Shares of Sweden's online payments company Klarna are plunging. It had vowed to cut headcount in half and save expense by adopting artificial intelligence (AI), but analysts say it failed to avoid the trap of bad loans amid high interest rates and a recession.
On the 19th (local time) at the New York Stock Exchange (NYSE), Klarna closed at $13.85, down 27% from the previous day. That is a drop of nearly 70% from its listing in September last year. When Klarna listed on the NYSE on Sept. 10 last year, it was valued at $15 billion (about 2.1765 trillion won), but it has now shriveled to around $5.3 billion (about 790 billion won).
What shocked the market was Klarna's results. After raising expectations by turning a profit in 2024, Klarna swung back to a loss in 2025 with a net loss of $273 million (about 395.3 billion won). Provisions for bad debts also dragged down the share price. A loan-loss provision is money set aside in case lent funds cannot be collected; in the fourth quarter of last year, Klarna set provisions at $250 million (about 362 billion won), up 60% from the same period a year earlier.
This suggests Klarna's core business model, the buy now, pay later (BNPL) service, took a direct hit from the economic slowdown. BNPL, which supports interest-free installment payments, has a primary customer base of young people with irregular income. Thanks to a structure that allows payments without a card, it became hugely popular among the young. In particular, as online shopping demand surged during the COVID-19 pandemic, Klarna's business grew rapidly. In 2021, the market valued Klarna's corporations at up to $46 billion (about 6.6746 trillion won). But after COVID-19, as the high interest-rate environment persisted, arrears rates jumped, and countries moved to regulate BNPL.
Some also say the episode exposed the limits of the AI push touted by Klarna CEO Sebastian Siemiatkowski. Klarna had boasted, "An AI chatbot handles two-thirds of customer inquiries, allowing us to cut headcount by nearly half," highlighting expense efficiency. But the cost-saving effect of AI proved useless against the fundamental risk in finance: bad loans. On a conference call, CEO Siemiatkowski explained it as "expense incurred in the course of aggressively expanding for greater future revenue," but the market's view is chilly. Experts said, "AI can reduce expense, but it cannot replace 'risk management,' the essence of finance," analyzing that the Fintech bubble is deflating. Klarna is set to announce its full-year results on the 26th.