The End of Klarna’s Easy Money Is Bad News for BNPL

Despite warnings of a looming recession, Sebastian Siemiatkowski, the founder and CEO of Klarna, is still confident in his company.

The EU is home to the most valuable private tech company. Buy now, pay later is a type of debt popular with Generation Z that allows shoppers to split the cost of their online purchases over several months. The company says it has over 150 million active users.

The worst form of credit is facing a number of threats. 10 percent of the company's staff were laid off and a new regulation in the UK will impose stricter rules on the industry. In the face of a possible recession, investors are losing faith in the sector, according to executives from the company. It's new. "They want to understand how we're able to weather that storm." According to The Wall Street Journal, the business is worth $30 billion less than it was a year ago, as a result of a $15 billion valuation. Klarna didn't want to comment on what it called speculative activity.

The turbulence was caused by changing investor sentiment and a new strategy. In the last six to nine months, investors were told that growth was the only thing that mattered. The last six months have seen that change. Profitability is what investors now want. They want to know how we're going to make money.

It will be a different strategy for Klarna to focus on short term profitability. The company had a net loss of 2.5 billion Swedish krona in the first quarter, four times higher than the same period a year ago. The company has been profitable for 14 years, but in the last few years has been dependent on people investing more money in the company

Competition is affecting the company. Apple's decision to offer its own product is validation of Klarna's idea, according to Siemiatkowski. An employee who worked on merchant partnerships until they were made redundant as part of the layoffs said that the market was becoming more and more crowded. If our competitors have a presence at our merchants, we know we're going to lose market share.