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Sebastian Siemiatkowski: Klarna will be a ‘force for good’ in the cost of living crisis

The CEO also said if he’d wanted to IPO, he would have done it a decade ago.

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Sebastian Siemiatkowski speaking at London Tech Week 2022.

Buy now, pay later lender Klarna is aiming to be a ‘force for good’ in the UK’s cost of living crisis, the CEO and co-founder announced on the opening panel of London Tech Week on Monday.

“We have the ability to very quickly adapt as the macroeconomics are changing, and be very mindful of making sure that our consumers don't overextend themselves,” Sebastian Siemiatkowski told moderator Katie Prescott, technology business editor of The Times.

“If you look at the credit card industry in the UK, a typical outstanding balance is maybe £4,000, in our case, it's £40 to £100.”

“So it's a huge difference, and we take an underwriting decision on every transaction. Credit cards give you a big balance and say, go and spend it and maximise out on it, [for Klarna] every new transaction is a new decision.”

Because of the lower borrowing amounts of Klarna’s150m-strong customer base, Siemiatkowski said the lender turns around its balance sheet 12 times a year and, if its underwriting changes, 50 per cent of its balance sheet is underwritten based on those new rules within two months.

For now, Siemiatkowski said Klarna’s losses remain 30 per cent below credit card industry standards, and added that 40 per cent of Klarna’s volume is debit transactions since it introduced ‘Pay Now’ last year.

“I think we've proven that [Klarna] is a more healthy type of borrowing, but that doesn't mean that it's not still borrowing, right? So you still have to be mindful when you go into a recession that things are changing, and you have to be mindful of your consumers,” the CEO added.

Klarna, and the whole buy now, pay later industry, has been under increasing scrutiny in recent months and years as regulators look to introduce new rules to protect consumers.

The company is said to be working on a fresh funding round that, last month, was reportedly said to slash its valuation by around 30 per cent.

Meanwhile, Siemiatkowski at the end of May announced a round of redundancies which would impact around 10 per cent of Klarna’s workforce.

While the CEO wasn’t asked directly about those redundancies or indeed Klarna’s valuation, the topic of IPO did come up in conversation, to which Siemiatkowski had a direct response.

“God, if I wanted to IPO and exit, I would have done it 10 years ago,” he said. “I've been at it for 17 years, I want to continue for a couple of decades.”

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