Klarna, a buy now, pay later firm, has reported a profitable month for the first time in three years.
The Swedish company, which allows shoppers to defer and split the cost of items but has been accused of tipping people into debt, has struggled to make money in recent years amid rising bad debts and weak consumer confidence.
Its chief executive, Sebastian Siemiatkowski, said the company had made a small net profit in May this year.
“Today’s results clearly rebut the misconceptions around Klarna’s business model, evidencing that it is incredibly agile and sustainable as we support our healthy consumer base in making sound financial decisions,” he said.
Campaigners have called for tougher protections for customers from buy now, pay later (BNPL) lenders. Klarna, which works with companies such as JD Sports, Asos, H&M and Superdry, makes its money by charging the retailer rather than the customer. However, people have increasingly been using BNPL to cover day-to-day essentials including food.
BNPL is unregulated by the Financial Conduct Authority (FCA) and reports in July indicated the Treasury was planning to shelve plans to crack down on the industry.
Klarna said it still made an operating loss of 865m Swedish kronor (£62m) for the second quarter, between April and June.
This was an improvement on the same period last year when the company made a loss of 3.7bn kronor.
Revenues increased by 17% to 5.5bn kronor in the quarter and credit losses fell by 41% to 1bn kronor.
Siemiatkowski said: “Some claimed Klarna would face difficulties in the tough macroeconomic climate with high interest rates. But having led the company through the 2008 financial crisis, I knew we had a strong and resilient business model to see us through. Despite the volatile environment, we have done exactly what we set out to do.”
Klarna said it would continue to focus on artificial intelligence to “enhance our customer offerings”. It added that AI used by the company saved customers an average of 19 seconds per interaction, which amounted overall to more than 60,000 hours a year.
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The fintech firm had many profitable years of trading after its inception in 2005 but ran into trouble from 2018. It blamed the losses on its rapid US expansion, rising staff costs and a slowdown in consumer spending.
Klarna, which was once Europe’s most valuable private firm, was forced to cut its valuation by 85% from $45.6bn to $6.7bn last year and also reduced the size of its global workforce by about 10%.
In the UK, Tulip Siddiq, the shadow City minister, criticised the delay in regulating BNPL.
In a letter to Andrew Griffith, the City minister, and seen by the Financial Times, Siddiq said: “I recognise that many people value BNPL deals, as they can be a useful way to budget and pay for items. But the government’s failure to regulate the sector has left millions at risk from bad actors in the market.”
