Klarna CEO Sebastien Siemiatkowski said Apple’s entry into the buy now, pay later (BNPL) space is “incredible” and a validation of the industry’s business model, Seeking Alpha reported Friday, June 10.
See also: Apple says it’s time to pay later
BNPL platforms generally allow customers to decide at the point of sale whether they wish to spread the payment of their purchases over four monthly installments without fees or interest. Klarna, based in Sweden, is a major player in the sector and announced on May 23 that it was cutting 700 jobs, or around 10% of its workforce.
Read more: Klarna will cut around 700 jobs due to inflation and war
Siemiatkowski said one of the reasons for the layoffs was the losses caused by Klarna’s heavy investment in expansion over the past few years. But looking forward, he said he expects increased profitability due to a focus on existing customers rather than new customers, Seeking Alpha reported.
Established players in the space face 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 abandons its banking partners in the BNPL program
Siemiatkowski said one of the advantages BNPL offers lenders is the short duration of the agreements it makes with consumers, according to the report. These short-term loans offer great flexibility to lenders looking to modify or tweak their business models or adjust their underwriting standards.
The result is that BNPL is a “very strong and recession-proof model”, he said, according to the report.
Klarna is privately held, but investors seemed spooked by the idea that Apple would fight 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.