Klarna Reverses Course: Hiring Humans After AI Customer Service Falls Short

Klarna is hiring humans again as AI replacements fail to deliver

Facepalm: As companies fall over each other replacing real employees with AI that doesn't require monthly wages, sick pay, maternity leave, etc., some are encountering a problem: AI performs a lot of jobs at a much lower quality than humans. AI-first firm Klarna has discovered this, and is now on a recruitment drive to add more flesh-and-blood staff to its ranks. Buy now, pay later/shopping service Klarna is one of the companies that have really been going all-in on AI. CEO Sebastian Siemiatkowski reached out to OpenAI boss Sam Altman in 2023, telling him "I want Klarna to be your favorite guinea pig," and the two firms have worked together ever since. Klarna has leaned heavily into AI since then; Siemiatkowski announced a freeze on hiring in December 2023 as it looked to pursue AI alternatives to humans. He also talked about cutting the workforce by almost half, from 3,800 to 2,000 - it had been around 5,000 in 2023 - though Siemiatkowski framed this as "natural attrition." The CEO said those left will have to use AI to "do more with less." Siemiatkowski also said that AI chatbots were handling two-thirds of customer service conversations within the first month of their deployment and performing the work of 700 employees. But more work doesn't mean better work. Siemiatkowski revealed to Bloomberg that Klarna is once again hiring humans so customers will always have the option to speak to a real person when they require customer service. "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," Siemiatkowski said. Siemiatkowski added that although AI customer service chatbots were cheaper to employ than human staff, they offered a "lower quality" output. "As cost unfortunately seems to have been a too predominant evaluation factor when organizing this, what you end up having is lower quality," Siemiatkowski said. "Really investing in the quality of the human support is the way of the future for us." Siemiatkowski said all new human customer service representatives will be remote-based in an "Uber type of setup." The company is targeting students, rural populations, and dedicated Klarna users for the roles. As Siemiatkowski notes, it's not just the poor quality of the AIs' work that has prompted Klarna's hiring spree. Some people refuse to use a company's services if they can only talk to a machine rather than a real person when help is needed. It's a lesson other firms that are also going all-in on AI may soon learn.

Klarna Hiring Back Human Help After Going All-In on AI

As soon as AI-powered chatbots seemed functional enough, buy now, pay later service Klarna went all in on them, promising to swap much of its human workforce with robotic replacements. Now it's on a human hiring spree after running into the limitations of AI, according to Bloomberg. Company CEO Sebastian Siemiatkowski recently announced that the company intends to make sure that customers will always have the option to speak to a human when they need service. It is, of course, doing that in a way that presents its own concernsâ€"claiming that it will structure its new human-powered customer service cohort will be fully remote and with a “Uber type of setup†that seems like it will rely on contract work and will reportedly tap into an employee pool of students and people in rural populations. But if the best we can do is exploitative work or out of work entirely, I guess the former at least represents the slightest of improvements. “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," Siemiatkowski said, per Bloomberg. It is a starkly different position than the company took just two years ago. Back in 2023, Siemiatkowski basically threw himself at AI, saying that he wanted his company to be OpenAI's “favorite guinea pig.†The company instituted a hiring freeze and set out to replace as many humans on its payroll as possible with AI. By 2024, the CEO was bragging about cutting the company's workforce nearly in half, dropping from a headcount of 3,800 to 2,000 by shifting to AI alternatives. He called the cutbacks "natural attrition†rather than the result of layoffs. Klarna claimed that AI chatbots were handling two-thirds of customer service conversations within their first month of deployment and went on to claim that AI was doing the work of 700 customer service agents. The problem is that it's really doing the work of 700 really bad agents, and that quality took a toll. “As cost unfortunately seems to have been a too predominant evaluation factor when organizing this, what you end up having is lower quality,†Siemiatkowski said. “Really investing in the quality of the human support is the way of the future for us.†One response to this may be: no shit. People do not like talking to chatbots, no matter how advanced they may have become in recent years. A study conducted last year found that more than four in five people would choose waiting to talk to a human over getting immediately served by a bot. A Gartner survey found about two-thirds of customers prefer that companies don't use AI for customer service, and there is research to indicate that people have lower trust in and satisfaction rates from AI agents. Frankly, this is something that Klarna knew two years ago when it went the AI route, because it had humans in place for those exact roles. It seems the company opted to create a worse experience for its customers because it wanted to come across as forward-thinking and innovative and wanted to save money, until that worse experience actually proved more costly than paying people.

