AND SO IT BEGINS: Swedish fintech company Klarna becomes first to conduct MASS LAYOFF directly linked to AI advancements

09/04/2024 / By Ava Grace

Swedish bank and financial technology company Klarna has become the first company to lay off over a thousand workers and utilize artificial intelligence (AI) to replace them.

Klarna Founder and CEO Sebastian Siemiatkowski claimed that advancements in AI have given him room to pare down his labor force. He believes the company can function with around half of its current workforce, thanks to the increasing use of AI in its operations.

Siemiatkowski stated his belief that the company can “do much more with less” and that it could function in the future with around 2,000 workers – that’s 1,800 less than it currently employs. (Related: Artificial intelligence is set to affect nearly 40% of all jobs, according to a new analysis by the International Monetary Fund.)

The comments came in interviews conducted by Siemiatkowski ahead of Klarna’s listing on the stock exchange. With many companies already replacing workers with AI this year, it is thought that the cost-cutting strategy will make the company a more attractive proposition for investors during the flotation.

Siemiatkowski heralded the benefits of AI in Klarna’s second-quarter results, which showed a significant narrowing of its net loss from 854 million Swedish kronor ($82.86 million) a year earlier to just 10 million kronor ($970,300).

Klarna has already cut its workforce from 5,000 to 3,800 in the past year, and Siemiatkowski is committed to continuing to cut his company’s employment numbers down to the stated 2,000 employees in the coming years as it expands its use of AI in tasks such as customer service and marketing.

“Not only can we do more with less, but we can do much more with less. Internally, we speak directionally about 2,000 [employees]. We don’t want to put a specific deadline on that,” he added.

Separately, Klarna has imposed a hiring freeze on workers apart from engineers and is using natural attrition rather than lay-offs to shrink its workforce.

Klarna’s workforce layoffs increasing its stock price

Not surprisingly, Siemiatkowski has become one of the most outspoken European tech bosses about the benefits of AI, even if it leads to lower employment, arguing that is an issue for governments to worry about.

“I think it’s critical for governments to consider what could we do for the group that could be affected, but while at the same point of time, not stop progress because it’s important that Europe and the democracies are ahead in the evolution of AI,” he said in a radio interview.

Siemiatkowski said Klarna had boosted its average annual revenue per employee from about $400,000 a year 12 months ago to $700,000 now by cutting its workforce and reducing expenses through AI.

Once the darling of the European tech scene valued at $46 billion in 2021, the Swedish group saw its valuation dropped to as low as $6.7 billion a year later because of rising interest rates and falling stock prices. Bankers and investors in Klarna now believe it may be able to achieve a valuation of between $15 billion and $20 billion, assuming it manages to fire many more employees.

Klarna had been consistently profitable from its founding in 2005 until 2019 when its rapid expansion in the U.S. caused it to make huge losses. Last year, it made its first quarterly net profit in more than four years, and Siemiatkowski said it would not go back to making losses, arguing that AI was boosting its gross margins.

“If I can get to a superior revenue per employee that will allow us to pay top class for the best talent, the people who are currently deep-diving and learning AI,” said Siemiatkowski. “The very strong message to our employees is less total labor cost, higher cost per individual. I’m very happy about seeing that this is paying off.”

Watch this video discussing the possibility of AI taking over from humans.

This video is from the LauraLynnTV channel on Brighteon.com.