Klarna’s CEO said increased inflation, a volatile stock market and the war in Ukraine have marked the beginning of a ‘tumultuous year’.
Swedish fintech Klarna has announced plans to lay off 10pc of its workforce “across all domains” of the company.
The ‘buy now, pay later’ (BNPL) start-up currently has more than 6,800 employees, which means the cuts are expected to impact around 680 people.
Klarna CEO and co-founder Sebastian Siemiatkowski said in a company announcement yesterday (23 May) that Klarna “does not exist in a bubble” and referenced several global issues that have impacted its business plans for the year ahead.
He cited Russia’s invasion of Ukraine, a shift in consumer sentiment, an increase in inflation, a highly volatile stock market and a likely recession, marking “the beginning of a very tumultuous year”.
“While crucial to stay calm in stormy weather, it’s also crucial not to turn a blind eye to reality,” Siemiatkowski added. “What we are seeing now in the world is not temporary or short-lived, and hence we need to act.”
The news comes days after the Wall Street Journal reported that Klarna is seeking new funds at a lower valuation. The fresh funding could see Klarna’s $45.6bn valuation fall by one-third, people familiar with the matter told the publication.
Siemiatkowski said affected staff members working in Europe will be offered to leave Klarna with “an associated compensation”, while the situation for those working outside of Europe is less clear.
The Swedish unicorn’s CEO also asked all staff to work from home this week, in “consideration of the privacy of the people affected by these changes”.
“I, together with the management team and all senior leaders are deeply saddened by seeing friends and colleagues leave,” Siemiatkowski said. “I want to thank each and every one of you for your hard work and above all your contribution to Klarna and our mission.”
Klarna has benefitted in recent years from a surge in online shopping and the option to buy now and pay later.
However, it is an increasingly competitive area. US rival Affirm floated on the Nasdaq in January 2021 and reached a market cap of $23bn.
A flurry of deals also took place in the BNPL sector last year, with big players such as Mastercard joining the space with its Installments service, PayPal acquiring Japanese BNPL player Paidy and UK digital bank Monzo jumping on the trend with its Monzo Flex feature.
The sector has also attracted some scrutiny over the ease with which shoppers can amass debt through online shopping. The UK is planning regulations to oversee these payment providers, and the country’s financial watchdog recently told four BNPL players to change their “potentially unfair and unclear” terms and conditions.
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Klarna CEO Sebastian Siemiatkowski speaking at the Digital Life Design conference in 2013. Image: Picture Alliance/Tobias Hase via Flickr (CC BY-NC-SA 2.0)