Meat back on the menu as Klarna rows back on AI

Company that vowed to cut employee numbers by half starts hiring human customer service staff once again

Klarna, the Swedish buy-now-pay-later financial services company, is rowing back on AI and has started hiring people, once again, after discovering that AI chatbots could not match human-based customer service.

The company announced a freeze on new hires in December 2023 while its CEO Sebastian Siemiatkowski indicated that AI would help slash the workforce, from about 5,000 in 2023 down to just 2,000 via a process of natural attrition.

While many of those job losses were to be replaced by AI, the remaining staff would also be expected to use AI tools to “do more with less”.

Siemiatkowski had urged OpenAI CEO Sam Altman to make Klarna its “favourite guinea pig” for artificial intelligence.

“Our AI assistant now performs the work of 700 employees, reducing the average resolution time from 11 minutes to just two, while maintaining the same customer satisfaction scores as human agents,” Siemiatkowski boasted to shareholders in the company’s 2024 annual report.

However, just months later and Siemiatkowski has admitted that Klarna is, once again, hiring new staff as a result of disappointment with the performance of the AI tools the company had rolled out.

“Cost, unfortunately, seems to have been a too predominant evaluation factor when organising this. What you end up having is lower quality,” he told Bloomberg in an interview. In a turnaround from his earlier attitude, he added: “Really investing in the quality of the human support is the way of the future for us.”

Nevertheless, the company insists that it is still following its policy of driving down staff numbers via natural attrition and was only hiring new customer service agents on a freelance basis for the company’s outsourcing division. The aim is to channel customers through the AI agent first, but with the ability to escalate to a real, live human if necessary.

Siemiatkowski’s experience is not an isolated case. According to a recent survey conducted for IBM of 2,000 CEOs, just one-in-four AI projects deliver a return on investment.

While the idea of removing high-maintenance humans from the payroll is alluring, cutting costs in the process, AI is not without its own costs: both AI training and inference are computationally challenging and relatively expensive, and cutting staff in particular areas also means losing knowledge and problem-solving initiative.

And current disappointment isn’t stopping the corporate push for AI, with the technology seemingly having gone from the “peak of inflated expectations” to the “trough of disillusionment” in almost record time in the Gartner hype cycle.