Klarna Cut 700 Jobs’ Worth of Work With AI. Its CEO Now Says That Was the Mistake

Key Takeaways

• Klarna’s AI customer service story is really two announcements eighteen months apart, and a UK C-suite should read both, not just the first one that went viral. In February 2024, Klarna said its OpenAI-built assistant handled 2.3 million conversations in its first month, doing the equivalent work of 700 full-time agents, cutting resolution time from 11 minutes to under 2, and was projected to add $40 million to 2024 profit.
• By May 2025, chief executive Sebastian Siemiatkowski told Bloomberg the strategy had gone too far. “We focused too much on efficiency and cost,” he said. “The result was lower quality, and that’s not sustainable.” Klarna started recruiting human customer service agents again, on flexible, remote, gig-style contracts.
• The headcount numbers are genuinely mixed, and worth reading precisely rather than as a clean before-and-after. Klarna’s workforce fell from roughly 5,000 to almost 3,000 employees, about 40%, but Siemiatkowski himself credited much of that to ordinary staff attrition, which he put at 15 to 20% a year, not to the AI system directly replacing people.
• The AI didn’t get switched off. As of the May 2025 reversal, it was still handling two-thirds of all customer inquiries, response times were 82% faster than before the AI launched, and repeat contact rates were still down 25%. What changed was where the company drew the line between what AI should handle and what a person should.
• Klarna reversed its AI-first messaging five months before pricing a $1.37 billion IPO on the New York Stock Exchange in September 2025 at a $15.11 billion valuation, itself a steep comedown from the more than $45 billion the company was valued at in 2021. For a UK C-suite, the lesson isn’t that Klarna’s AI failed. It’s that a cost-driven AI rollout and a customer-quality AI rollout are different projects with different failure modes, and Klarna ran the first one before realising it needed the second.

Klarna’s AI customer service assistant is the most cited AI case study in enterprise circles for a reason: it is one of the few with a genuinely public, multi-year arc, a triumphant launch, a candid reversal, and enough concrete numbers at each stage to actually compare. Most AI case studies a UK C-suite reads are either brand-new and unproven or old enough that no one is still checking the follow-up. Klarna’s is neither. It has been checked, restated and partly walked back by its own chief executive, on the record, twice.

What Klarna actually announced in February 2024

Klarna’s AI assistant, built in partnership with OpenAI, went live globally in Klarna’s app in February 2024. In a press release dated 27 February 2024, Klarna said the assistant had handled 2.3 million conversations in its first month, two-thirds of Klarna’s total customer service chat volume, work the company said was equivalent to that of 700 full-time human agents.

Average resolution time fell from 11 minutes to under 2, and repeat customer inquiries, people re-contacting support because their issue hadn’t actually been resolved, dropped 25%.

Klarna said the assistant was on par with human agents on customer satisfaction scores, available around the clock in 23 markets, and could communicate in more than 35 languages. The company estimated the assistant would drive a $40 million improvement to 2024 profit. “This AI breakthrough in customer interaction means superior experiences for our customers at better prices,” said Sebastian Siemiatkowski, Klarna’s co-founder and chief executive, in the announcement.

OpenAI’s own chief operating officer, Brad Lightcap, called Klarna “at the very forefront among our partners in AI adoption and practical application.”

The hiring freeze nobody outside the company saw happen in real time

What followed the launch wasn’t publicised with the same fanfare. In a Bloomberg Television interview reported in December 2024, Siemiatkowski said Klarna had effectively stopped hiring around a year earlier as the AI system took on more of the workload, with headcount falling 22%, to roughly 3,500 employees, over that period, driven mostly by natural attrition rather than layoffs.

That framing matters: Klarna didn’t announce mass redundancies tied to the AI launch. It quietly stopped backfilling roles as people left, and let the AI system absorb the resulting gap in customer service capacity.

