After lots of discussions about how AI is transforming financial services as a new, foundational technology that has massive granularity of use cases, it doesn’t always work. In a very major public about face, Klarna says it doesn’t work. This is the company that saved millions by getting rid of two of five staff. Now, it wants those people back. Why?
Well, let’s start at the beginning. Two years ago, the company’s CEO, Sebastian Siemiatkowski, announced he wanted his company to be the “favourite guinea pig” of OpenAI and began trying to automate all processes using an AI first approach whilst letting staff go.
Then, in a headline grabbing move late last year, Mr. Siemiatkowski, said that AI had taken over tasks once handled by hundreds of employees and, as a result, froze all new hires during 2024. In fact, over 18 months, he claimed that staff numbers dropped 40% through a mixture of a hiring freeze and natural attrition. More specifically, an OpenAI-driven assistant replaced 700 customer service agents and, from an experiential view, the machines were dramatically cutting average resolution times for customer issues from 11 minutes to just two. In fact the chatbots could handle up to 75% of customer calls in 35 languages in minutes and, on top of this, the company saved $10 million on marketing costs by outsourcing tasks like translation, art production, and data analysis to generative AI.
Doesn’t that sound wonderful?
Well, maybe not. In a major pivot, Mr. Siemiatkowski is saying it’s not working.
In a recent interview with Bloomberg, he admitted that Klarna is hiring new staff due to a level of disappointment with the performance of the AI tools the company had rolled out.
“Cost, unfortunately, seems to have been too predominant an evaluation factor when organising this. What you end up having is lower quality … “investing in the quality of the human support is the way of the future for us.”
It is a clear case that machines cannot do what humans can do, as the change of strategy was due to the decline in the quality of support and that users react negatively to overly automated interaction.
Nevertheless, the company insists that it is still following its policy of driving down staff numbers via natural attrition and was only hiring new customer service agents on a freelance basis for the company’s outsourcing division.
According to Mr. Siemiatkowski, the aim is that customers deal with Klarna AI first, but with the ability to deal with a real human when necessary. That makes sense to me, as AI should not be replacing humans but augmenting them.
Interestingly, the humans are not staffers as, in the modern world of the gig economy, they are freelancers WFH. Is that going to fit with corporate culture?
Talking of which, is there a best way to implement AI in a large company?
Well, there are some clues and it starts with clarity, clearance, consolidation and integration. You cannot be efficient with dumb data (ed: did I really say this six years ago), so the start point is business process and data clarity.
This means that, before implementing AI, companies must unify processes, documentation, and prepare high-quality data sets. That takes time and is why a recent survey found that over half of UK business leaders regret their decision to replace humans with AI.
Meanwhile, I will leave the final comment to Klarna’s CEO Sebastian Siemiatkowski:
“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.” Interestingly, one year earlier, his view was “that AI can already do all of the jobs that we, as humans, do.”
So maybe the real reason for his change of heart isn’t AI at all, but to do with customers not paying back their loans. This week, Klarna reported that their losses more than doubled in the first quarter, as more consumers failed to repay loans. They made a net loss of almost $100 million for the three months to March 2025, up from $47 million a year earlier. Specifically, its customer credit losses had risen to $136 million, a 17% year-on-year increase.
Shift happens.
Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, TheFinanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...