Consumers klarn’t pay their debt

Swedish payments giant, Klarna, has seen its 2025 losses swell to more than double that of last year despite strong growth in active customers and quarterly revenue, which crested 100 million and $701 million respectively.

Klarna has been able to grow its user base and revenue through partnerships with the likes of Walmart and DoorDash. 

Their CEO, Sebastian Siemiatkowski, has also attributed this to their “AI-first strategy” which has allowed them to cut their workforce by 40% with 96% of Klarna employees reported to be using AI daily. 

In the report announcing their losses, Klarna points to one-off costs related to restructuring and expenses stemming from its initial public offering (IPO) which has been paused for the time being. 

However, there have been increasing doubts surrounding the sustainability of Klarna’s growth, especially following their DoorDash partnership.

Klarna’s niche, Buy Now, Pay Later (BNPL), would typically be used for large purchases such as furniture. However, their partnership with DoorDash made it possible to finance much lower value items such as fast food.

This was met with heated discord surrounding the continued debt burden on US consumers in particular.

Data shows that US consumers are continuing to struggle with debt as delinquency rates (consumers past due on debt payments) are continuing to climb, reaching the highest level since the financial crisis. 

Delinquency rate on US consumer loans, Federal Reserve of St. Louis

Therefore, offering consumers the ability to finance smaller items plays into wider concerns that consumers are taking on too much debt which they will not be able to pay.

While adding this kind of option to Klarna reveals short-term prospects by accessing a wider customer base, it is of no use to them if the debt is never repaid.

Klarna is already starting to feel the squeeze from this as its customer credit losses (the financial harm a business incurs when a customer fails to repay their outstanding debt) surges 17% year-on-year.

Although, impacts have not just been financial. 

Both DoorDash and Klarna have also suffered reputationally from this move, as the National Review pokes fun by titling their coverage of the situation ‘Don’t Finance Your Burrito Bowl’.

Toby Espinosa, of DoorDash, attempted to defend the partnership by highlighting that DoorDash also allows deliveries of larger ticket items, claiming that this was the aim all along.

This comes at an unfortunate time for Klarna as they are repeatedly forced to delay their IPO.

Initially, their IPO was paused due to the market turbulence caused by Donald Trump’s Liberation Day tariffs and ensuing trade wars.

Since then Klarna has struggled alongside the debt-ridden consumers they depend on.

Furthermore, stricter regulations for BNPL have been announced leading Klarna to be brought under the supervision of the Financial Conduct Authority (FCA). 

This poses challenges for Klarna as complicity with stricter regulations typically leads to lower profitability and higher levels of bureaucracy.