Klarna CEO Sebastian Siemiatkowski said Apple’s entry into the buy now, pay later (BNPL) space is “amazing” and a validation of the sector’s business model, Seeking Alpha reported Friday (June 10).
See also: Apple Says Now Is the Time for Pay Later
BNPL platforms usually let customers decide at points of sale whether they want to spread payments for purchases over four monthly installments with neither fees nor interest charges. Klarna, based in Sweden, is a major player in the space and announced May 23 that it was cutting 700 jobs — about 10% of its workforce.
Read more: Klarna to Cut About 700 Jobs Due to Inflation, War
Siemiatkowski said one of the reasons for the layoffs was losses caused by Klarna’s big investment in expansion during recent years. But looking forward, he said he sees increased profitability due to an emphasis on existing, rather than new, customers, Seeking Alpha reported.
Established players in the space are facing new competition from financial heavyweights such as PayPal and Barclays. And that was before Apple announced it was entering the space at its Worldwide Developers Conference on June 6.
See also: Apple Ditching Banking Partners in BNPL Scheme
Siemiatkowski said that one advantage BNPL provides for lenders is the short durations of agreements it enters into with consumers, according to the report. These short-term loans provide great flexibility for lenders looking to change or tweak their business models or adjust underwriting standards.
The result is that BNPL is a “very strong, recession-proof model,” he said, per the report.
Klarna is privately held, but investors appeared spooked by the notion that Apple would do battle against Klarna’s publicly traded competitors. Shares of Affirm Holdings, Block, SoFi Technologies and Upstart Holdings all fell in apparent reaction to Apple’s announcement.