Buy-now pay-later giant Klarna said it was targeting profitability in the second half of 2023 despite losses nearly doubling in the third quarter of the year.
In its third quarter results today, the Swedish-headquartered fintech firm said losses had swelled to SEK 2.13bn (£170m) in the three months to the end of September, up from SEK 1.18bn (£93m) in the same period last year.
Klarna’s founder and chief Sebastian Siemiatkowski insisted it had made “huge progress” towards profitability however, by slashing credit losses to 0.7 per cent of its total merchandise value, and reducing its operating loss by 42 per cent on the previous quarter.
The UK and US had been the firm’s growth engines in the third quarter of the year, Klarna said, after a surge in Stateside popularity for Klarna’s products through the pandemic.
“The US continues to show massive growth with volumes up 92 per cent year-on-year,” Siemiatkowski said in a statement.
“That is a brilliant result considering 2021 was significantly boosted by pandemic-driven e-commerce growth, and because we have driven credit losses down 16 per cent compared to the last quarter and credit loss rates down 30 per cent versus 2021.”
He added that 99 per cent of its customers were settling their debts and 70 per cent of those using buy-now pay-later products were settled early.
The figures come after a turbulent period for the firm in which it has slashed its headcount and tapered back its growth plans as the sector is buffeted by a sharp downturn this year.
Buy-now pay-later firms have suffered from a particular turnaround in investor sentiment as consumer demand weakens amid soaring prices.
Klarna has been among a host of firms to see its valuation hammered amid growing scepticism from investors. An $800m July funding round saw Klarna’s valuations plunge nearly 85 per cent to $6.7bn from $45.6bn in June 2021.
Uncertainty also hangs over the future regulatory framework in the sector, with tighter rules set to come into force in the UK in 2024. The Treasury is expected to deliver another update on the plans after rolling out an initial framework for regulation in June.