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“Buy now, pay later” fintech Klarna reported a loss in its first quarterly earnings since going public in September, as a push into conventional lending weighed on profits.
The Swedish lender on Tuesday posted a net loss of $95mn in the third quarter, down from a $12mn profit in the same period last year.
As the company grew its traditional interest-bearing loan book, it increased its provision for potential losses to 0.72 per cent of its total payment volume, up from 0.44 per cent a year earlier. This squeezed margins and hit profitability.
Klarna has been diversifying away from its bread-and-butter model of deferred payment loans as its interest-free instalment loans have come under pressure from higher interest rates and criticism from consumer advocates.
Still, Klarna’s realised consumer credit losses fell by one percentage point to 0.44 per cent in the quarter from a year ago, defying fears over the financial health of low-income Americans who are contending with higher prices.
Chief executive Sebastian Siemiatkowski said he had not witnessed meaningful changes in customer behaviour linked to these pressures. But he warned he was concerned about the potential for artificial intelligence to destabilise financial security for a wide swath of the professional workforce.
“The AI transformation that society is going through right now, it is not primarily going to impact the waiter, the nurse, the truck driver. It is impacting white-collar jobs much more than blue-collar jobs,” he said. “There may be bigger implications there than what people see.”
Siemiatkowski has been a champion of AI and personally invested in the sector through his family office at Flat Capital. He told the Financial Times earlier this week that he was “nervous” about the sector’s ballooning investments into data centres.
Klarna’s third-quarter revenue rose 26 per cent year on year to $903mn as the company continued to grow in the US.
The fintech launched a payment card in July and said on Tuesday it had amassed 4mn users and that the new product accounted for 15 per cent of its transactions. The lender is seeking to become a full-fledged neobank competing with the likes of Revolut.
Siemiatkowski said Klarna was adding perks and rewards to the card, some of which could potentially come in the form of cryptocurrencies in a bid to establish itself in the hypercompetitive US credit card market.
He added that Klarna would soon unveil more details about its plans to offer crypto, potentially by offering stablecoins for international transfers without ruling out acquisitions in the sector.
Competition between crypto companies and neobanks is heating up as crypto companies seek to make the most of a permissive regulatory environment under US President Donald Trump to acquire banking licences and offer retail banking services.
It is “very important for us to stay ahead of that curve”, Siemiatkowski said.