Klarna CEO defends business despite massive losses and layoffs
- Klarna gives customers the option of when to pay for an item — they can pay upfront, pay in installments or delay payment for a certain period of time.
- Critics say this enables people to buy things they might not necessarily be able to afford, although Klarna says it runs affordability checks to ensure that consumers can pay them back.
- The fintech reported a loss of $748 million last year and last month announced that it was laying off around 10% of its workforce as part of an effort to cut costs.
Klarna CEO Sebastian Siemiatkowski has defended his company's business model and the controversial "buy now, pay later" industry.
Klarna gives customers the option of when to pay for an item — they can pay upfront, pay in installments or delay payment for a certain period of time. Critics say this enables people to buy things they might not necessarily be able to afford, although Klarna says it runs affordability checks to ensure that consumers can pay them back.
In an interview with CNBC's "Squawk Box Europe" on Friday, the Swedish entrepreneur said BNPL is "superior" to the credit card model, claiming that the average Klarna user has an outstanding balance of $50, whereas the average credit card user has an outstanding balance of $5,000.
Siemiatkowski went on to say his business is "extremely recession-proof" compared with traditional credit card firms. However, the fintech reported a loss of $748 million last year and last month announced that it was laying off around 10% of its 6,500 staff as part of an effort to cut costs.
On top of that, Klarna will soon be competing with Apple in the BNPL sector after the iPhone maker announced this week that it plans to enter the market with a new product called Apple Pay Later.
That puts BNPL players like PayPal, Affirm and Klarna in an awkward spot. The fear is that Apple, a $2 trillion company and the world's second-largest smartphone manufacturer, could draw clients away from such services. Shares of Affirm have sunk 17% so far this week on the news.
"I think it's a final, massive embracement of what to me is a much healthier form of credit," Siemiatkowski said of Apple's entry into the market.