This week, “buy now, pay later” (BNPL) company Klarna announced its losses had deepened a further 47% on the year prior, reporting a cool $1 billion loss for 2022.
Lose now, profit later(?)
Klarna competes in the increasingly crowded BNPL space. For those unfamiliar, such services allow almost anyone to pay for things in instalments. A new TV. Clothes. Makeup. Vacations. Pretty much anything can be BNPL'd — even a $12 vodka cranberry can be split over 4 payments if you really want.
By primarily making money from the merchant, rather than charging interest to the customer, Klarna offers an “alternative” to the fees often charged by credit card providers. After raising funding at a $5.5bn valuation in 2019, Klarna rode the pandemic wave, raising billions of dollars at increasingly eye-watering valuations, with reports in Feb ‘22 of a potential $60bn valuation.
But, like so many startups, Klarna has had to pull the handbrake. It's slowed down on its aggressive expansion into the US, as investor sentiment turned against fast-growing, cash-burning businesses, towards more sustainable (read: profitable) business models. The company maintains that it’s on course to get back into the black, but investors have lost confidence. Since its peak, Klarna has been forced back to the negotiating table at lower and lower valuations — most recently raising $800m at a $6.7bn valuation.
