Buy now, pay later provider Klarna took another step toward a U.S. listing last week, reporting progress on its transition into internally developed AI systems. AI-driven staff reductions of 700 contractors have generated "significant efficiency" according to the Swedish company, which now expects revenue per employee to reach $1 million, higher than the $575,000 reported last year.

Buy now, pay later payment processing services let retailers offer short-term installment loans at the time of purchase, allowing buyers to spread out payments. The loans are usually interest-free and without service charges, potentially encouraging customers to buy more than they can afford. Not surprisingly, these firms have come under investigation. Notably, the Swedish Financial Supervisory Authority hit Klarna with $46 million in fines in December after accusing it of money laundering in 2021 and 2022.

The company filed with the U.S. Securities and Exchange Commission for an IPO in March, citing an American domicile in Columbus Ohio. It postponed plans after President announced tariffs on Europe in April and hasn't responded to the latest rejection by U.S. Federal courts. Klarna reported a 13% revenue increase to $710 million in the first quarter of 2025 but still hasn't said when it will proceed with the offering.

The BNPL business model works by charging fees to merchants, like card processors. There may also be flat transaction fees and late fees for missed payments. The second issue could upend the industry after a recent Bankrate survey reported that about "half of buy now, pay later users have experienced issues like overspending and missing payments." While these companies depend on late fees, high incidence rates may attract the attention of regulators.

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Almost one-third of Americans have used BNPL, according to the survey. Klarna captured 9% of the report’s market share while PayPal (NYSE:PYPL) led the pack with 15%. Half of customers reported "issues related to service." Of those, 24% mentioned "overspending," 16% "missed payments" and 15% "regretting a purchase." Gen Z users reported the highest rate of these issues, across all generations. It also revealed "consistent use across all income levels," which is surprising, given the greater financial struggles of the lower classes.