Klarna Lost $1BN, Yet the Company’s Hope Is Still Hope to Bounce Back Before Summer 2023

According to the annual report released recently, Klarna is moving toward profitability despite a $1bn decline in revenue in 2022.

The Swedish fintech company Klarna, even after facing a loss of $1bn has still said that they have put in measures to cover the gap before the summer of 2023. How are they going to do that? Will they increase their service fee? These questions are crucial at such a time. 

A Word From the CEO, Klarna

"In a tough macro climate we have once again demonstrated our resilience delivering excellent profitability throughout our traditional markets while launching goods and services helping to diversify our revenues and solve customer concerns," stated Klarna CEO Sebastian Siemiatkowski.

“With GMV up 22% YoY and credit loss rates reducing, we've made great progress on our new strategy and we're on a strong route towards profitability,” he added.

Klarna's annual report also disclosed that the business is optimizing for sustained growth this year and beyond. The company is also aiming to return to profitability by the summer of 2023. 

Sanctions That Contributed to Klarna's Loss of $1BN?

Research showed that lenders are not verifying borrowers' ability to repay loans or are pushing borrowers to spend beyond their means have prompted the regulatory examination of the broader buy now, pay later industry in countries such as the United States, the United Kingdom, and Australia.

However, the UK Treasury released draft proposals in February that would give the Financial Conduct Authority the power to prevent corporations from making future loans if they failed to do proper credit checks. After considering public feedback, the UK government plans to introduce legislation to parliament before the end of the year.

The threat of inflation and the actions of central banks are also challenges for the financial technology industry (Klarna). 

A Recap on Klarna Growth

Klarna was founded in 2005 and was profitable within six months and throughout the next 14 years, which was uncommon for a financial startup. Throughout the epidemic, Covid-19, it aggressively grew with venture money, becoming Europe's most valued fintech business at $46bn in 2021.

Last year the Swedish fintech company turned 18. It moved to a 10% increase in revenue in May, and after receiving $800m, its valuation dropped to $6.7bn in its highest investment round. The firm is developing swiftly despite a 58 percent increase in losses.

FAQs

Why Is Klarna making losses?

The company's intentions for expansion are mainly responsible for the losses that were incurred. The company has achieved significant progress in the United States market despite the terrible macroeconomic conditions. In December of the previous year, Klarna reached a new milestone by exceeding the point where the United States represented its largest income source.

Is Klarna losing money?

"Buy-now, pay-later" startup Klarna stated on Tuesday that it plans to generate a profit by the summer, even though it announced greater losses for the year 2022. Klarna's operational loss for the whole year came in at 10.5 billion crowns ($1 billion), which was an increase from 6.6 billion crowns in 2021.

Who are the largest investors in Klarna?

Klarna has received funding from 73 different investors. The most important investors presently in this company are Vijay Shankar and the Canada Pension Plan Investment Board.

Conclusion

Klarna has been a profitable fintech company for years now and has extended its services to many nations. It has earned a reputation as a supplier of "Buy now, pay later" (BNPL) benefits since it allows clients to obtain credit for their purchases while they are in the process of checking out. However, there have been some areas in the borrowing (debt), that the company needs to strengthen to avoid more losses.