Swedish buy-now-pay-later (BNPL) company, Klarna, has reported its net operating income has increased 21% from the same period last year. However, the firm reported a net loss over the January-June period of $185m.
The company aims to achieve profitability in the second half of the year. The last time Klarna reported a full-year profit was 2018.
BNPL companies allow customers to defer payment through staggered installments on interest-free credit. The companies earn a profit by charging merchants a fee rather than consumers.
As rampant inflation has seen interest rates soar, the BNPL model has struggled. Klarna’s market valuation fell from $46bn to $6.7bn in 2022, with competitors PayPal and Affirm also facing a share sell-off.
Klarna embarked on a cost-cutting mission in 2022, in the hopes of achieving a profit in late 2023, which involved laying off 10% of its workforce last year.
Klarna co-founder and CEO Sebastian Siemiatkowski appeared encouraged by the results, tweeting: “I remember speaking to people last year who were not confident we’d pull it off […] we’ve achieved exactly what we set out to do!”
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Alongside harsh macroeconomic conditions, the BNPL sector is also grappling with tighter policing. Regulators, market watchdogs and consumer advocacy groups have warned that the BNPL industry could hurt people’s finances.
Wary of the potential market overhaul, BNPL firms have introduced new measures to keep consumers safe.