Klarna has continued to invest in growth despite cutting more than 10% of its workforce last year. It has added 12 new markets since 2020 and expanded in existing markets, especially the U.S. The company said earlier this month that the U.S. has become its biggest market, overtaking Germany in the process.

The growth comes as Klarna takes on additional risk in underwriting new customers. Klarna disclosed today that overall consumer credit losses in 2022 increased over 2021. “However, our focus on the path to profitability is already yielding results with two consecutive quarters of improvement in credit losses,” the company said in the letter. 

Still, the company’s credit loss rate as a percent of GMV edged up to .68% for all of 2022, from .67% for 2021, according to the reported results. 

After a period of rapid expansion, BNPL companies in recent months have begun to prize profitability over growth, largely due to a push from their investors who are worried about the gloomy global economic outlook. Stockholm-based Klarna isn't the only BNPL provider curbing costs and drumming up new revenue streams to reduce losses. Sydney-based Zip and San Francisco-based Affirm have cut workers, tightened underwriting standards and considered merchant fee increases.

Growth in the company’s interest income, at 9%, was below growth in total net operating income, showing that Klarna’s customers preferred interest-free, shorter duration payment options over its alternatives.

By Lynne Marek on Feb 28, 2023
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