If you are betting big on BNPL, please make sure you read this and try to understand that the winds of the economy are turning…losses at Klarna quadrupled in a crushing H1 2022.
Yes…losses QUADRUPLED to SKr6.2 billion ($581 million) for Europe’s one-time most valuable private FinTech company.
Klarna is now preparing to slash costs in an effort to find a route back to profitability.
It reported the net loss of $581 million and attributed the deepening losses to higher employee costs, investments in integrating newly acquired Swedish price comparison service PriceRunner and rising credit losses, reflecting the greater difficulty of underwriting new customers with limited credit histories.
Revenues increased 24% year on year to SKr9.1 billion ($850 million), driven by growth in markets including the US, where Klarna has built up 30 million users — a fifth of its global total.
“Klarna has been operating in a very different environment in the first half of 2022,” said Sebastian Siemiatkowski, chief executive and co-founder.
“When we set our business plans for 2022 in the autumn of last year, it was a very different world than the one we are in today.”
Klarna’s struggles reflect the challenges facing BNPL services. The products are highly popular among younger users in sectors such as fast fashion.
However, as has been reported by Payments Cards & Mobile numerous times, a trifecta of worsening economic conditions, growing regulatory scrutiny in markets including the UK, and competition from lenders and big tech companies are challenging the business model.
After several attempts to raise cash at higher valuations failed, the value of Klarna’s shares slumped in July to $7 billion after it raised $800 million from investors including Sequoia and Mubadala, the Abu Dhabi sovereign wealth fund.
Klarna secured a valuation of $46 billion as recently as June last year, following a $639 million funding round led by Japan’s SoftBank, the investment group behind a disastrous bet in office-sharing group WeWork.
The value of other BNPL providers has collapsed in recent months. Shares of the US-listed provider Affirm, which has partnered with big retailers such as Amazon and Walmart, are down more than 80% from their high in November.
