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 company the latest major tech name 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 affected by the measures, he said, however some will be informed that they are being let go.
“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,” Siemiatkowski said.
“Since then, we have seen a tragic and unnecessary war in Ukraine unfold, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession.”
Staff in Europe will be offered redundancy packages with “an associated compensation,” Klarna’s boss said, while the process for other employees “will look different” depending on where they work. Klarna will share more information with employees about the changes “very soon,” Siemiatkowski said.
The Swedish payments giant currently has more than 6,500 employees globally.
Buy now, pay later services like Klarna’s, which allow shoppers to spread the cost of purchases over a series of interest-free installments, became wildly popular as online shopping accelerated during the Covid pandemic.
But investors are getting worried about the sustainability of the sector’s growth as consumers 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 the year.
The layoff announcement comes after media reports last week said Klarna is set to lose a third of its valuation 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 Klarna’s decision to reduce staffing numbers was one of the “hardest” decisions in the company’s history, but that it was necessary 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,” he 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 during 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 Meta and Uber are among the companies slowing hiring, while Netflix and Robinhood have announced job cuts.