Klarna and the impossible BNPL juggling act

What a difference a year makes. This time last year Klarna closed a funding round that valued the Swedish-founded fintech at $US46 billion.them into rapid retreat. Last week Klarna revealed in a quarterly update it would cut 10 per cent of its workforce as its accounts showed a quarterly loss of SEK2.5 billion that was three times higher than for the first three months of 2021.

While most non-profitable tech companies have sold off sharply in public markets, the BNPL sector has come under additional pressure because mounting bad debts have compounded losses., which makes it hard to compare to other forms of lending. Rubinstein points out that if this is the case, the credit losses are part of cost of customer acquisition, but it remains to be seen if losses can actually be reined in.

The challenge, some experts in the space say, is the customers are often young, sometimes low-income users, who might never graduate to be profitable enough to bank.The second model is around content creation. That, vaguely speaking, is acting as a portal or influencer of spending decisions rather than just a facilitator, for which an additional fee can be extracted. It’s an avenue Klarna is apparently contemplating.as Afterpay has done with Square which acquired it last year.

Buy now, pay later is donzo.

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