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Klarna has significantly reduced its workforce over the past year, with plans for further cuts as it prepares for a potential stock market listing.
The buy-now-pay-later (BNPL) company has reduced its employees from about 5,000 to 3,800, largely due to the integration of artificial intelligence (AI) into its operations.
Klarna’s AI-Driven Efficiency and Job Reductions
In its interim results released on August 27, Klarna highlighted the impact of AI on its operations.
The company’s AI assistant is now performing tasks equivalent to the work of 700 employees, resulting in a significant reduction in average resolution time for customer inquiries from 11 minutes to two minutes.
Klarna CEO @klarnaseb: "In H1 24, we saw firsthand the benefits of adopting practical AI..Our AI assistant now performs the work of 700 employees, reducing average resolution time from 11 minutes to just 2, while maintaining the same customer satisfaction scores as human agents" pic.twitter.com/BLZJgzNxMT
— The Transcript (@TheTranscript_) August 28, 2024
This AI-driven efficiency has allowed Klarna to reduce operating expenses and improve gross profits.
CEO Sebastian Siemiatkowski emphasized that the workforce reduction was primarily achieved through natural attrition, such as employee resignations and retirements, rather than forced layoffs.
“By simply not hiring, which we haven’t done since September … the company is kind of becoming smaller and smaller,” Siemiatkowski explained.
He added that the company’s workforce could eventually fall to 2,000, though no specific time frame was provided. The impact of these changes is evident in Klarna’s productivity metrics.
I tell journalists same as all our employees for months:
– AI allows us to be fewer in total
– This means lower cost in total
– Employees stay on average 5 years in tech companies
– Almost fully stopping recruitment means shrink by 20% / y through natural leave
– Savings are…— Sebastian Siemiatkowski (@klarnaseb) August 28, 2024
The average revenue per employee over the past 12 months has increased by 73%, from 4 million crowns to 7 million crowns.
Notably, Klarna’s strategy aligns with broader industry trends regarding AI integration in the workforce.
Recent studies from McKinsey, the IMF, and Goldman Sachs indicate that AI could replace around 40% of jobs, with customer service being one of the key areas for swift disruption.
McKinsey released their 76-page long report on generative AI.
They say AI will automate 30% of work hours by 2030.
Here are 5 most important things you need to know: pic.twitter.com/9k44BWyHT2
— Aadit Sheth (@aaditsh) August 22, 2024
Despite the workforce reductions, Klarna has reported strong financial performance.
The company increased its revenue by 27% to 13.3 billion Swedish krona ($1.3 billion) and swung to an adjusted profit of 673 million krona from a loss of 456 million krona last year.
This turnaround comes after a period of financial losses that began in 2020 following a rapid expansion in the US market.
Klarna’s Potential IPO and Broader Implications for AI in the Workforce
Klarna is now eyeing a potential stock market listing as early as next year. Siemiatkowski believes that an initial public offering (IPO) in 2025 “sounds reasonable,” although no definite plans have been made.
The company is considering listing in the US but has also explored European options.
A recent valuation estimate by top Klarna investor Chrysalis Investments suggested the fintech firm could achieve a valuation of between $15 billion and $20 billion at an IPO.
As companies like Klarna continue to integrate AI into their operations, organizations must develop comprehensive AI workforce strategies.
