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Beijing time on September 1 morning news, According to reports, Local time Wednesday, Sweden "Buy before pay" Unicorn Klarna announced earnings. Financial results show that the company's losses in the first half of the year rose sharply.

Klarna posted revenues of 9.1 billion Swedish kronor ($950 million) in the first half of this year, up 24% from the same period last year.

However, revenue growth has come at a time when the company has suffered huge losses. The pre-tax loss for the first half of the year was SEK 6.2 billion, more than tripling year-on-year. The company lost 1.8 billion Swedish crowns in the first half of last year.

The company's main business is to amortize consumers 'purchase costs, allowing interest-free installments to replace one-time payments. During the first half of the year, the company's operating costs and user defaults increased significantly.

Klarna's operating costs amounted to SEK 10.8 billion in the first half of the year, much higher than SEK 6.3 billion in the same period last year, mainly due to increased administrative costs due to expansion in many countries such as the United States. In addition, the company's credit losses in the first half of the year (installment payment user defaults) amounted to 2.9 billion Swedish kronor, an increase of more than half.

Since its birth, Klarna has been profitable for most of its life. By 2019, the company was losing money for the first time in its history, mainly due to expansion in many countries around the world, resulting in a significant increase in investment spending.

Klarna expanded aggressively in the wake of the global outbreak, but huge losses in the first half of the year showed the high cost of such aggressive expansion. Since the beginning of 2020, the company's installment business has entered 11 new countries and regions, including market "big bets" in the United States and the United Kingdom.

In the U.S., the company is spending heavily on marketing and user acquisition in an effort to steal paying users from its main competitor Affirm. In the UK, Klarna acquired PriceRunner, a comparison shopping site, in April. The company has also invested in lobbying politicians and officials in the face of upcoming industry regulations from the UK government.

Valuation avalanche However, recently, Klarna began to be forced to contract. In May, the company made several layoffs around the world, cutting a total of 10% of its employees. The company subsequently raised $800 million in funding, but the company was valued at just $6.7 billion, a staggering 85% drop from its previous valuation. Klarna's plunge in valuations is the latest example of a high-growth tech company's steep depreciation amid investor fears of a possible recession.

Klarna's steep valuation also reflects a lack of interest from investors in the public and private Internet finance industry. Affirm, for example, has been listed since the beginning of the year, and its capital market value has fallen for three consecutive quarters.

Sebastian Siemiatkowski, CEO and co-founder of Klarna, said the company was forced to make some difficult decisions to ensure that the right human resources were allocated to the right business units to return the company to profitability, while continuing to support consumers and retailers during more difficult macroeconomic times.

Klarna offers mainly short-term credit products and has a more flexible financial position than traditional banks, he said. But even for Klarna, some management decisions will have an impact over time.

Many internet finance companies are cutting back on spending or postponing planned IPOs because of the global macroeconomic downturn. In addition, consumer-oriented Internet finance companies lost the appetite of investment institutions, and so-called "business-to-business" Internet finance companies began to be favored.

According to the financial report, Klarna has reached 150 million installment payment users worldwide, serving a total of 450,000 merchants. It is reported that the company's profits mainly come from merchants, not consumers, each time users complete an installment payment, the company will draw a commission.

Simon Taylor, an executive at competitive Internet finance company Sardine.ai, comments that Klarna has proven that installment payments are a profitable business and that they are betting heavily on the U.S. market, but obviously at a cost. Competing for a bigger share of the U.S. market makes sense in the long run, but it takes time and money, and it's a new challenge for Klarna.

Klarna faces a rise in installment payments. Many tech companies or financial firms are already salivating at the installment market. This fall, for example, Apple plans to launch its own installment service, Apple Pay Later, where users can spread past lump-sum payments into four monthly installments.

Moreover, in many countries, the installment market is facing greater government regulatory pressure. In Britain, for example, the government has announced plans to require installment companies to scrutinize consumers more closely about their ability to pay back, and to crack down on misleading advertising by installment companies. In the United States, the Consumer Financial Protection Bureau has launched an investigation into a number of installment companies.

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