Klarna has announced that it will reduce its workforce by almost 50 percent.
The buy-now-pay-later specialist believes that its investment in and use of AI will allow the company to cut thousands of jobs, reducing its staff from 3800 to 2000.
This follows a steady stream of releases from Klarna over the past two years, which have already seen the financial service firm lose over 1500 members of its workforce.
Speaking in December 2023, CEO Sebastian Siemiatkowski outlined that the company was freezing hiring as it looked to pursue AI alternatives.
This theme is also prevalent in the latest phase of planned job cuts, which was revealed during an interim financial results announcement where Siemiatkowski claimed that AI had directly contributed to a revenue boost of 27% in the first half of 2024.
In addition, the Klarna boss confirmed that average revenue per employee had risen by 73% year-over-year.
In a discussion with the Financial Times, Siemiatkowski explained how AI technology was enabling Klarna to be more efficient with a smaller workforce:
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.
Rather than introducing layoffs, Siemiatkowski confirmed that Klarna would continue with its strategy of “natural attrition.” As workers move on to higher-paying jobs or seek new opportunities, which is typical in the tech industry, the company will mostly opt not to replace them.
The CEO also stated that the company would not be employing common strategies like halting promotions, freezing pay raises, or increasing performance improvement plans, in order to encourage employees to leave.
This process would usually result in remaining employees facing a heavier workload. However, Siemiatkowski believes that AI will be able to pick up the slack, suggesting it could be a “positive development,” potentially leading to higher pay for some employees.
According to Nicolas de Kouchkovsky, an Industry Analyst for CaCube Consulting, this further implementation of AI includes overhauling Klarna’s tech stack and ending its subscriptions to Salesforce and Workday.
In place of the partnerships, the company plans to introduce a streamlined system powered by generative AI GenAI, which could challenge traditional enterprise software models.
An AI Acolyte
Klarna and Siemiatkowski have been enthusiastic advocates of AI for quite some time.
Indeed, earlier this year, the financial service organization teamed up with OpenAI to introduce its first virtual assistant.
At the time, Klarna claimed that the new assistant was handling two-thirds of customer service chats and performing the work of 700 employees.
The company also stated that query resolution times had dropped from 11 minutes to 2 minutes, with customer satisfaction remaining stable.
In discussing the success of his company’s AI solution, Siemiatkowski revealed that, following a conversation with OpenAI’s Sam Altman, he had made a conscious decision to make the business an early adopter of AI and to become OpenAI’s “favorite guinea pig.”
While Siemiatkowski seems to have no intention of slowing down on his ‘all in on AI’ strategy, it is important to be cautious when operating with a technology that is still in its infancy.
As the old adage goes, don’t put all your eggs in one basket.
The dangers of overreliance on AI were discussed in a Gartner study from the beginning of the year. The report warns against fully replacing human agents with AI, predicting that the EU may soon enforce a “right to talk to a human.”
Instead, the research juggernaut advises using AI as a support tool rather than a complete replacement for human agents.
Job Cuts Galore
While Klarna’s unashamedly pro-AI CEO and the scale of the job cuts have drawn the attention of many in the customer service and CX sector, other high-profile vendors have also recently announced staff reductions.
Last week, Five9 confirmed that it would be cutting its workforce by 7%, affecting around 180 employees, as part of a broader strategy to enhance shareholder value.
According to an SEC filing, these layoffs are intended to drive balanced, profitable growth and support the company’s positive long-term outlook.
The job cuts and other measures are expected to be largely completed by the end of 2024, with the process beginning on August 20.
In discussing the news, Five9 CEO Mike Burkland emphasized the company’s commitment to supporting impacted staff through severance packages and job transition assistance.
Earlier in the month, Cisco made a similar announcement, confirming a restructuring plan that will cut its global workforce by over 7%, resulting in more than 5,500 job losses.
This marks Cisco’s second round of layoffs in 2024, following the departure of around 4,000 employees in February.
According to EVP & CFO Richard Scott Herren, the reasons behind both rounds of layoffs are “not about cost saving,” but about a shift in strategy:
So, [we are] pivoting more into AI, pivoting more into cloud, and pivoting more into cybersecurity.
As part of its shift toward cybersecurity, Cisco will merge Webex with its networking and security businesses into a single unit.
Herren stated that this move will enable Cisco to better emphasize the importance of integrating its collaboration, networking, and security products.