Company Regrets Replacing All Those Pesky Human Workers With AI, Just Wants Its Humans Back

Two years after partnering with OpenAI to automate marketing and customer service jobs, financial tech startup Klarna says it's longing for human connection again. Once gunning to be OpenAI CEO Sam Altman's "favorite guinea pig," Klarna is now plotting a big recruitment drive after its AI customer service agents couldn't quite hack it. The buy-now-pay-later company had previously shredded its marketing contracts in 2023, followed by its customer service team in 2024, which it proudly began replacing with AI agents. Now, the company says it imagines an "Uber-type of setup" to fill their ranks, with gig workers logging in remotely to argue with customers from the comfort of their own homes. "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," admitted Sebastian Siemiatkowski, the Swedish fintech's CEO. That's a pretty big shift from his comments in December of 2024, when he told Bloomberg he was "of the opinion that AI can already do all of the jobs that we, as humans, do." A year before that, Klarna had stopped hiring humans altogether, reducing its workforce by 22 percent. A few months after freezing new hires, Klarna bragged that it saved $10 million on marketing costs by outsourcing tasks like translation, art production, and data analysis to generative AI. It likewise claimed that its automated customer service agents could do the work of "700 full-time agents." So why the sudden about-face? As it turns out, leaving your already-frustrated customers to deal with a slop-spinning algorithm isn't exactly best practice. As Siemiatkowski told Bloomberg, "cost unfortunately seems to have been a too predominant evaluation factor when organizing this, what you end up having is lower quality." Klarna isn't alone. Though executives in every industry, from news media to fast food, seem to think AI is ready for the hot seat -- an attitude that's more grounded in investor relations than an honest assessment of the tech -- there are growing signs that robot chickens are coming home to roost. In January of last year, a survey of over 1,400 business executives found that 66 percent were "ambivalent or outright dissatisfied with their organization's progress on AI and GenAI so far." The top issue corporate bosses cited was AI's "lack of talent and skills." It's a problem that evidently hasn't improved over the year. Another survey recently found that over 55 percent of UK business leaders who rushed to replace jobs with AI now regret their decision. It's not hard to see why. An experiment carried out by researchers at Carnegie Mellon University stuffed a fake software company full of AI employees, and their performance was laughably bad -- the best AI worker finished just 24 percent of the tasks assigned to it. When it comes to the question of whether AI will take jobs, there seem to be as many answers as there are CEOs excited to save a buck. There are gray areas, to be sure -- AI is certainly helping corporations speed up low-wage outsourcing, and the tech is having a verifiable effect on labor market volatility -- just don't count on CEOs to have much patience as AI starts to chomp at their bottom line.

Going 'AI-first' appears to be backfiring on Klarna and Duolingo

Artificial intelligence might be the future of the workplace, but companies that are trying to get a head start on that future are running into all sorts of problems. Klarna and Duloingo have been some of the poster children for the "AI-first" workplace. Two years ago, Klarna CEO Sebastian Siemiatkowski announced he wanted his company to be the "favorite guinea pig" of OpenAI, instituting a hiring freeze and replacing as many workers as possible with AI systems. Last month, Duolingo announced an AI-first shift, saying it would stop using contractors to do work AI can handle and only increase headcount when teams have maximized all possible automation. Klarna, though, is reversing course these days. And Duolingo is finding itself under attack on social media for its decision. Klarna CEO Siemiatkowski tells Bloomberg the fintech company is about to go on a hiring spree, in order to ensure customers will always have the option to speak to a live representative. The company did not say how many people it plans to add, but Siemiatkowski indicated Klarna would look at students and rural areas to boost its workforce.

Klarna Is Hiring Customer Service Agents After AI Couldn't Cut It on Calls, According to the Company's CEO

