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　　according to reports, on Wednesday local time, Sweden's "buy now, pay later" unicorn Klarna announced its financial report. The company’s losses in the first half of the year climbed sharply, the earnings report showed.

　　huge loss

　　In the first half of this year, Klarna achieved operating income of 9.1 billion Swedish kronor (equivalent to 950 million US dollars), an increase of 24% compared with the same period last year.

　　But while revenue grew, the company posted huge losses. The pre-tax loss in the first half of the year was SEK 6.2 billion, more than triple the year-on-year. The company posted a loss of SEK 1.8 billion in the first half of last year.

　　The company's main business is to spread the cost of purchases evenly for consumers, allowing one-time payments to be replaced with interest-free installments. During the first half of the year, the company's operating costs and user defaults increased significantly.

　　Klarna's operating costs in the first half of the year were as high as SEK 10.8 billion, much higher than the SEK 6.3 billion in the same period last year, mainly due to increased administrative costs due to expansion in many countries such as the United States. In addition, the company's first half of the credit losses (payment of user defaults) amounted to SEK 2.9 billion, an increase of more than half.

　　Gamble Expansion

　　Since its inception, Klarna has been profitable for the most part. In 2019, the company posted a loss for the first time in its history, mainly due to expansion in many countries around the world, which led to a significant increase in investment spending.

　　After the global outbreak of the new crown epidemic, Klarna aggressively expanded its business, but the huge loss in the first half of the year shows the high price of this aggressive expansion. Since the beginning of 2020, the company's installment business has entered 11 new countries and territories, including market "big bets" in the United States and the United Kingdom.

　　In the U.S., the company has burned through massive amounts of money on marketing and user acquisition in an effort to snatch paying users from its main rival, Affirm. In the UK, Klarna acquired the comparison shopping site PriceRunner in April. In addition, the company has invested in lobbying efforts targeting politicians and officials in the face of upcoming industry regulations from the British government.

　　Valuation Avalanche

　　More recently, though, Klarna has been forced to shrink. In May, the company made several layoffs around the world, cutting a total of 10% of its employees. Subsequently, the company raised an $800 million financing, but the company's valuation was only $6.7 billion, a staggering 85% drop from the valuation of the last financing. Klarna's slump in valuation has become the latest example of a high-growth tech company slumping in value amid investor fears of a possible recession.

　　The plummeting valuation of Klarna also reflects that investment institutions are no longer interested in the listed or private Internet finance industry. For example, since the beginning of this year, the capital market value of Affirm, a listed installment payment company, has fallen for three consecutive quarters.

　　Executive Analysis

　　Sebastian Siemiatkowski, Klarna's CEO and co-founder, said the company was forced to make some tough decisions to ensure the right human resources were placed in the right business units , thereby returning the company to profitability while continuing to support consumers and retailers during more difficult macroeconomic times.

　　He said that Klarna mainly provides short-term credit products, and compared with traditional banks, the company's financial position is more flexible. But even for Klarna, some management decisions will have a time shock.

　　Due to the poor global macroeconomic situation, many Internet finance companies are cutting expenses or delaying listing plans. In addition, consumer-oriented Internet financial companies have lost the appetite of investment institutions, and so-called "business-to-business" Internet financial companies have begun to gain favor.

　　The financial report shows that Klarna has 150 million installment payment users worldwide, serving a total of 450,000 merchants. It is reported that the company's profits mainly come from merchants, not consumers, and the company will draw a commission for each installment payment completed by the user.

　　Competition is fierce

　　Simon Taylor, an executive at Internet finance company Sardine.ai, commented that Klarna has proven that installment payments are a profitable business, and they are betting heavily on the US market, but it clearly comes at a price. Competing for more market share in the U.S. is wise in the long run, but it requires an investment of time and money, which is a new challenge for Klarna.

　　In the installment payment space, Klarna faces the rise of the pack. Many technology companies or financial companies have already coveted the installment payment market. For example, this fall, Apple plans to launch its own installment payment service "Apple Postpay", which allows users to split the past one-time payment into four monthly installments.

　　In addition, in many countries, the installment market is facing greater government regulatory pressure. In the UK, for example, the government has announced plans to require instalment companies to more rigorously investigate consumers' ability to repay later, while cracking down on misleading advertising by payment companies. In the United States, the National Consumer Financial Protection Bureau has launched an investigation into a number of installment companies.