Pay rise for Klarna chief Sebastian Siemiatkowski despite record loss

Klarna’s CEO saw his salary rise to more than £1 million last year as the company posted its biggest ever loss.

Sebastian Siemiatkowski, the founder and chief executive of the buy-now-pay-later (BNPL) firm, will receive £1.05 million in 2022 – a 35 per cent increase on the previous year.

The pay rise came despite Klarna plummeting to a £830m loss, the biggest since the company was founded in 2005 and far worse than the £522m loss in 2021.

The dismal numbers came amid increasing scrutiny of the BNPL industry as it explodes in popularity among customers who can’t or won’t afford to pay for goods up front.

It is feared that many users – especially young people – are unknowingly accumulating debts that they will find it difficult to pay off amid the cost of living crisis.

However, analysts suggested that any industry regulatory constraint could work in favor of the big players like Klarna as smaller players fold.

The privately held Swedish company saw its valuation fall 85 percent from £38bn to £5.5bn in a funding round last year. It also cut 700 staff in two rounds of layoffs.

Klarna announced 41-year-old Siemiatkowski’s salary alongside the results yesterday, saying its compensation policy was in line with those of other tech companies “to hire and retain the best talent.”

Klarna was regularly profitable until it started an aggressive rollout in the US four years ago.

While the United States is now the largest market by revenue, Klarna hasn’t posted a full-year profit since 2018, with marketing and labor costs taking their toll.

Klarna was more optimistic about the fourth quarter of 2022, where losses narrowed to £150m from £364m a year earlier.

Credit losses, which arise when customers fail to pay back what they owe, fell 18 percent to £110 million.

With this in mind, the company said its goal was to return to profitability by the summer of 2023.

Founded in 2005, Klarna has exploded in popularity in recent years, allowing customers to split the cost of purchases into installments, often without interest or fees unless they fail to pay back on time.

The payment method is popular with younger shoppers and in sectors such as clothing and fast fashion. Klarna has partnerships with major brands including Nike, H&M and IKEA.

But the BNPL industry, which includes other major players such as Clearpay and Laybuy, is under increasing scrutiny.

Research from Barclays Bank and the charity StepChange last year found that nearly a third of BNPL borrowers said their loans had spiraled out of control.

BNPL products are classified as ‘high risk’ by the City Watchdog alongside other unregulated investments such as cryptocurrencies.

The Treasury unveiled draft proposals this month that would allow the Financial Conduct Authority to ban companies that have failed to conduct adequate credit checks on customers.

The government plans to introduce legislation to parliament later this year.