If you’re not familiar with Klarna then you should be. The Swedish-based company offers a popular financing option called “buy now pay later” which allows consumers to purchase products from merchants on lay-a-way. BNPL has exploded in popularity over the past few years and Klarna has been one of the leaders in this nascent industry.
But this is not a story about BNPL. It’s a story about AI. Klarna has recently disclosed how it’s using AI to increase its profits. Paying attention? If you’re running a business you should be.
Klarna is certainly not a small business. The company says it has more than 150 million active consumers that buy products using its financing services from over half a million merchants. Its site processes more than two million transactions a day. The company also employs more than 5,000 people.
When ChatGPT launched back in 2022, the company’s executives realized early on that AI models like it could provide a significant boost to their profits. So – like many others – they licensed the model from OpenAI and for the past year Klarna has been developing its own product – called the AI Assistant – with the aim of automating much of its customer service process. On February 27th, Klarna updated the public on the results of its efforts. And the results are pretty mind-boggling.
The company’s AI Assistant now handles queries ranging from refunds, returns and payment related issues to cancellations, disputes and resolution of invoice inaccuracies. It can provide real time updates on outstanding balances and payment schedules and advise customers on their spending limits and other purchasing options. It does this in over 35 languages, 24/7.
According to the company, over the past year its AI assistant has had 2.3 million conversations, representing two-thirds of its overall customer service chats and is now doing the work of 700 – yes 700 – full-time agents on a “par with human agents in regard to customer satisfaction score.”
Klarna says that its AI Assistant is “more accurate” in “errand” (ticket) resolution and has contributed to a 25 percent drop in repeat inquiries. Tickets are now completed in less than two minutes, compared to 11 minutes previously. The tool is now available in 23 markets and communicates in more than 35 languages.
The company hasn’t disclosed its investment but it’s clearly in the tens of millions, maybe more. Klarna’s AI Assistant is something that few if any small and mid-sized businesses can afford. But make no mistake about it, what Klarna has done – and what it’s doing – has an enormous impact on all companies. Like many other big brands, Klarna has taken a licensed Large Language AI model and developed it into a tool that’s saving more than $40 million per year. That’s real ROI.
“This AI breakthrough in customer interaction means superior experiences for our customers at better prices, more interesting challenges for our employees, and better returns for our investors.” Sebastian Siemiatkowski, co-founder and CEO of Klarna said in a press release. “We are incredibly excited about this launch, but it also underscores the profound impact on society that AI will have.”
Research firm Gartner reports that the biggest use of AI is in customer facing operations and here is an exact prototype of that.
What’s the impact on their employees? As Siemiatkowski said above it will create “interesting challenges.” That’s a good way of saying “watch out, people!” Should employees there be concerned? Some should. But the good customer service agents will keep their jobs because they will be able to provide a higher level of service to more customers than ever before. Mediocre performers that can be replaced by a bot will be replaced by a bot.
Because in the end it’s about the customer, and thanks to its AI Assistant Klarna’s customers will experience faster and better service.
Small and mid-sized companies – my clients – can’t afford to spend tens of millions of dollars on an AI solution for their businesses like Klarna. But their time will come. As more big brands make these investments, AI customer service applications like Klarna’s will become commoditized and therefore cheaper. I predict within the next three to four years even the smallest of companies will be able to use apps like Klarna’s to provide a better and more efficient customer service experience while at the same time reducing headcount and increasing profits.
We’re just starting to see how generative AI is being used in the real world. Klarna’s a great example of this. Hold on to your hats. There’s more to come.
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