Klarna Boosts Profits With ChatGPT as BNPL Firms Tap AI

Klarna is seeing generative artificial intelligence improve its margins, as buy now, pay later (BNPL) firms turn to new digital capabilities to address their profitability challenges.

ChatGPT parent company OpenAI shared Friday (April 5) that the payments network’s adoption of the technology is estimated to yield a $40 million improvement in the company’s profits this year. Additionally, the firm noted that the chatbot fields two-thirds of Klarna’s customer service chats, contributing to consumers resolving their issues in less than one-fifth the time it took previously, and that the technology takes on the labor of 700 full-time employees.

“The capabilities of AI technology are not only addressing existing challenges, but also rapidly advancing how we can enhance the consumer experience for the near future,” said Martin Elwin, senior director of engineering at Klarna, said in a statement.

He added that the company is working on “a number of initiatives that truly elevate the shopping experience for millions of people worldwide” while also boosting efficiency.

By reducing manual intervention and processing times, BNPL providers can lower operational costs and improve profit margins.

Klarna is not the only BNPL company looking to AI to boost performance. In November, Afterpay announced a partnership with eCommerce technology company Rokt, using the latter’s machine learning and AI to make transactions more personalized for each shopper.

To that end, AI-powered recommendation engines can suggest products that align with customers’ preferences and purchasing behavior. This personalized approach can increase order values and encourage repeat purchases, thereby boosting revenue.

Additionally, on PayPal’s last earnings call, Alex Chriss, president and CEO of the payments company, which also offers BNPL capabilities, shared that the firm intends to “leverage our merchant relationships and the power of AI to make the entire shopping experience personalized for consumers while giving them control over their data.”

These moves come as the FinTech companies work hard to improve the profitability of their BNPL capabilities. For instance, Klarna’s latest annual report showed improvement, with losses narrowing.

“Overshadowed by economic uncertainty, BNPL companies continued to rely on their core technologies not only to sustain profitability but also to increase it in Q3 2023, reinforcing the criticality of the industry’s modern payments infrastructure in ensuring BNPL’s economic resilience,” noted a December PYMNTS Intelligence report, “BNPL Defies the Economic Odds Through Innovation and Partnerships.”

Consumers, for their part, want the option to pay with these capabilities. According to “Tracking the Digital Payments Takeover: What BNPL Needs to Win Wider Adoption,” a report issued last year by PYMNTS Intelligence, 53% of consumers increased their use of deferred payment installment plans thanks to their satisfaction with BNPL. Plus, three-quarters of all BNPL users were very or extremely satisfied with their BNPL options — regardless of which BNPL provider users said they preferred.

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