May 2025: the reversal, in Siemiatkowski’s own words

By May 2025, in another Bloomberg interview reported by trade publication CX Dive and others, Siemiatkowski said the strategy had gone further than it should have. “We focused too much on efficiency and cost,” he said. “The result was lower quality, and that’s not sustainable.” He was specific about what he thought the company had got wrong: not that AI itself was the mistake, but that Klarna had let cost-cutting outrun the customer experience it owed people who needed genuinely human help. “I just think it’s so critical that you are clear to your customer that there will always be a human if you want,” he told Bloomberg, adding, “Really investing in the quality of the human support is the way of the future for us.” Klarna began recruiting customer service staff again, piloting what CX Dive described as an “Uber-type” flexible, remote, gig-style arrangement aimed at “highly educated students, professionals and entrepreneurs”, with one stated goal being to bring in-house some of the customer service work Klarna had previously outsourced to third-party contractors, rather than simply re-hiring for the original 700 roles the AI had absorbed.

Separately, in a CNBC interview around the same time, Siemiatkowski gave the fuller headcount picture: Klarna’s total workforce had fallen from about 5,000 to almost 3,000 employees, a roughly 40% reduction.

But he was careful not to credit all of that to the AI system directly. “Natural attrition in a company like ours is 15-20% per year, so we shrink naturally 15-20% by people just leaving,” he said, framing the AI’s role as enabling the company to not backfill those departures rather than actively cutting jobs itself.

That distinction, between AI-enabled attrition and AI-driven layoffs, is one most retellings of the Klarna story flatten, and it’s a materially different claim about what the technology actually did.

The AI didn’t get switched off. The target changed.

The detail most useful to a UK C-suite is what didn’t change in May 2025: the AI assistant was still handling roughly two-thirds of all customer inquiries even after Siemiatkowski’s public reversal, CX Dive reported, with response times still 82% faster than before the assistant launched and repeat contact rates still down 25%. Klarna didn’t retreat from AI-handled customer service as a category.

It retreated from treating “AI handles it” as sufficient for every kind of interaction, and rebuilt a deliberate lane for cases, complex disputes, financial hardship, anything where getting it wrong costs a customer real money or trust, that get routed to a person instead of resolved end-to-end by the assistant.

The rollout’s actual failure mode wasn’t that the AI performed badly against the metrics Klarna originally chose to measure. It was that those metrics, speed and average satisfaction, didn’t capture whether harder, lower-volume, higher-stakes cases were being handled well.

The timing a UK C-suite shouldn’t miss

Context that rarely makes it into the Klarna story: the May 2025 reversal came five months before Klarna priced its US initial public offering. Klarna listed on the New York Stock Exchange under the ticker KLAR in September 2025, pricing shares at $40 and raising $1.37 billion at a $15.11 billion valuation, a real recovery from the roughly $6.7 billion trough Klarna’s valuation fell to in 2022, but still a steep comedown from the more than $45 billion it commanded at its 2021 peak.

A company preparing to go public in 2025, after a valuation collapse, had every commercial incentive to tell an aggressive cost-efficiency story through 2024, and then to be seen correcting course on customer quality before investors started asking pointed questions about churn and brand damage.

None of that makes Siemiatkowski’s admission untrue. It’s a reasonable, evidence-based reading of why the timing looked the way it did.

What a UK C-suite should actually take from this

Klarna’s AI assistant did what Klarna said it did in February 2024: handled millions of routine conversations faster and, on the metrics Klarna chose to track, at least as well as the humans it replaced.

That part of the story holds up. What failed wasn’t the AI’s competence at the task it was measured against; it was the decision to let a cost and efficiency target stand in for a customer-quality target, and to let that substitution run for the better part of a year, through a hiring freeze and a real headcount reduction, before correcting it in public.

For a board weighing its own AI-driven customer service plans, the specific, transferable lesson isn’t “AI customer service doesn’t work,” which the two-thirds figure that survived the reversal directly contradicts.

It’s that the metrics chosen to declare an AI rollout a success will determine what gets missed, and that a board should decide, before launch, which failure it would rather catch early: a bad quarter of efficiency numbers, or a public reversal after a year of customers quietly getting worse service than they were promised.