Artificial intelligence (AI) is moving rapidly with the evolution of generative AI and large language models. Over the past couple of years, tools like ChatGPT and Gemini have transformed how we interact with technology. This has spurred visions about how businesses could leverage this technology to transform industries.
One company that has leveraged AI to enhance shopping and customer experience is Klarna, the Swedish buy now, pay later (BNPL) company. The company has incorporated AI into its business to help deal with customer inquiries and other payment things, and it could be going public as soon as this year.
Here’s what investors should know about Klarna, which could be one of the largest initial public offerings in 2025.
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Klarna is a Swedish fintech with a vast global reach
Klarna, a pioneering Swedish fintech company established in 2005, aims to innovate how consumers approach shopping. One of its flagship offerings is its BNPL payment solutions tailored for e-commerce. By offering flexible and convenient payment options, Klarna simplifies the shopping experience for consumers while helping merchants boost sales potential.
Competition in the space is heating up as more people use BNPL, with companies like Affirm, Block (which owns Afterpay), and PayPal all offering installment loans of their own.
For this reason, Klarna has evolved beyond BNPL into a one-stop spot for online shopping, seamlessly guiding consumers from browsing to checkout. Klarna seeks to capture an edge by leveraging AI to gather extensive insights into consumer behavior, refine behavioral models, and craft a shopping experience tailored to each user’s preferences.
The company boasts a vast global presence, operating in 26 countries with a network of approximately 575,000 merchants. With around 85 million active customers, Klarna has become a significant player in the fintech landscape.
It’s been a roller coaster ride for the fintech
Klarna’s journey has not been without its challenges. In 2021, the company raised $639 million, which gave it a peak private market valuation of $45 billion. However, the economic landscape shifted, and challenges emerged in 2022 and 2023 as interest rates rose in response to inflationary pressures, causing ripple effects throughout the financial sector.
The company has aggressively expanded its footprint in the U.S. market and now has over 34 million U.S. customers. However, rising costs have weighed on the fintech, and it has taken some significant steps to embrace technology and improve its efficiency and credit quality.
Klarna has fully embraced artificial intelligence
Last year, Klarna swiftly incorporated AI technologies, including ChatGPT, to streamline operations by automating repetitive and time-consuming tasks. This approach has helped reduce operational costs and enhance the fintech’s efficiency.
A key highlight from Klarna’s press release last year says that AI-powered digital assistants performed the work equivalent to 700 full-time agents. This transformation has led to a remarkable 25% decrease in repeat customer inquiries and a significant reduction in resolution times for customer queries, showcasing the potential of AI to improve customer satisfaction while slashing wait times.
The integration of AI has allowed Klarna to maintain a lean workforce while efficiently scaling operations. In addition, the company has used AI to help eliminate more costly software-as-a-service providers and opt for its own internally built applications. For example, the company eliminated its need for Salesforce and Workday, with CEO Sebastian Siemiatkowski saying, “We are shutting down a lot of our SaaS providers as we are able to consolidate.”
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Its latest financial results speak volumes. In the first half of 2024, the company reported revenue of 13.3 billion Swedish krona ($1.2 billion in U.S. dollars), reflecting an impressive 27% increase compared to the previous year. This growth trend mirrors gross profit, which rose to 6.3 billion krona ($564 million), a solid 22% improvement.
What stands out even more is Klarna’s significant reduction in net loss, which narrowed to 333 million krona ($29.8 million) from 2.1 billion krona ($187 million). Klarna has streamlined its operations by cutting customer service and sales and marketing costs by 11% and 10%, respectively. This notable shift indicates that the company’s automation strategies are starting to yield tangible financial benefits.
Keep an eye out for Klarna’s IPO in 2025
Klarna is an intriguing company that has embraced AI with open arms and will be a good example of how much this innovative technology could transform business as we know it.
According to a report by Reuters, Klarna confidentially filed paperwork with the Securities and Exchange Commission (SEC) in November and is eyeing a valuation of around $15 billion. This is the second time in three years that Klarna has begun the process of going public, and if market conditions remain favorable, this could finally be the year the fintech goes public.
Courtney Carlsen has positions in Block and PayPal. The Motley Fool has positions in and recommends Block, PayPal, Salesforce, and Workday. The Motley Fool recommends the following options: long January 2027 $42.50 calls on PayPal and short March 2025 $85 calls on PayPal. The Motley Fool has a disclosure policy.
