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Klarna's Resilient Evolution: Banking Expansion and AI Innovation Set the Stage for Future Growth

Updated: Jun 3

The following blog discusses:


  • Klarna's strategic reassessment and diversification efforts after a significant valuation drop

  • Milestones in Klarna's global expansion, including securing approval to offer credit and payment products in the UK

  • The transformative impact of AI on Klarna's operations, including cost savings and enhanced customer service.

  • Klarna's global expansion plans and forward-looking perspective


A Key Milestone in Global Growth and Financial Evolution Beyond BNPL


A pivotal moment came when Klarna Bank AB secured approval in 2023 to offer credit and payment products in the UK, marking a significant milestone in its global business strategy. By the third quarter of 2023, strong financial results reflected Klarna's evolution and readiness for public markets.


The US market played a crucial role, with Klarna achieving its fourth consecutive quarter of gross profit, solidifying its position in a major consumer market. Globally, Klarna's user base surged from 33 million in 2017 to over 150 million in 2022, a 69% year-over-year increase, demonstrating its rising popularity and scalability.

Explore Klarna's dynamic journey in banking expansion and AI innovation, shaping the future of fintech. Witness strategic milestones unfold.

Founded in 2005 and fully licensed as a bank since 2017, Klarna's expansion into banking services builds on a foundation of innovation and customer trust. While the recent UK authorization excludes its hallmark BNPL loans, it represents a significant milestone, opening new revenue streams and reinforcing Klarna's position as a versatile financial services provider.


2023 a Transformative Year


2023 was a transformative year for Klarna, marked by significant milestones and advancements in generative AI. It achieved its first month and quarter of profitability in four years, with a gross profit margin of 50%, and improved its adjusted operating result by 95%. Klarna’s global growth outpaced digital commerce by almost seven times, and it saw a 32% reduction in consumer credit losses, which remained near historic lows.

Explore Klarna's dynamic journey in banking expansion and AI innovation, shaping the future of fintech. Witness strategic milestones unfold.

Source: Klarna Investor Deck. 28 February 2024


Partnerships with major global retailers such as Airbnb, Selfridges, and Zalando have significantly contributed to Klarna's success. The adoption of generative AI has been transformative, with over half of Klarna’s employees using AI tools daily to enhance services and operational efficiency.

Looking ahead, Klarna aims to leverage AI to become a comprehensive personal financial digital assistant. The company is committed to accelerating commerce and achieving long-term profitability, with strategic investments planned for future growth.


Klarna's AI Evolution: Profitability Gains and Workforce Reductions


Klarna has implemented artificial intelligence (AI) solutions across its operations, resulting in significant cost savings and improved customer service. In the first quarter of 2024, Klarna reduced its sales and marketing spend by 11%, leveraging AI to achieve 37% of the cost savings, amounting to approximately £7.8 million ($10 million) annually.

Explore Klarna's dynamic journey in banking expansion and AI innovation, shaping the future of fintech. Witness strategic milestones unfold.

Source: Klarna. 7 February 2024


By cutting spending on external marketing agencies by 25%, Klarna has saved £3.1 million ($4 million) annually, particularly in areas such as production, CRM, and social agencies. Furthermore, Klarna has reduced image production costs by £4.6 million ($6 million) annually through the use of AI-driven generative tools like Midjourney, DALL-E, and Firefly. These tools have not only saved Klarna money but also expedited the image development cycle, reducing it from six weeks to just seven days.

Explore Klarna's dynamic journey in banking expansion and AI innovation, shaping the future of fintech. Witness strategic milestones unfold.

Source: Klarna Investor Deck. 28 February 2024.


David Sandström, Klarna's chief marketing officer, emphasized the transformative impact of AI on the company's operations, stating that AI has enabled Klarna to become leaner, faster, and more responsive to customer needs while driving increased marketing activity. Klarna's AI-powered initiatives extend beyond cost savings to enhance customer experiences, such as enabling weekly updates to the app and website images, reflecting key retail events.


