The idea of a consumer paying for a more expensive item over time has had many names over the years.
Many from the Boomer generation will think of layaway, which was introduced during the Great Depression in the 1930s. People were often strapped for cash, leading retailers to offer a program that allowed people to make payments over time for higher-ticket items.
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Layaway hung around for a long time, but a new form of it emerged when retail stores started to offer their own branded credit cards. These allowed the customer to do something very similar to layaway, but with an added perk that went over quite well: the customer got to bring home the item they wanted right away, instead of waiting until the final payment.
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Every store has a card these days, but finance-savvy consumers often avoid them as their annual percentage rates (APR) tend to be extremely high. Several retailers’ APRs land as high as 33.24%, including The Academy Sports + Outdoors Credit Card, the Burlington Credit Card, the Good Sam Rewards Credit Card and the Michaels Credit Card.
Then, in the early 2010s, yet another form of delayed payments began to pop up everywhere. Buy Now Pay Later, or BNPL, was first offered by fintech companies like Affirm, Afterpay, and Klarna. BNPL was by far the easiest way to opt for deferred payments as the service is integrated into many retail websites’ checkouts directly, making the process of obtaining credit smoother than ever.
Not all is well in BNPL land, however. Swedish payment startup Klarna is facing some major problems after making big moves designed to revolutionize the way it does business.
Klarna CEO: ‘There will always be a human if you want’
Klarna made a shocking announcement on May 19 that its net loss for the first three months of 2025 totaled $99 million, which is more than 50% of its Q1 losses one year prior.
Klarna named several reasons for the loss, including restructuring, depreciation, and share-based payments. Part of that restructuring was a highly publicized shift from using human workers to using AI for everything from customer service to marketing.
The move was lucrative in several ways. Klarna CEO Sebastian Siemiatkowski boldly stated that the company’s chatbot had replaced 700 humans and handled inquiries an average of nine minutes faster.
But more importantly, the strategy helped save $10 million on marketing — a change Klarna badly needed after its valuation plummeted from $45.6 billion to $6.7 billion in 2022.
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“I am of the opinion that AI can already do all of the jobs that humans do,” Siemiatkowski said during a video interview with Bloomberg. “It’s just a question of how we apply it.”
Only a few months have passed, and now Klarna is openly admitting the big AI shift was a mistake and that it will turn back to hiring humans again.
“From a brand perspective, a company perspective, I just think it’s so critical that you are clear to your customer that there will be always a human if you want,” Siemiatkowski said.
As for the decision to pivot to AI, Siemiatkowski admitted that Klarna acted too hastily with cost savings in mind.
“As cost unfortunately seems to have been a too predominant evaluation factor when organizing this, what you end up having is lower quality,” Siemiatkowski said, referring to the customer experience with AI.
Klarna’s solution is more shocking than the problem
The solution to Klarna’s problem seems pretty simple: hire back the humans.
But rather than bring them back full-time, Siemiatkowski has another unusual strategy to solve his company’s problem: gig workers. Much like Uber drivers, these remote customer service providers would log in and out and work when they want to earn money. In an interview with Bloomberg, Siemiatkowski says everyone from students to existing users to people in rural areas would be ideal for these roles.
Klarna previously announced its intent to file an IPO in early 2025 and had been targeting a valuation of $15 million, per an exclusive with the Wall Street Journal.
But the BNPL company then announced on April 7 it would pause the IPO, saying in an SEC filing: “A downturn in the general economic environment or a slower pace of economic growth, including as a result of changes in international trade policies, multilateral trade agreements or imposition of new tariffs, taxes and other restrictions on global trade, or changes to immigration policies or migration patterns, can lead to decreased consumer spending and adversely affect the financial condition of our merchants.”
Klarna has yet to announce a new date for the IPO.