Klarna Adopts AI to Halve Staff and Prepare for 2025 IPO | Generative ai examples in banking | Introduction to generative ai google | What is generative ai | Turtles AI

Klarna, the well-known Swedish "buy now, pay later" service, is planning a significant reduction of its workforce, aiming to halve it thanks to the integration of AI into business processes. 

Key Points:

• Workforce reduction – Klarna aims to cut its staff by half through automation with AI
• Increased Productivity: Revenue per employee grew from $400,000 to $700,000 per year.
• Hiring freeze: Excluding engineers only, staff reduction without direct layoffs.
• IPO Preparation: Valuation target between $15 billion and $20 billion.

CEO Sebastian Siemiatkowski recently highlighted technological advancements as a key factor in reducing quarterly losses and increasing employee productivity, highlighting a strategy that is geared towards operational efficiency and preparation for a future IPO. This decision, which could bring the workforce to around 2,000 units, is not based on layoffs but on a natural staff reduction approach, with a hiring freeze that excludes only engineers. Siemiatkowski also highlighted how AI is helping to increase revenue per employee, which went from $400,000 to $700,000 annually, while improving the company’s gross margins. Klarna, already the protagonist of a significant devaluation in recent years, is aiming for a new valuation of between 15 and 20 billion dollars with the future listing on the stock exchange. Despite a 22% increase in credit losses in the second quarter compared to the previous year, the company reported a 25% increase in revenue, signaling an improvement in overall performance. The cost reduction strategy through AI represents one of the strong points for the IPO, with a clear message to employees: less staff but more investments per individual.

AI is having a significant impact on several operational areas, including customer service, marketing and managing daily operations. A concrete example is the introduction of an AI virtual assistant which, in just 30 days after launch, handled two-thirds of customer conversations, carrying out the equivalent work of 700 full-time agents. This assistant is able to resolve requests in less than two minutes, significantly reducing the time compared to the eleven minutes needed with a human operator. Furthermore, it helped improve the accuracy of responses and reduce repeat customer requests by 25%, leading to an increase in profits of approximately $40 million in the year.

This technological transformation is not only a move to reduce costs, but also represents a crucial strategy ahead of Klarna’s next IPO, expected in 2025. The company, once valued at $46 billion, is now aiming for a new valuation between $15 billion to $20 billion, thanks to AI integration and continued expansion into the US market, where it saw a 93% increase in gross profits over the past year.

Despite this progress, Klarna’s credit losses increased 22% in the second quarter of 2024 compared to the previous year, a challenge the company is trying to mitigate.

Strategic use of AI and cost reduction are central to Klarna’s future as it continues to evolve in a competitive market.