Klarna’s AI push takes centre stage ahead of IPO
Klarna seems to be making all the right steps about its AI ambitions, but is the Swedish fintech giant genuinely building an AI-first model for its users or simply crafting a compelling narrative for its much-anticipated IPO?
“I’m not sure it gets a choice in the matter” Chris Jones, managing director at PSE told City PM, highlighting the seismic shift brought about by new agent products from major tech players like OpenAI.
“The pace with which consumers are likely to adopt some form of agent in commerce is well beyond the control of Klarna or indeed, others”, he added, citing Visa, MasterCard and Paypal.
This ‘agentic’ future, where AI assists or even executes purchases, presents both immense opportunities and significant threats for Klarna.
The buy-now-pay-later (BNPL) pioneer has already leveraged AI to drive impressive efficiency gains.
Klarna’s AI assistant, launched in early 2024, is reportedly handling the workload of 800 human employees, reducing customer service resolution times from 11 minutes to just two, while maintaining satisfaction levels.
This AI-driven efficiency contributed to Klarna’s reported $40m (£29.9m) profit improvement in 2024 and its recent return to the black, which is a key highlight as it reportedly prepares for a US IPO with an expected valuation of around $15bn.
However, recent reports suggest Klarna has also experienced a ‘strategic U-turn’ in its AI approach, acknowledging that over-automation can lead to customer frustration.
While AI excels at routine tasks, complex dispute resolution and personalised financial advice still require the human touch. This hybrid approach aims to balance efficiency with crucial customer trust.
Agentic AI and Klarna’s position
The real battle for Klarna, Jones argues, will be in the AI agent ecosystem itself.
“Unless Klarna is part of that particular bundle of options and it would apply to PayPal as well, if they’re paying three, I think, then they are a substantial disadvantage”, Jones told City PM.
This refers to AI agents, such as OpenAI’s newly launched general-purpose agent in ChatGPT, which can control web browsers and even make purchases.
If these agents primarily offer credit card options, Klarna could be sidelined.
Yet, Klarna has advantages. “They have relationships with both merchants and consumers in the same way that PayPal does, so the product itself lends itself to this sort of innovation more so than a traditional full party card product does”, Jones highlighted.
What’s more, Klarna already boasts integrations with Apple Pay and Google Pay, crucial players in the emerging agent world.
The question of consumer trust in AI-driven credit decisions also raises concerns. While current AI offerings can be “at the clown car stage of product development”, he believes younger consumers, who prioritise convenience, will ultimately embrace them when they function seamlessly.
Regulators, however, are struggling to keep pace. The speed of AI’s integration into commerce, especially in sensitive areas like credit, will stretch regulators capacity to respond.
Jones cautions that while AI presents a “fantastic educational opportunity” to explain financial choices, there are also risks if the model is purely driven by who pays most for visibility.
Klarna, as a regulated entity, has a track record of responsible lending, but public perception remains a battle. “You still get lots of people who say it’s a terrible thing. It’s a credit bubble. It’s taking advantage, despite the fact there’s a growing amount of evidence that it isn’t,” Jones said.
Will AI replace Klarna staff?
But the path to AI supremacy isn’t always smooth.
As reported a few months ago, Klarna is now actively rehiring human customer service agents, a striking development given its earlier triumphant announcements about AI replacing vast swathes of its workforce.
Initially, Klarna boldly claimed its AI chatbots were doing the work of 700 employees. Now, that number has swelled to 800 chatbots, accompanied by two extra hires in Sweden who have been employed to look at more complex issues which require a unique skillset.
Chief executive Sebastian Siemiatkowski publicly admitted that an overemphasis on cost-cutting, rather than AI itself, led to “lower quality” service, underscoring the vital need for human interaction in complex and empathetic customer scenarios.
The new hiring strategy, focusing on remote and contract-based roles, primarily targeting students and rural workers, brings with it questions about job stability, but unequivocally signals the limitations of AI in isolation.
While critics might point to this as a costly retreat, Klarna maintains it’s not “reversing on AI”.
The company asserts it continues to invest heavily, rebuilding its tech stack to be “AI-first”, and claims its AI assistant now performs the work of “700 full-time roles”.
Klarna insists this is a “dual-track approach,” combining scalable AI with high-quality human support, and not a step back from automation.
They stress that human support was never fully eliminated, and the current pilot of two new agents is an “addition, not a rehire or reversal.”
This nuanced position highlights the evolving understanding of how AI best integrates with human expertise in customer-facing roles.
For Klarna’s IPO, the AI narrative is undeniably a boon. It offers a compelling story of innovation and future-proofing.
The Swedish fintech just received an electronic money institution licence from the Financial Conduct Authority, setting the firm up to compete with UK firms Monzo and Revolut.
The licence will allow Klarna to offer its 11m UK customers savings accounts and also pave the way for a debit card launch.
Abby Vickers, Klarna’s head of financial services UK, hailed the approval as the “next big step in the UK” as it seeks to extend operations.
Yet, the ultimate success will depend on real-world execution and seamless integration into the burgeoning AI agent landscape. “I think the arguments are true that Klarna are taking advantage of this, but in the short term, in the run up to an IPO, an AI push is probably a big benefit”, Jones added.
In the grand scheme, Klarna’s ability to navigate the complexities of AI, from seamless integration with tech giants to building consumer trust in an increasingly automated world, will dictate whether its AI bet truly pays off.