Klarna, a big name in the Buy Now, Pay Later (BNPL) sector, saw its net loss double in the first quarter, which has led to issues with repaying loan installments.
Klarna recently disclosed a net loss of $99 million for the first quarter, nearly doubling last year’s loss of $47 million for the same period. The company, which provides BNPL services to various merchants, allows consumers to make purchases while incurring charges for late payments.
The first-quarter revenue report indicated a rise in consumer credit losses, reaching $136 million, a 17% increase compared to the prior year. A survey by Lendingtree highlighted a growing issue with BNPL users meeting their payment obligations. It found that 41% of these users paid late on at least one loan, up from 34% the previous year. Those most likely to miss payments included high-income earners, men, younger individuals, and parents with young kids.
According to Lendingtree, about one in four BNPL users turned to these loans for grocery purchases due to escalating supermarket prices, showing a 14% increase from the year before. Additionally, almost 25% reported having three or more BNPL loans active simultaneously, raising questions about the long-term viability of the BNPL model and its effects on consumers and service providers alike.
In an effort to mitigate costs, Klarna has embraced artificial intelligence. The company revealed that its workforce had shrunk by 39% over the last two years, and customer service expenses decreased by 12% year-on-year in the first quarter. It’s estimated that around 700 jobs were replaced by AI.
However, Klarna has recently begun to rehire human employees after the CEO admitted that the AI chatbot was delivering “low quality” service. This suggests that while AI can help cut costs and improve efficiency, the human touch remains crucial for quality customer service and overall customer satisfaction.
