Klarna
Klarna posts $1bn 2022 loss. Can it get back to profitability?
Following a rapid shift in the economic landscape, Klarna saw a number of headwinds hit its business in 2022. But the company is still optimistic it can reach profitability soon.

Klarna is progressing towards profitability despite posting a $1bn loss in 2022, its highest ever, according to the company’s annual report.
This particular data point accompanied by optimism might seem at odds. Is it?
"Through a challenging macro environment we have once again proven our resilience delivering high profitability across our established markets while launching products and services helping to diversify our revenues and solving problems for consumers,” said Sebastian Siemiatkowski, CEO of Klarna.
“With GMV up 22 per cent YoY and credit loss rates decreasing, we have made significant progress on our new strategy and we're on a solid path towards profitability,” he added.
The company is now working towards a goal to return to profitability by the summer of 2023, while also “optimising for continuous growth this year and beyond,” Klarna’s annual report said.
“Our focus on the path to profitability is already yielding results with two consecutive quarters of improvement in credit losses,” it added.
A profitable start
Founded in 2005, Klarna was profitable - very rare for a fintech company - within six months and for the next 14 years of its life.
Then began a venture capital-fuelled aggressive path of growth during the pandemic that saw it crowned as Europe’s most valuable fintech company priced at a staggering $46bn in 2021.
No doubt the past twelve months have been something of more of a mixed bag for the lender come-financial super shopping app which now counts Paris Hilton as an ambassador.
Last year, the Stockholm-head quartered fintech firm entered its 18th year of business.
In May it let go of 10 per cent of its workforce. This was followed by raising its largest-ever funding round ($800m), but one in which it had its valuation decimated to $6.7bn.
Despite a widening loss, which is 58 per cent, higher than the previous year, the company is still rapidly growing.
US expansion
The US became Klarna's largest market by revenue in 2022 and reaching poll position in a very competitive industry.
This was driven in part by a huge and costly marketing push, as a number of US retail giants - including Samsung, Groupon, Booking.com, Instacart, Tractor Supply Company and Fossil Group - signed with Klarna. It now counts 34 million Americans as customers.
Klarna said credit losses were reduced in the year but, as it primarily deals with very short-term lending, changes to its underwriting policy were fully reflected in 70 per cent of its balance sheet within three months.
By Q4 this meant a reduction in credit losses of 18 per cent to £23m (SEK 300m). This was a 34 per cent improvement on Q4 2021 to 0.58 per cent.
A near 90 per cent fall in its valuation in May 2022 was followed by a significant round of job cuts. This was carried on through the year with further redundancies.
“The accompanying shift in investor sentiment from a total focus on growth to profitability has also had wide-ranging effects. At Klarna, it has required some hard but necessary decisions,” said Klarna’s annual report.
Nonetheless, Klarna saw growth in a variety of metrics as Klarna “realigned its business to the new macro-economic environment” from May by tightening its underwriting from May. By Q4 this had reduced credit losses by 18 per cent.
The total value of goods purchased through Klarna (Gross Merchandise Volume (GMV)) leapt up 19 per cent in the last quarter of 2022 compared to the same period in 2021. This prompted an increase of 20 per cent in revenue.
Its marketing revenue was up 131 per cent over the whole of 2022, reaching 10 per cent of total global revenue in Q4 2022.
The number of times the average customer bought something using Klarna in 20222 - in what the company dubs ‘global purchase frequency- increased by 23 per cent over the course of the year.
“In December 2022 the US became our largest market by revenue, with GMV up 71 per cent YoY, and we're adding real value to our growing fanbase of over 150 million consumers every day. We're committed to accelerating commerce and making shopping an enjoyable, worry-free experience for everyone," Siemiatkowski said.
In 2022 Klarna saw a rapid shift away compared with previous years as the economic environment deteriorated.
A profit-ecy
High-growth technology-focused loss-making businesses reliant on venture capital were hard hit. Those geared towards consumer confidence, spending or general robustness were hit even harder.
However, Klarna like other BNPL providers also faced deeper scepticism towards the overall model and manner of its style of lending.
What’s interesting in reading Klarna’s annual report is how it contrasts itself to others in the BNPL space.
Yes, the company talks openly about BNPL (it mentions the acronym six times compared with five times in its 2021 report, Siemiatkowski is also candid in showing he wants the company to have a much more diversified series of revenue streams.
Klarna, he says is on a mission to revolutionise retail banking by taking on the “$16 trillion-dollar global payments industry”, reducing payment costs by 60 per cent.
The company also has been increasingly promoting its open banking arm Kosma and developed new commerce solutions and consumer insights analytics for merchants. It’s turned to the creator economy with a platform helping retailers find influencers to help sell products.
Increasing diversification of its revenues accompanied by an improving macroeconomic environment - far from guaranteed - in 2023 will undoubtedly help boost Klarna's numbers. A few more quarters following its stronger performance in 2022's closing three months could well mean a return to form.