Klarna Slashed 40% of its Staff for AI — Now They're Scrambling to Rehire Humans After Customer Backlash

Swedish fintech giant Klarna's dramatic reversal from AI back to human employees exposes the harsh reality that artificial intelligence cannot match human capability in customer-facing roles, despite corporate promises of efficiency and cost savings.

Klarna had made headlines for this drastic move of replacing a significant portion of its workforce with artificial intelligence that led to a 40% staff reduction.

Two years after partnering with OpenAI to automate marketing and customer service jobs, Klarna is now yearning for human connection again. The financial tech startup, which once aimed to be OpenAI CEO Sam Altman's 'favourite guinea pig,' is now planning a major recruitment drive because its AI customer service agents simply didn't deliver.

The AI Promise: Efficiency At What Cost?

The buy-now-pay-later company had a clear pattern: in 2023, it cancelled its marketing contracts, and by 2024, it was proudly swapping out its customer service team for AI agents. The company now envisions an 'Uber-type of setup' to restaff, where gig workers can remotely log in and engage with customers from their own homes.

As Bloomberg reported, Sebastian Siemiatkowski, the CEO of Klarna, conceded a crucial point: 'From a brand perspective, a company perspective, I just think it's so critical that you are clear to your customer that there will be always a human if you want.'

This marks a significant change from his December 2024 remarks to Bloomberg, where he stated his belief that 'AI can already do all of the jobs that we, as humans, do.' Notably, Klarna had stopped hiring human staff the year before, leading to a 22 percent reduction in its workforce.

Just months after halting new hires, Klarna boasted about saving $10 million (£7.38 million) in marketing expenses by assigning tasks such as translation, art creation, and data analysis to generative AI.

From Automation To Apology: Klarna's Reversal

The company further alleged that its automated customer service agents could manage the workload of '700 full-time agents.' So, what prompted this sudden change in direction?

The truth is that directing already-annoyed customers to interact with a less-than-perfect algorithm wasn't the best approach. As Siemiatkowski shared in a Bloomberg interview, 'Cost, unfortunately, seems to have been a too predominant evaluation factor when organising this; what you end up having is lower quality.'

When Algorithms Fall Short

Klarna is just one example. While leaders across various sectors, from news to fast food, appear to believe AI is prepared for prominent roles—a stance seemingly driven more by investor interests than a true evaluation of the technology—evidence is mounting that these automated solutions are facing real-world challenges.

In January 2024, a survey involving more than 1,400 business executives revealed that 66 percent felt either 'ambivalent or outright dissatisfied with their organisation's progress on AI and GenAI so far.' Corporate leaders frequently pointed to AI's 'lack of talent and skills' as the main problem.

AI's Reality Check In Business

This issue has clearly not improved throughout the year. In fact, a recent survey revealed that more than 55 percent of UK business leaders who quickly substituted human roles with AI now regret that choice.

The reason isn't hard to grasp. In an experiment, Carnegie Mellon University researchers filled a mock software company with AI employees, and their output was inferior—the top-performing AI worker managed to finish only 24 percent of its assigned tasks.

The question of AI's impact on jobs brings forth a wide array of opinions, often mirroring the enthusiasm of CEOs looking to cut costs. There are certainly nuanced aspects.

AI undeniably helps companies accelerate low-wage outsourcing, and this technology is demonstrably impacting labour market instability – but don't expect CEOs to remain patient once AI begins to affect their profits.