Klarna, once hailed as a FinTech unicorn and leader of the “buy now, pay later” movement, is under intense scrutiny as it battles mounting losses, credit defaults, and delayed IPO plans.
With U.S. consumer debt hitting record levels and Klarna’s own credit losses rising sharply, questions are circulating, is Klarna going out of business?
This article dives deep into Klarna’s recent financial performance, market challenges, and operational shifts to provide a clear picture of its future.
What Is Driving Klarna’s Increased Losses in 2025?
Klarna reported a net loss of $99 million in Q1 2025, more than double its $47 million loss from the same period last year.
This surge is linked to:
- A 17% year-on-year rise in customer credit losses, totaling $136 million.
- One-off expenses from share-based payments and severance restructuring costs.
- Depreciation costs related to past expansion and AI investments.
While revenue rose 13% to $701 million and active users hit 100 million, the gains were eclipsed by these mounting operational and financial setbacks.
Klarna is also grappling with rising funding costs, up 15% to $130 million, further pressuring profitability.
Is Klarna Going Out of Business Due to IPO Delays and Debt Defaults?
Klarna is not going out of business, but the company is showing signs of financial stress that cannot be ignored. Its much-anticipated U.S. IPO, once expected to value the firm at $15 billion, has been postponed due to broader economic uncertainty and newly imposed U.S. tariffs.
Klarna’s core buy-now-pay-later (BNPL) model is also under pressure amid rising consumer debt and increasing loan delinquencies in the U.S. market.
The company’s credit loss rate has edged up from 0.51% to 0.54%, still relatively low but trending in the wrong direction. These financial signals, combined with growing funding costs and an unstable consumer credit environment, pose real risks.
However, Klarna is still operational and pushing forward with new partnerships and AI-driven efficiency strategies. While not in immediate danger, the company must navigate carefully to maintain its market position.
Why Are Klarna Users Struggling to Repay Loans on Time?
Increased defaults among Klarna’s customers can be traced to broader economic conditions and consumer behavior shifts in the U.S.:
- Soaring consumer debt: U.S. households now owe a record $18.2 trillion.
- Wage stagnation vs. inflation: Spending continues to rise, yet wages remain flat for many under $100K households.
- Use of BNPL for essentials: More users now rely on Klarna for groceries and necessities, up from 14% to 25% in one year.
| Factor | Q1 2024 | Q1 2025 |
| Net Loss | $47 million | $99 million |
| Customer Credit Losses | $116 million | $136 million (+17%) |
| Credit Loss Rate | 0.51% | 0.54% |
| U.S. BNPL Market Share | ~24% | 26.2% |
The consumer shift from discretionary to essential spending via BNPL suggests growing dependence on short-term credit, raising concerns about long-term sustainability.
How Is Klarna Using AI to Control Operational Costs?
Klarna is heavily leaning on artificial intelligence to cut operational costs and improve scalability.
AI integration milestones
- 96% of staff use AI daily.
- Customer service transaction costs dropped by 40% since Q1 2023.
- Revenue per employee increased by 152% YoY.
Restructuring efforts
- Workforce reduced by 39% since 2022.
- Tech team composition rose from 36% to 52%.
Next-gen tools: Klarna has launched an AI-powered customer assistant and now uses AI-generated avatars for public updates, including CEO presentations.
This AI-first strategy supports Klarna’s long-term sustainability, though it has prompted criticism over lack of human interaction, leading Klarna to rehire some support agents.
Has Klarna Lost Consumer Trust Due to Payment Rejections?
Some Klarna users have recently reported issues at checkout when trying to use payment options. Here’s why:
Automated credit checks
Klarna performs real-time risk assessments for each transaction, considering:
- Credit history
- Outstanding debt
- Previous Klarna payment behavior
Temporary declines
Approval may be rejected even if past transactions were successful. Rejections are:
- Based on updated credit bureau data
- Non-negotiable via customer service
This process reflects Klarna’s efforts to protect users and itself from overexposure but may frustrate long-term customers unaware of dynamic eligibility checks.
Why Did Klarna Put Its IPO on Hold, and What Happens Next?
Klarna paused its IPO in April 2025 due to increasing geopolitical and economic volatility:
Key Factors Behind the Delay
- President Trump’s sweeping U.S. tariffs triggered investor caution.
- IPO market instability also affected companies like StubHub and Chime.
- Klarna cited “market turbulence” as a core reason for pausing.
Implications for Klarna
- Missed opportunity to raise capital in public markets.
- Delay in improving transparency and valuation credibility.
- Uncertainty over when, and at what valuation, the IPO may resume.
Still, Klarna remains attractive to investors due to its tech stack, customer base, and partnerships with Walmart, eBay, and DoorDash.
What Are Klarna’s Current Strengths Amid Challenges?
Despite losses, Klarna maintains several strong fundamentals:
- Global reach: 100 million active users and 724,000 merchant partners.
- Revenue growth: 13–15% YoY increase, even in turbulent markets.
- Merchant partnerships: Expanded ties with Walmart, eBay, and DoorDash.
- Adaptability: 83% of its loan book refreshes every three months, giving Klarna agility in response to changing market conditions.
These aspects offer resilience against short-term downturns, positioning Klarna as a leaner, more scalable fintech going forward.
Is Klarna’s Business Model Sustainable in the Long Term?
The viability of Klarna’s “buy now, pay later” model in a high-debt, inflation-prone market is under review. Here’s what might shape its long-term sustainability:
Challenges
- Consumer delinquencies rising across the BNPL sector.
- Softening household spending, especially under $100K income.
- Loosening of BNPL regulatory oversight in the U.S., exposing users to fewer protections.
Opportunities
- AI-led cost reductions.
- Strong brand loyalty in key markets.
- High-volume partnerships with global merchants.
The model’s survival depends on balancing risk controls with customer satisfaction and leveraging AI to offset rising funding and credit costs.
Conclusion
So, is Klarna going out of business? The short answer is no, but the company is at a crossroads. With increasing consumer defaults, delayed IPO ambitions, and economic headwinds, Klarna must navigate uncertainty while doubling down on tech efficiency and customer trust.
Its strategy of AI-driven scaling, combined with strong merchant partnerships and a diversified global user base, offers a path forward.
Whether it can convert these assets into profitability without alienating users remains the key challenge ahead.
FAQs About Klarna Business Closure
Is Klarna going out of business in 2025?
No, Klarna is still operating globally, though it has paused its IPO and reported rising losses.
Why did Klarna delay its IPO?
Klarna postponed its IPO due to U.S. market instability and new tariff concerns.
Are Klarna users defaulting on payments?
Yes, Klarna’s consumer credit losses rose 17% year-over-year in Q1 2025.
How is Klarna reducing its costs?
The company is using artificial intelligence to cut staffing and customer service costs significantly.
Why might my Klarna payment be declined at checkout?
Klarna uses real-time credit checks that may temporarily reject payment based on your current credit status.
Has Klarna laid off employees recently?
Yes, Klarna cut its workforce by 39% since 2022 but is now rehiring in customer service.
What are Klarna’s future plans?
Klarna aims to resume its IPO when markets stabilize and continue scaling through AI and partnerships.
