Klarna lost about one-third of its valuation since last year.
Photo by Thomas Trutschel/Photothek via Getty Images

According to reports from Protocol and TechCrunch, Klarna is laying off 10 percent of its global workforce in a pre recorded video message. The company currently has 7,000 employees and a 10 percent cutback will affect 700 of them.

Users can purchase a product for nothing or a small fraction of its full price with services like Affirm and Afterpay. Customers will face an interest-free fee for late payments, but they can makeIncremental payments over a set period of time. At the height of the Pandemic, many people were strapped for cash and had nothing else to do but shop online.

The war in Ukraine, a shift in consumer sentiment, a steep increase in inflation, and a likely recession were all cited by the CEO in a pre recorded video message. In Europe, workers will receive associated compensation, but in the US it will look different.

Klarna’s valuation has suffered a significant dip

The Wall Street Journal reported last week that Klarna is looking to raise a new round of funding that would value the company at $30 billion, a third less than it was a year ago. Affirm's share price has sunk 75 percent this year.

The unreliability of its customers in a volatile economy is one of the reasons why the services are struggling. According to a recent report from Sfgate, 73 percent of its customers are considered part of Gen Z, and 43 percent of them report missing at least one payment. According to a report from Fox Business, about 30 percent of the customers of BNPL struggle to pay back what they owe, and the current state of inflation doesn't help. It's a risky business to run if you don't get paid back.

Despite the decreased valuation and layoffs, Siemiatkowski told employees that he still believes in Klarnas.