Buy now, pay later products like Klarna’s became wildly popular in the Covid pandemic.
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Klarna plans to lay off about 10% of its global workforce, making the buy now, pay later firm the latest major tech company to announce job cuts.
Sebastian Siemiatkowski, Klarna’s CEO and co-founder, made the announcement to his employees in a pre-recorded video message Monday. The “vast majority” of Klarna employees won’t be impacted by the measures, he said, however some “will be informed that we cannot offer you a role in the new organization.”
“If you are working in Europe, you will be offered to leave Klarna with an associated compensation,” Klarna’s boss said. “Outside of Europe, the process for impacted employees will look 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 a headcount of more than 6,500.
Buy now, pay later products like Klarna’s — which allow shoppers to spread the cost of purchases over a series of interest-free installments — became wildly popular as Covid accelerated adoption of online shopping. But investors are getting worried about the sustainability of the sector’s growth as consumer tighten their purse strings amid rising inflation and an increase in borrowing costs. Affirm, the biggest BNPL provider in the U.S., has lost nearly three quarters of its stock market value since the start of 2022.
The move comes after media reports last week said Klarna is set to lose a third of its market value in a new round of funding. The privately held company was last valued at $46 billion in an investment led by SoftBank. A Klarna spokesperson said the company doesn’t comment on market speculation.
Siemiatkowski said that Klarna’s decision to reduce staffing numbers was “tough,” but necessary for the company to stay “laser-focused on what really will make us successful going forward.”
“While crucial to stay calm in stormy weather, it’s also crucial not to turn a blind eye to reality,” Siemiatkowski said. “What we are seeing now in the world is not temporary or short-lived, and hence we need to act.”
Many tech companies that flourished in the Covid pandemic are now taking steps to cut down on costs as investors sour on the sector due to concerns over rising interest rates and declining market liquidity. Facebook parent company Meta and Uber are among the companies slowing hiring, while Netflix and Robinhood have announced job cuts.