The company Klarna, the most valuable European fintech company, has announced the layoff of as much as 10 percent of its employees, CNBC reports. Co-founder and CEO of this Swedish fintech company Sebastian Siemiatkowski announced in a video message to his employees that the vast majority of them will not be directly affected by these latest measures, but around 650 employees will still receive termination notices. The reason for this mass layoff, according to Siemiatkowski is the geopolitical situation in the world.
– When we set the business plan for 2022 last autumn, we were in a different world than we are today. We are currently witnessing an unnecessary war in Ukraine, a sharp rise in inflation, a very unstable stock market, and a likely recession – said Siemiatkowski.
Employees will be offered severance packages along with compensation, and as Siemiatkowski emphasized, more information will be provided soon.
Founded in 2005, the company is known to young people for its principle 'buy now, pay later' thus changing the way consumers pay for products they purchase online, and currently employs more than 6,500 people worldwide.
The 'buy now, pay later' service allows online purchases from major retailers without immediate payment. Consumers can therefore pay for their purchases in four installments with interest charged every two weeks or pay the full amount within 30 days.
Although it has gained popularity since the beginning of the pandemic, investors are concerned about the sustainability of this sector as their consumers are currently trying to save wherever they can due to rising inflation and consequently increased borrowing costs.
The Value of Affirm Has Also Fallen
However, Klarna is not the only company operating on the 'buy now, pay later' principle in the world. The largest such company in the U.S. is Affirm whose stock value has fallen by nearly 75 percent since the beginning of 2022.
The announcement of layoffs followed reports last week that Klarna could lose a third of its value in a new funding round. The company was previously valued at $46 billion in an investment led by SoftBank.
Despite the CEO stating that laying off employees is one of the hardest decisions in the company's history, he believes it is inevitable for the company to remain focused on what will make them permanently more successful.
– While it is crucial to remain calm in times of crisis, it is also crucial not to turn a blind eye to reality. What is currently happening in the world is not temporary, and that is why we must act – said Siemiatkowski.
Many tech companies that thrived during the pandemic are now taking steps to reduce costs as investors are concerned about rising interest rates and falling market liquidity. Companies like Netflix and Robinhood have announced layoffs, while Meta and Uber have reduced hiring.
