Klarna Isn’t Dying, Despite What TikTok Says - But BNPL's Troubles Are Very Real

May 2025

Fintech & Payments

Lorien Carter

Senior Research Analyst

The internet - particularly TikTok - has been awash with rumours about Klarna in recent weeks, with one popular video (now at 5.7 million views) claiming that the company is 'going bankrupt because no one is paying them back.'

Klarna is a Swedish BNPL company that lets consumers buy now and pay later in instalments at thousands of major retailers. Last month, it reached 100 million active users. As the largest BNPL provider in the US, news of Klarna going bankrupt would certainly be shocking - if it were true.

But it isn’t. So why are people saying otherwise?

Source: @johnridgeway

Much of the chatter surrounding Klarna's non-existent shutdown followed its announcement of $99 million in losses for the first quarter of 2025; more than double the $47 million loss in the same period last year. The company also reported $136 million in consumer credit losses, which may be fuelling the rumour that customer defaults are driving its supposed collapse. Its partnership with DoorDash has added to the controversy, with critics arguing that financing meals can lead to financial instability and encourage overspending; particularly among vulnerable consumers who may then struggle to pay Klarna back.

While their 110% increase in losses is certainly noteworthy, Klarna has attributed this to one-off factors related to their recently paused IPO. The company stated: 'The main reason we made a loss was a one-time share payment to employees related to the IPO, not credit losses. Excluding this payment, depreciation, and restructuring costs, Klarna made an adjusted operating profit of $3 million for the quarter.'

Furthermore, the consumer credit card loss rate only increased by 3 basis points; from 0.51% in Q1 2024 to 0.54% in Q1 2025. So, while consumer credit losses rose 15% year-on-year, this is largely due to a higher volume of loans being issued, rather than a significantly greater proportion of borrowers failing to repay.

That doesn’t mean, however, that Klarna - or BNPL as a whole - is in the clear. In our latest Consumer Payments Tech Horizon, we forecast that BNPL will fall short of market expectations over the coming year; not just due to growing unease around the business model, but also a confluence of emerging market factors:

• Intense competition in an already saturated market means most individual providers will struggle to grow their market share. As a result, we expect smaller BNPL firms to exit the market or be acquired by larger, more established players like Klarna and Affirm.
• Overextension of credit resulting from BNPL providers performing (typically) less stringent credit checks than credit card companies, leading to credit being extended to consumers who may struggle to repay; increasing defaults and eroding consumer trust. However, given that the main draw of BNPL is its accessibility, any attempts to tighten access may reduce its appeal amongst its target audience.
• The saturation of BNPL providers means consumers may have multiple concurrent repayment plans, making it difficult to track payments and increasing the risk of confusion and defaults.
• Regulatory bodies cracking down on BNPL companies in favour of stronger consumer protections. In the UK, for instance, the UK Treasury plans to bring BNPL providers under the supervision of the Financial Conduct Authority; requiring stricter finance checks such as affordability assessments before each transaction, which could shrink the pool of eligible consumers and increase compliance costs.

However, larger companies with the resources to meet these requirements are well-positioned to rise to the challenge; many have even supported regulation and worked alongside regulators for years. Klarna, for example, states it already performs affordability checks before each purchase, meaning the new rules will have minimal impact on their operations. These regulations present an opportunity for established providers to build greater consumer trust and potentially acquire smaller firms that struggle to comply.

As a Research Analyst, Lorien examines key innovations and market shifts driving change in financial services. Her recent work on Virtual Cards, Network Tokenisation, and CBDCs & Stablecoins offers data-driven insights to support informed decision-making among banks, payment providers, and card networks.