Klarna emphasises AI adoption and US profitability in FY23 results

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Klarna completed a ‘record-breaking year’ in 2023 as the Buy Now, Pay Later (BNLPL) firm revealed it became profitable for the first time in the US.  

Publishing its full year financials this week, the privately-held Swedish fintech outlined year-end revenue of SEK 23.5bn (€2bn), a 22% increase on corresponding 2022 figures of SEK 19.3bn (€1.7bn).

This was divided between transaction and service revenue as well as interest income from operating activities, with the former rising by 29% from SEK 15.4bn (€1.4bn) to SEK 19.8bn (€1.8bn).

The latter segment experienced a decline on the other hand, however, falling by 6% from SEK 3.9bn (€348,000) to SEK 3.7bn (€330,000). This was offset by the former, however, which led to the firm’s gross profit increasing comfortably.

Klarna’s report shows a 60% growth rate for gross profit from SEK 7.2bn (€642.6m) to SEK 11.7bn (€1bn). On the other hand, the net result for the period still showed signs of struggle, falling 69% from SEK 10.5bn (€937.2m) to SEK 3.2bn (€285.6m).

Regardless, Klarna CEO, Sebastian Siemiatkowski had a positive assessment of the firm’s Q4 and FY23 performance, saying: “2023 was a year punctuated by many firsts, each marking a significant milestone in our relentless pursuit of accelerating commerce, now increasingly delivered through generative AI. 

“We not only achieved our first month and quarter of profitability in four years, but also did so while maintaining a great growth trajectory across all markets and driving a gross profit margin of 50%. But those weren’t the only firsts in 2023. In fact, the year was full of them.”

Additionally, although the operating result may not have been ideal, Klarna’s CEO noted that the company is still becoming more and more profitable, with a particular boost from its US operations highlighted last year.

The firm’s US profit rose from a loss of SEK 900,000 (€80,000) last year to a positive result of SEK 1.4m (€124,000), with Siemiatkowski noting that this is the first year the company has turned a gross profit in the US market.

“While we continue on our journey to long-term profitability, we made a conscious decision to invest in growth in the peak shopping season of Q4,” Siemiatkowski summarised the firm’s approach moving forward..

“We will continue to invest wisely for growth and focus on being cost-effective on our path towards annual profitability.”

Much of Klarna’s success is driven by its aforementioned provision of BNPL services, which the company itself has noted is increasing in usage across Europe. The company completed a survey last year, concluding that 74% of Europeans use its services at least once a month.

Last year proved to be an eventual year for Klarna in more ways than just revenue growth,, with the company becoming one of many fintechs to begin upping its adoption of AI technology.

In other areas, the company’s international growth was bolstered in 2023 by market launches and licence acquisitions. By August 2023, the firm had launched in 11 European markets, and later on in the year, secured Financial Conduct Authority (FCA) approval in the UK.

On the technological side of things, in Siemiatkowski’s view, the ‘era of generative AI truly arrived’ in 2023 – this is an opinion shared with various other fintech stakeholders, although authorities have been assessing how the tech can be safely developed.

Klarna was one of the first companies to incorporate ChatGPT into its operations, and the firm’s CEO estimates that around half of its workforce currently use AI tools on a day-to-day basis such as for ‘repetitive administrative tasks’.

He concluded: “While our mission at Klarna remains the same – to accelerate commerce and provide the best possible experience for our consumers and retailers – the introduction of AI is undoubtedly accelerating our progress. 

“With a wealth of AIpowered ideas in the pipeline, we’re excited about the next few years as we continue to evolve our vision of Klarna as a comprehensive personal financial digital assistant.”