Klarna predicts AI's toll on jobs, India's payment rail boosts Walmart

August 28, 2024 3:15 PM

Adyen has hired former Block payments executive Tom Adams to oversee the Dutch payment company's digital diversification; buy now/pay later lender Sezzle looks to expand small-business lending through a fintech partnership; and more. Here's what's happening in the world of payments.

Klarna’s valuation boosted roundup slide.

Hollie Adams/Bloomberg

AI helps lower headcount at Klarna

Klarna on Tuesday said it has brought in an average of 73% more revenue per employee over the past 12 months, part of a broad push to use new forms of artificial intelligence at the Swedish financial institution. The impact of AI is also reducing the number of employees the company needs, news that will draw more attention to AI's role in financial services employment.

The company has about 3,800 employees. Klarna CEO Sebastian Siemiatkowski told Reuters that AI's impact had contributed to cutting that headcount from about 5,000 a year ago. That reduction had come largely through attrition and not layoffs, Siemiatkowski said, adding further reductions to less than 3,000 were possible in coming years. In an email, Klarna's public relations office said, "We are not planning on cutting jobs. However, we are acknowledging that, due to the use of AI, we are not replacing those who decide to leave the business, so through natural attrition the business becomes smaller, but there are no redundancies."

The company, which is well-known outside of Sweden for buy now/pay later lending, reported that its profits were about $66 million for the quarter ended June 30, compared with a loss of about $68 million for the quarter ended June 30, 2023. Klarna, in the quarter ended Sept. 30, 2023, returned to profitability for the first time since 2019.

Klarna is adding financial products such as savings accounts in the U.S. and European markets as it prepares for a public listing in the U.S. in early 2025. That brings Klarna into more direct competition with PayPal, Block and U.S. banks, though payment analysts have said Klarna faces a challenge in convincing U.S. consumers that it offers more than buy now/pay later. As it attempts to diversify its products, Klarna is investing heavily in generative AI. Before Tuesday's release and the Reuters interview, Siemiatkowski had made several claims about generative AI, including that it performed the "work of 700 people," and said the company would not hire staff outside of engineering because AI can perform many tasks. Klarna has made gen AI available to all of its employees and said gen AI performs 66% of its customer engagements. —John Adams

Walmart's Indian payments unit reaches profitability

PhonePe this week reported a net profit of about $23 million for the fiscal year that ended March 31, up from a loss of about $7 billion the prior year, an improvement it attributed to payments processing and the impact of India's national payments system.

In recent months, the Walmart-owned PhonePe has added services beyond payments, such as insurance, merchant lending and wealth management.

PhonePe has a 48% share of transactions on India's United Payments Interface, the country's national payment rail, making PhonePe the largest UPI user. PhonePe has partnered with Google, another large UPI adopter, to export UPI's digital payments technology to other countries. That also gives Google Pay an outlet to offer digital payments via U.S. firms that sell to India, enabling Google to compete with U.S. payments firms that are also active there.

Walmart uses its ownership of PhonePe as a way to expand its financial services strategy in India, and to use India as a testing ground for payments technology that Walmart uses in its other markets. —John Adams

Adyen hiring payments exec from Block

Dutch payments company Adyen has hired Tom Adams to be its chief technology officer. Adams was previously head of engineering at Cash App, Block's peer-to-peer transfer app.

At Adyen, Adams will supervise payments, financial product development and data strategies. Adams joins Adyen in the midst of a technology overhaul. The company recently added Fastlane, a PayPal product that consumers use to store payment credentials over a network of merchants, enabling faster checkout.

Adyen has also added digital payments technology for both e-commerce and the physical point of sale as the Amsterdam-based company focuses on international growth in the U.S. and other markets outside of Europe. One of its competitors is Block, which retains its original Square brand for its merchant-facing business. Cash App plays a key role at Block, serving as a funding mechanism for the company's cryptocurrency business, and as an enrollment tool for both consumer and business clients at Block.

