Swedish fintech giant Klarna has reported concerning financial results for Q1, with losses more than doubling to $99 million compared to $47 million in the same period last year. The buy now, pay later (BNPL) provider faced mounting challenges as U.S. consumers increasingly struggled to meet payment obligations.
The company’s credit losses surged by 17 percent year-over-year, reaching $136 million, highlighting growing stability concerns in the American consumer credit market. This development comes as Klarna maintains significant partnerships with major U.S. retailers including Walmart, eBay, and DoorDash.
Recent market turbulence, exacerbated by President Trump’s latest tariff announcements, has forced Klarna to postpone its planned New York IPO. The broader economic environment has shown signs of strain, with consumer confidence dropping to near-record lows amid rising inflation expectations.
Despite these challenges, Klarna maintains some positive metrics. The company’s revenue grew by 13 percent to $701 million, while its active user base expanded to 99 million. The firm emphasized that 83 percent of its loan portfolio turns over within three months, potentially limiting long-term exposure to defaults. The credit loss rate relative to total payment volume showed a modest increase from 0.51 to 0.54 percent.
The company has implemented significant cost-reduction measures, including a 39 percent workforce reduction over two years. Customer service expenses decreased by 12 percent compared to the previous year. However, Klarna faces increased funding costs, which rose 15 percent to $130 million.
Recent consumer behavior trends reveal concerning patterns in BNPL usage. According to Lending Tree research, 41 percent of BNPL users reported late payments in the past year, up from 34 percent
previously. While most late payments were resolved within a week, these self-reported figures may understate the actual extent of payment delays.
The survey also highlighted shifting consumption patterns, with clothing and accessories leading BNPL purchases at 41 percent, followed by technology devices at 39 percent. Notably, there’s been a significant increase in BNPL usage for essential items, with grocery purchases rising from 14 to 25 percent year-over-year. This trend is particularly pronounced among Generation Z, where one-third report using BNPL for groceries. Food delivery services have also seen increased BNPL adoption, with 16 percent of users financing these purchases.
The study revealed that nearly half of respondents have utilized BNPL services, with 11 percent reporting six or more uses. Multiple concurrent loans are common, with 23 percent of users managing three or more BNPL arrangements simultaneously. Gender analysis shows higher adoption among men (53 percent) compared to women (46 percent), while generational differences are stark, with 64 percent of Gen Z using BNPL services versus 29 percent of Baby Boomers.
The company acknowledges the changing economic landscape, stating it is “closely monitoring changes in the macroeconomic environment” and maintains it is “well-positioned to adapt swiftly if required.” However, the combination of rising defaults, increased funding costs, and growing reliance on BNPL for essential purchases suggests potential challenges ahead for the sector.