Klarna Claimed Its AI Was Doing the Work of 700 Employees. It’s Now Rehiring Humans

In June 2022, Swedish fintech company Klarna announced mass layoffs through a controversial pre-recorded video. Additionally, CEO Sebastian Siemiatkowski shared personal data of the 700 fired employees on LinkedIn, further complicating the situation.

AI takes over. After the layoffs, Klarna made a unique decision. It decided to implement an AI system powered by OpenAI models to take over the functions previously performed by those 700 employees.

By February 2024, company officials proudly claimed that its AI assistant was “doing the equivalent work of 700 full-time agents.” Klarna stated that its AI was “on par with human agents in regard to customer satisfaction score.”

Not so fast. Interestingly, Siemiatkowski recently started a hiring process to ensure that customers can always speak to a human agent. This decision is particularly noteworthy given Klarna’s ambitious plans to use AI.

Poor service. The previous strategy of centering support services around AI is no longer considered viable. “As cost unfortunately seems to have been a too predominant evaluation factor when organizing this, what you end up having is lower quality,” Siemiatkowski told Bloomberg. Moving forward, the company plans to invest “in the quality of the human support.”

An Uber-type setup. Siemiatkowski also said that Klarna is shifting to an operational model similar to Uber’s. This new structure will allow workers to log in and work remotely for Klarna, enabling these new hires to replace “the few thousand human agents” that the company currently outsources.

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Cheap labor. The pilot project for this transition has a limited scope, but its goal is to attract candidates such as students or individuals from rural backgrounds. “We also know there are tons of Klarna users that are very passionate about our company and would enjoy working for us,” Siemiatkowski said.

The intention is clear. Rather than hiring experienced professionals in the field, Klarna wants to replace them with these low-cost profiles.

An erratic trajectory. Klarna was valued at $45.6 billion in 2021. However, a series of decisions led to a drastic reduction in that value, dropping to an estimated $6.5 billion within a year. The company currently aims to raise $1 billion through an IPO, which would increase its valuation to around $15 billion. Plans for this IPO have been postponed due to current market volatility.

A decrease in workforce size. Despite these changes, Klarna believes that technologies such as AI will continue to influence the size of its workforce in the future. Siemiatkowski expects that the number of employees will decrease from the current 3,000 to around 2,500 within the next year.

Not an isolated case. In 2023, IBM laid off 8,000 workers to replace them with AI, but it’s simultaneously hiring programmers and salespeople. Some companies say that replacing humans with AI has been successful. However, many are discovering that after implementing AI, they still need to bring in new hires with different skill sets.

A double-edged sword. AI is eliminating certain jobs while creating opportunities in others. Companies that invest in AI tend to replace human workers in routine, highly automated tasks. However, these same companies often realize they require more programmers and specialized personnel. This is likely needed to enhance the performance of AI systems, enabling them to execute automated tasks much more effectively than they initially did.

Image | Brett Jordan

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