👉 Background: Klarna is one of the largest buy now, pay later companies in the world. It may be Sweden born, but it is globally ubiquitous. In fact, Australia’s biggest bank, Commonwealth Bank, even invested $300m USD into the company.
👉 What happened: But now, Klarna has recorded its biggest annual loss in its history. We’re talkin’ an operating loss of $1.4 billion...really nice time to increase its CEO’s pay by a third. Yikes.
👉 What else: Last year, Klarna’s company valuation was sliced from $66.7 billion to $9.8 billion - largely due to the fact that investors just don't rate the BNPL business model anymore and consumer spending has tapered. But there are also a number of other factors at play.
💡 When an industry becomes too big, too quickly, it often receives intense spotlight.. And can become highly regulated.
💡This has happened to big tech (Hello Google, Meta and friends). It also happened to ride-sharing (greetings to you Uber, Didi, Ola and Lyft). And of course, it has started to happen to the BNPL industry - here in Australia and around the world.
💡And generally, when regulation tightens, it results in companies needing to prioritise compliance …and de-prioritise other things, like product innovation. This combo of increased regulation, and higher cost of living for consumers, has seen the wider BNPL sector suffer.
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