"As the financial services industry continues to digitize, and as we see shopper expectations continue to evolve, there is immense opportunity to drive innovation," Adams said in a release. Dutch regulators have approved Adams' appointment, as required by local law; and Adyen's board of directors will also need to approve his hiring. The date for that meeting was not released. Adams will replace Alexander Matthey, who will depart Adyen later this year. —John Adams

Amazon invests $20M in Indian buy now/pay later company

Amazon.com has made a $20 million equity investment in India-based buy now/pay later company Axio, which powers the retailer's buy now/pay later offering in the country.

Axio, founded in 2013, provides working capital finance services and e-commerce solutions to small and medium enterprises in India. Consumers can select buy now/pay later terms between three and 12 months, according to the company.

The move marks Amazon's second investment in Axio. Amazon in 2018 invested $22 million during the company's Series C funding round. Axio has raised $226.3 million in debt and equity funding since its inception, according to Crunchbase.

Axio plans to use the new funds to scale its loan portfolio, enhance its buy now/pay later offering and expand its credit offering to its nine million credit customers, Axio co-founders Sashank Rishyasringa and Gaurav Hinduja said in a statement. —Joey Pizzolato

Visa, Y Combinator join in $5M funding round for Kenyan payroll provider

Kenyan payroll provider Workpay doubled its total funding with fresh investments from a Series A funding round.

Workpay provides cloud-based payroll and a human resources software-as-a-service platform for businesses operating in Africa. Customers are able to process payroll, track time, manage leave, track expenses and manage employee and contractor performance, according to the company.

Visa, Y Combinator and six other investors participated in the funding round, bringing the fintech's total funding to $10.3 million, according to Crunchbase. The company previously raised $5.3 million in its seed funding round.

The company said that over 1,000 businesses use its services across more than 20 countries in Africa.

Co-founder Paul Kimani said in a statement that the funds would be used to help steer the company toward profitability. —Joey Pizzolato

Sezzle, London fintech partner to sell merchant lending

U.K. financial technology company Liberis will offer Sezzle-branded loans to small businesses in the U.S., with a planned launch in Canada in the coming weeks.

The product, called "Sezzle Capital, fueled by Liberis," will add a credit option to merchants that offer Sezzle's buy now/pay later loans to consumers at the point of sale.

Founded in 2007, Liberis sells financing and other products to small businesses, working through a network of more than 30 partners. The firm, which says it has lent more than $1 billion over the past 17 years, cited research from Goldman Sachs that found 77% of small businesses are concerned about their ability to access capital.

"Working with Sezzle allows us to serve both their early-stage and mature business customers, with fast and flexible funding through our platform," Liberis CEO Rob Straathof said in a release. The collaboration will enable Sezzle to compete with Block, PayPal and other payment technology companies that cross-sell lending and other financial services to their merchant clients. —John Adams

AI startup raises $8.5M for autonomous payments

Skyfire Systems is looking to make payments fully autonomous with the help of artificial intelligence.

The San Francisco-based fintech raised $8.5 million to build an AI agent that will be able to make and receive payments without human intervention. The AI agent will provide secure wallet access, verifiable agent identity and an open payment protocol, the company said.

"AI can't truly change the world until it can transact freely. Agents need more than intelligence; they need the autonomy to complete economic tasks without human intervention," said Craig DeWitt, Skyfire's co-founder and head of product, in a release.

Co-founders DeWitt and Amir Sarhangi, who serves as CEO of the venture, previously worked together at Ripple, a technology company focused on cross-border payments, crypto liquidity and central bank digital currency.

Ripple, along with 15 other investors, participated in the $8.5 million seed round. —Joey Pizzolato

Singapore bank DBS pilots programmable disbursements over blockchain

Singapore-based DBS completed a pilot that used programmable disbursements to send grant money to businesses in the country last week.

Programmable disbursements are automatic payments that are released when specific conditions are met, such as meeting certain milestones. Spending conditions, such as limiting the type of retailer the funds can be sent to, or time-based restrictions such as expiring funds, can also be implemented into the disbursement rules over blockchain.

DBS partnered with Singapore's fintech council and Enterprise Singapore, a government agency that supports small and medium enterprise development, for the pilot.

Disbursements were made to 27 fintechs, with conditions that included disbursements to only approved recipients upon the fulfillment of certain business conditions.

DBS Singapore's Country Head Han Kwee Juan said in a release that milestone-based project payments and consumer rewards were additional use cases for the technology. —Joey Pizzolato