In brief: The danger faced by buy now, pay later companies is when customers don't adhere to the "pay later" part. It's a problem being faced by industry giant Klarna, which saw its net losses more than double in the first quarter as more customers struggled to pay back their loan installments. Klarna's net losses for the first quarter reached $99 million, almost double the $47 million it lost during the same period a year earlier. The problem is that an increasing number of customers who have taken out the buy now, pay later loans are struggling to pay them back. Klarna offers its BNPL services to a range of merchants, letting customers purchase a wide range of items in installments. The company makes its money by charging fees to the merchants and customers who fail to pay on time. In its first quarter earnings report, Klarna revealed that consumer credit losses were up to $136 million, an increase of around 17% compared to a year earlier. It seems there's a growing trend of BNPL customers being unable to meet their contractual obligations. Credit platform LendingTree carried out a survey last month that found 41% of users of BNPL loans said they paid late on one of them in the past year, up from 34% compared to a year ago. High-income borrowers were among the most likely to pay late, along with men, young people, and parents of young kids. // Related Stories   The survey also showed that a quarter of BNPL users said they used the loans to buy groceries amid rising supermarket costs and marking a 14% increase compared to a year ago. It also revealed that nearly 1 in 4 BNPL users said they've had three or more active BNPL loans at one time. The Federal Reserve Bank of New York last week reported that US consumer debt rose by $167 billion in the first quarter to reach a record $18.2 trillion. Elsewhere in Klarna's earnings, which was presented using an AI-generated avatar of its chief executive, the company said it has used artificial intelligence to help cut costs. The company's headcount is down 39% over the last two years, customer service costs were down 12% YoY in the first quarter. Klarna is estimated to have replaced 700 employees with AI. The good news for humans is that Klarna has started hiring them again after its CEO recently admitted AI customer service chatbots offered a "lower quality" output.

Klarna said it used an AI doppelganger of CEO Sebastian Siemiatkowski to report its updated quarterly earnings. Klarna 2025-05-22T02:31:59Z Save Saved Read in app This story is available exclusively to Business Insider subscribers. Become an Insider and start reading now. Have an account? Klarna said it used an AI avatar of its CEO to report quarterly earnings in a YouTube video. Klarna brands itself as an AI company and has "streamlined" its workforce by 40% since 2022. Klarna's Q1 results show revenue growth but see a spike in net and credit losses. Buy now, pay later services company Klarna said it used an AI doppelganger of CEO Sebastian Siemiatkowski to report its quarterly earnings on Monday.The AI avatar appeared in a video on Klarna's official YouTube channel to deliver earnings highlights. It wore a brown jacket reminiscent of one in Siemiatkowski's corporate headshots, and aside from a lack of blinking and suspect"Our AI-first strategy is driving exceptional returns, we're outpacing competitors, our merchant network is scaling rapidly, and our next-gen products are reshaping money management for millions," a presumably human Siemiatkowski said in a press release.The move comes as Klarna, which last month put its IPO on ice due to economic uncertainty, tries to brand itself as an AI company. In the earnings press release, Klarna said it has "streamlined" its workforce by around 40% since 2022.In 2022, 800 employees were fired, while some were quietly offered an exit package last year after being placed into a "talent pool." In February 2024, Klarna announced that itsKlarna has recently ramped up partnerships with platforms like Walmart, eBay, and DoorDash, but consumer watchdogs have long been concerned about the potential for overspending under BNPL services. Under the Biden administration, theBNPL providers as credit card lenders, which required stricter protections around disclosures and disputes.The Federal Reserve found in 2024 that users of BNPL services are more likely to rely on high-interest financing tools and are more financially fragile.LendingTree, an online lending marketplace, also found in an April survey that 41% of BNPL users in the US paid late over the last 12 months, up from 34% a year ago.Klarna's latest Q1 results also show that an increasing number of people may not have been paying their loans. While revenue grew 13% year over year and it reached 100 million active users, Klarna also doubled its net losses from $47 million in Q1 2024 to $99 million in Q1 2025 — a 110% increase.During the May 19 earnings call, Klarna attributed the spike in losses to several one-off costs related to depreciation, share-based payments, and restructuring.Klarna's consumer credit losses have also jumped, which its Q1 financial report said is "driven by the accelerated expansion of Pay Later and Fair Financing products." Klarna's first quarter saw a 17% year-on-year increase in credit losses from $117 million to $136 million.Klarna did not immediately respond to requests for comment.