Ritika Janiya
Klarna, the well-known “Buy Now, Pay Later” (BNPL) company, has made a surprising turnaround this year. After facing a significant loss in 2023, the company has now reported a profit in the first half of 2024. This is a big deal, especially since Klarna is one of the leading players in the BNPL sector, which allows people to split their purchases into smaller, interest-free payments. This service is popular with consumers who want to manage their finances better, and merchants are happy to cover the transaction fees because it encourages more sales.
In the first six months of 2024, Klarna reported an adjusted operating profit of 673 million Swedish krona (about $66.1 million). This is a huge improvement from the loss of 456 million krona they experienced in the same period last year. Even though the company still recorded a net loss of 333 million krona, Klarna focuses on adjusted operating income as a better measure of their profitability. According to Klarna, this metric gives a clearer picture of their underlying business activities.
Klarna’s revenue also grew by 27% year-on-year, reaching 13.3 billion krona. This growth shows that the company’s strategies are paying off, especially in the United States, where Klarna saw a 38% increase in sales. Klarna’s CEO and co-founder, Sebastian Siemiatkowski, highlighted the company’s expansion in the U.S., mentioning that their global network continues to grow rapidly. They’ve added millions of new consumers and 68,000 new merchant partners, boosting their market presence even further.
So, how did Klarna manage to swing from losses to profits in just one year? The answer lies in their smart use of technology and a focus on sustainable growth. Klarna has been a pioneer in the corporate world by leveraging artificial intelligence (AI) to increase productivity and reduce costs. AI has helped them streamline operations, making the company more efficient. Siemiatkowski mentioned that Klarna’s average revenue per employee increased by an impressive 73% over the past year, reaching 7 million Swedish krona. This means that each employee is now contributing significantly more to the company’s revenue, thanks to the efficiencies brought by AI.
Klarna is not just resting on its BNPL laurels. The company is looking to diversify its offerings and expand beyond its core product. Earlier this month, Klarna launched a new product called Klarna Balance, which functions like a checking account. This new feature is part of Klarna’s strategy to become a primary banking provider for its customers. By offering more financial products, Klarna hopes to keep its customers within its ecosystem, encouraging them to use Klarna for all their financial needs.
The company’s recent successes have brought them closer to their highly anticipated initial public offering (IPO). Although Klarna has not set a specific date for the IPO, it is widely expected to take place in the United States. In an interview earlier this year, Siemiatkowski hinted that an IPO in 2024 is “not impossible,” but he acknowledged that there is still work to be done before Klarna can go public. The IPO is eagerly awaited by investors, as Klarna is one of the most high-profile companies in the fintech space.
In addition to its IPO plans, Klarna made another strategic move earlier this year by selling its proprietary checkout technology business. This technology allows merchants to offer online payments, and the sale was seen as a way for Klarna to focus more on its core business while reducing competition with other online payment services like Stripe, Adyen, and Block. The sale was led by a group of investors, including Kamjar Hajabdolahi, CEO and founding partner of the Swedish venture capital firm BLQ Invest. Klarna described the sale as a “strategic” step, which aligns with their goal of focusing on what they do best: providing BNPL services and expanding their financial offerings.
As Klarna continues to grow and innovate, it remains a key player in the rapidly evolving fintech industry. Their ability to turn losses into profits, embrace AI, and diversify their products shows that they are well-positioned for future success. With a potential IPO on the horizon and new products in the pipeline, Klarna is set to remain at the forefront of the financial technology world. Whether you’re a customer, merchant, or investor, Klarna is a company worth keeping an eye on as it continues to shape the future of finance.
