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EconomicsELI5 How do companies like Klarna and Afterpay make money without charging interest?(self.explainlikeimfive)
I see these companies offering installment payment options for online purchases but they don't charg...
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you link to a financial statement not really understanding the numbers it provides or the meaning of it. look at the fundamentals they ARE profitable:
Why you have a "net loss":
so they are profitable and on a good path..
Are you a shill for Klarna?
They got their accountants to say they actually "made" $3m dollars if you just ignore inconvenient things like... checks notes: compensating their employees as legally required.
They grew their users 10%, while growing their default rate on bad loans to 6 times the default rate of credit cards, Their revenue is up 13% while their quarterly losses are doubled.
Their customer service costs dropped because they fired 40% of their staff hoping AI could make up the difference, and are now having to rehire and retrain people, because the AI couldn't handle it. They have significant spending that will increase next q.
If I spend $100 million dollars more than I make every three months, I am not profitable. I don't know how you can say they are profitable while they have set a record for quarterly losses, and have NEVER ONCE had more revenue than expenses. They are the definition of not profitable.
We can argue about whether this is a good path, but I would argue that losing more money than ever, at a faster rate, while their portfolio of loans continues to default at an astonishing and increasing rate is not a path you want to be on.
It reminds me of the old SV startup joke: They're losing money on every customer, but they can make up for it with volume.
There is a reason that the financial press has spent a month absolutely dunking on them.
Wow, that’s a lot of heat, did Klarna repossess your Afterpay hoodie or something?
Let’s get real. No, Klarna isn’t profitable on a GAAP basis - no one said they were. But calling adjusted operating profit “fraud” because it excludes non-cash stock comp is disingenuous.
Every tech company reports adjusted figures - welcome to public markets. If you’re going to rage at Klarna, go knock on the door of every S&P 500 CFO too.
As for “6x credit card default rates” - that’s just plain wrong. I suggest to not use made up numbers to back your made up claims, specially since its just a google search to dismantle your source-less claims. Klarna’s credit loss rate is 0.54%. Average U.S. credit card default rates hover around 2–3% up to 5% for 90-day delinquencies, where klarna is: Klarna's lending is mostly short-term and small-ticket - totally different risk profile. If you're going to trash their underwriting, at least use the right numbers.
Yes, they cut service staff. Yes, they leaned too hard on AI. Then they reversed course and are rehiring - that’s called correcting a mistake, not a doomsday spiral. You don’t get to paint a cost cut as evil and its reversal as a failure. Pick one.
And about that “losing money on every customer” line - yeah, they’re burning cash. But they also just flipped their core operations to a profit, which is how you get out of that hole. You can’t meme your way around the fact that Klarna went from -$2M to +$3M in operating terms. It’s not everything, but it’s a real signal. Thats where profit is literally defined, not on one-time effects.
So no, I’m not shilling for Klarna - I’m just not here to pretend that growth, improving margins, and operating discipline are irrelevant because you’re angry.
Financial press is dunking because drama sells. But under the headlines, Klarna is starting to act like a real business.