In addition to cost-saving measures, Klarna's AI assistant, developed in partnership with OpenAI, has significantly enhanced customer service capabilities. Handling 2.3 million customer service chats in 35 languages, the chatbot has successfully resolved two-thirds of Klarna's customer service queries within a month, resulting in a 25% drop in repeat inquiries. This success has led Klarna to reduce its customer service workforce from around 3,000 to approximately 2,300 employees.


Klarna's Global Expansion Plans in the United States and Germany


Klarna is set to launch its credit card in the United States, marking a significant expansion for the Swedish fintech giant. According to an exclusive interview with TechCrunch, David Fock, Klarna’s chief product and design officer, highlighted that the new card allows users to pay in installments, aligning with the company's foundational "Klarna way" of spreading out payments over time. This U.S. launch follows the successful introduction of the Klarna credit card in the EU several years ago.


The new credit card, issued in partnership with Salt Lake City–based WebBank, will not have an annual fee or foreign transaction fees. It offers up to 10% cash back on selected merchants within its app and integrates with Klarna's AI assistant to find deals. The virtual Visa card is also compatible with Google and Apple Pay. Customers can apply to be on a waitlist, with the rollout expected in the coming months.


Klarna’s credit card will compete with Apple, Robinhood, and Affirm, offering flexible payment options. Customers can spread payments for larger purchases across three to six months or extend the due date by one month, with interest rates ranging from 14.99% to 33.99%. Despite these rates being higher compared to typical credit cards, Fock emphasized that Klarna's options aim to be healthier and more sustainable than traditional revolving credit cards.


Klarna has seen significant success in the U.S., its largest market by revenue, with over 37 million users as of November 2023. The company continues to expand its footprint, now targeting the U.S. and Germany as its largest markets, with the U.S. often leading on a quarterly basis.

Explore Klarna's dynamic journey in banking expansion and AI innovation, shaping the future of fintech. Witness strategic milestones unfold.

In the US, Klarna turned a gross profit for the first time, delivering SEK 1.4B in FY23. It also achieved a record month with over SEK 100B Gross Merchandise Value (GMV), surpassing the total GMV of 2015, and increased revenue by 25% YoY in Q4 2023.


PubMatic has partnered with Klarna to expand Klarna’s native advertising inventory using PubMatic’s Convert platform. This collaboration will allow advertisers to engage with Klarna’s 150 million global shoppers at the point of purchase. Initially launching in the U.S. and then Europe, the integration promises click-through rates three times higher than the industry average. Klarna’s CMO, David Sandstrom, highlighted the goal of providing a personalized shopping experience and aiding retailers’ growth through programmatic advertising. PubMatic’s VP, Hashim Mian, emphasized the potential for high-performance campaigns targeting active shoppers, especially Millennials and Gen Z. Klarna’s platform includes 37 million U.S. shoppers and 550,000 retail partners, handling over 2.5 million daily transactions.


Forward-looking Perspective for Klarna's Future


Klarna's strategic evolution and resilience amidst challenges position it favorably for future growth and innovation. As it continues to expand its banking services and diversify its offerings, Klarna is poised to deepen its global footprint and solidify its position as a leading player in the fintech industry.


One key area of focus for Klarna is its commitment to leveraging AI to enhance customer experiences and drive operational efficiency. As it further develops its AI-powered initiatives, Klarna has the potential to revolutionize the digital banking landscape, offering personalized and seamless financial services to millions of users worldwide.


Additionally, Klarna's partnerships with major retailers and its ability to adapt to changing consumer preferences underscore its agility and market acumen. By staying at the forefront of emerging trends and technologies, Klarna can continue to innovate and differentiate itself in an increasingly competitive market.


Klarna's imminent launch of its credit card in the United States, along with its existing banking license in the EU, opens up possibilities for further expansion and revenue streams. Given its success in the US market, Klarna could consider acquiring a banking license in the US to deepen its integration into the financial ecosystem and offer a broader range of financial products to its customers.


Looking ahead, Klarna's expansion into new markets, such as the United States and Germany, presents significant growth opportunities. Klarna's strategic vision, coupled with its innovative approach and customer-centric focus, positions it for continued success and growth in the evolving digital banking landscape.


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