*Klarna continued to count more losses as its consumers failed to repay loans. In its first quarter, the Swedish “buy now, pay later” lender has taken home a double net loss.
This outcome has raised concerns about the financial health of US shoppers. US President Donald Trump’s trade war with other nations, notably China, has increased fear of higher inflation.
The gloomy economic sentiment in the US has no doubt contributed to consumers’ failure to repay.
Last week alone, a closely watched measure of consumers’ confidence fell to its second-lowest level on record in the US. Klarna presented Monday’s earnings via an AI-generated avatar of its chief executive. The lender bet heavily on artificial intelligence and has said the technology helps it to cut costs.
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The company offers interest-free consumer loans to allow shoppers to make retail purchases. But on Monday, the fintech announced a net loss of $99M for the three months to March, up from $47M a year earlier. It added that its customer credit losses had risen to $136M, a 17% year-on-year increase.
The Swedish company makes a profit by fining merchants and consumers who fail to repay on time. It looks like the shoppers are not just not paying on time — they are simply not paying at all. The company itself had had to put on hold its plan for a long-awaited stock market listing in New York as Trump’s sweeping tariff announcements disrupted markets.
Determined to grow rapidly in the US, Klarna has in recent years signed partnerships with merchants including DoorDash, Walmart and eBay. But looks like it has opened itself to the vulnerability that comes with a US recession.
However, Klarna has said it’s closely monitoring changes in the macroeconomic environment and “remains well-positioned to adapt swiftly if required.”
The company added that the short duration of its loans allowed it “to respond rapidly to evolving market conditions”. 83% of its loan book refreshes within three months.
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