Klarna and Sezzle are eyeing higher revenue and net income growth in 2023

Klarna and Sezzle are eyeing higher revenue and net income growth in 2023

Klarna and Sezzle are eyeing higher revenue and net income growth in 2023

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The 12-month period in 2022 has been a challenging year for most consumer-focused BNPL firms. Declining valuations, increasing losses, and growing regulatory scrutiny are among the various issues faced by BNPL providers. The macroeconomic factors have also led to the downfall of firms like Openpay. In 2023, while the macroeconomic factors are projected to again pose challenges to the net income growth of BNPL firms, Klarna and Sezzle are among the firms that are eyeing profitability through their strategies.

  • Klarna, for instance, announced that the firm is aiming to return to profitability in H2 2023. In 2022, Klarna posted a full-year operating loss of US$1 billion, compared to the US$680 million loss reported in 2021. Although the losses have increased 47% during the 12 months, the firm posted smaller Q4 losses at US$188 million, compared to US$217 million in Q3 2022 and US$455 million in Q4 2021. The gross merchandise volume, on the other hand, reported an increase of 19% year over year in Q4 2022.

To help preserve the bottom line, Klarna adopted various cost-cutting measures, including the cut down in staff. The firm announced layoffs twice in 2022, once in May and once in September. Overall, the firm had sacked 10% of its workforce to drive down the costs of its operations.

Alongside cost-cutting measures, the rebound in the demand for BNPL schemes has also supported the growth in gross merchandise volume for Klarna in Q4 2022. Globally, more and more consumers have turned to BNPL schemes to fund their purchases during the year-end holiday season. For Klarna, the growth in gross merchandise volume has been also driven by the growing adoption of the payment method in the United States.

At the end of 2022, the United States had become the biggest market by revenue for Klarna. Over the 12 months, Klarna reported a 71% growth in gross merchandise value year over year in the United States.

  • As of February 2023, Klarna had amassed a total of 34 million users in the North American market. Of these, more than 8 million are active monthly users. This is much higher compared to the 6 million active monthly users in February 2022.

With a growing network of merchants across industry verticals, the monthly active user base for the firm is projected to continue over the next 12 months. Another strategy that has enabled Klarna to boost its active monthly users is the launch of a browser extension that enables shoppers to use the payment method at any online retailer, even if they are not partners. Notably, the introduction of the browser extension is driving more than US$6 billion worth of volume for Klarna.

This feature offers, coupled with others such as marketing opportunities for merchants, are projected to drive the revenue growth for Klarna in 2023, and therefore, leading the path to profitability.

For Sezzle too, the 12 months in 2022 have been a difficult year, during which the US$491 million merger deal with Australian BNPL provider Zip was also called off. However, despite the economic challenges and the called-off merger deal, the firm ended the year on a profitable note with total income reaching US$38.3 million. The termination of 20% of its workforce, coupled with other growth strategies such as renegotiation of merchant fees and exiting loss making operations in India, Brazil, and Europe, aided the revenue growth for the firm in 2022.

Furthermore, the firm has been building its premium offering, which now has 132,000 active subscribers as of February 2023. From the short to medium-term perspective, the firm is expected to adopt more such initiatives to drive revenue growth, thereby leading the firm on the path of profitability. The firm had announced that it had identified other revenue sources that can bring in an additional US$10 million.

From reporting a net loss of US$75.2 million in the financial year 2021 to ending Q4 2022 with a net income, Sezzle has shown that BNPL operations can be profitable. As Sezzle continues to build on its growth in 2023, PayNXT360 expects more firms to report strong revenue growth over the next 12 months, owing to various cost-cutting measures and growth-driven feature and product offerings.

To know more and gain a deeper understanding of the BNPL industry in the United States, click here.

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