on what will really allow us to be successful in the future”.
“While staying calm in stormy weather is crucial, it’s also crucial not to close our eyes to reality,” Siemiatkowski said. “What we are seeing now in the world is neither temporary nor fleeting, and so we must act.”
Many tech companies that thrived during the Covid pandemic are now taking steps to cut costs as investors turn to the sector amid concerns over rising interest rates and declining market liquidity . Facebook parent company Meta and Uber are among companies slowing hiring, while Netflix and Robinhood have announced job cuts.