Now, the company is reversing course and hiring human customer service agents again. Months after touting AI's potential to replace human work, Klarna CEO Sebastian Siemiatkowski is backtracking and reversing an AI-induced hiring freeze to bring on more human staff. Siemiatkowski, 43, told Bloomberg on Thursday that Klarna is hiring human workers again to ensure that customers always have a human presence to talk to, if needed. "From a brand perspective, a company perspective, I just think it's so critical that you are clear to your customer that there will always be a human if you want," Siemiatkowski told the outlet. Related: Klarna CEO Says AI Could Help Reduce Company Headcount By 50% Siemiatkowski tells Bloomberg that the AI-focused strategy Klarna employed for the past few years wasn't the right path. He says that while AI customer service chatbots were cheaper to employ than human staff, they resulted in a "lower quality" output. So now Klarna is recruiting a new batch of customer service employees, and the company will now focus on providing "quality" human support for customers, he said. In its recruitment drive, the company is targeting students, rural populations, and dedicated Klarna users who are passionate about the company. The roles are fully remote. "Really, investing in the quality of human support is the way of the future for us," Siemiatkowski told Bloomberg. In December, Klarna paused all hiring a year prior as it focused on AI investments. The company's headcount dropped 22% in that time frame to 3,500 employees, mostly because of attrition, Siemiatkowski disclosed at the time. He asked Klarna's employees to turn to AI to help fill in the gaps left by their departing colleagues. In February 2024, the company claimed AI could do the work of 700 customer service agents and had taken on 75% of the company's customer chats, or about 2.3 million conversations, within a month of launch. The bot handled questions about topics like refunds, returns, and payments in more than 35 languages. Related: There Are New Rules for 'Buy Now, Pay Later' Programs -- Here's What to Know Early tests with Klarna's customer service AI chatbot showed that the AI churned out exact answers from existing documentation and passed on customers to human support agents quickly. Gergely Orosz, an author and writer at The Pragmatic Engineer, wrote on X last February that Klarna's AI chatbot acted "basically as a filter" to reach human customer support agents when he tested it.

Klarna takes foot off AI gas as CEO acknowledges importance of human customer service

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. A year ago, Klarna CEO Sebastian Siemiatkowski boasted in a letter to shareholders that the BNPL giant's AI assistant was performing the work of 700 employees. At the time, the company revealed that it had trimmed its workforce through natural attrition from 5000 to 3800 over the last year and Siemiatkowski said there was an ambition to get this down to 2000, thanks largely to AI. However, in an interview with Bloomberg, Siemiatkowski concedes that the strategy has gone to far. "As cost unfortunately seems to have been a too predominant evaluation factor when organising this, what you end up having is lower quality," he says. "Really investing in the quality of the human support is the way of the future for us." Klarna is now testing a group of staffers "in an Uber-type of setup" that allows them to work remotely as customer service reps. "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," says Siemiatkowski.

Klarna rethinks AI customer service push as as CEO acknowledges value of human touch

This content has been selected, created and edited by the Finextra editorial team based upon its relevance and interest to our community. A year ago, Klarna CEO Sebastian Siemiatkowski boasted in a letter to shareholders that the BNPL giant's AI assistant was performing the work of 700 employees. At the time, the company revealed that it had trimmed its workforce through natural attrition from 5000 to 3800 over the last year and Siemiatkowski said there was an ambition to get this down to 2000, thanks largely to AI. However, in an interview with Bloomberg, Siemiatkowski concedes that the strategy has gone to far. "As cost unfortunately seems to have been a too predominant evaluation factor when organising this, what you end up having is lower quality," he says. "Really investing in the quality of the human support is the way of the future for us." Klarna is now testing a group of staffers "in an Uber-type of setup" that allows them to work remotely as customer service reps. "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," says Siemiatkowski.

Klarna Focuses on Human-Powered Customer Service | PYMNTS.com

Pay-later firm Klarna is reportedly rethinking some of its AI-centered cost-cutting. Now, CEO Sebastian Siemiatkowski told Bloomberg News in an interview posted Thursday (May 8), the Swedish startup is undertaking a hiring effort to make sure customers always have the option of talking to a human customer service rep. Siemiatkowski said the firm is testing a group of employees "in an Uber-type of setup" where they can log in and work remotely, hoping to ultimately replace "the few thousand human agents" that Klarna outsources now. "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," the CEO said. As Bloomberg notes, Klarna had paused hiring for more than a year while it focused on developing its artificial intelligence (AI) capabilities. But Siemiatkowski said that strategy is no longer the right fit. "As cost unfortunately seems to have been a too predominant evaluation factor when organizing this, what you end up having is lower quality," he said. "Really investing in the quality of the human support is the way of the future for us." PYMNTS explored the limits of AI-powered customer service in a report earlier this year, noting that two years after the debut of ChatGPT, many customer-facing chatbots aren't smarter. Rather, AI has been relegated to helping human workers research company policies and product information that they can pass along to customers. "With concerns over reliability, more companies are restricting the usage of generative AI and opting for a more secure pathway," Marlene Wolfgruber, computational linguist at ABBYY, told PYMNTS. The report also notes that some high-profile cases have cast a shadow over using chatbots directly with the public, considering the potential financial and brand damage if the chatbot or AI agent hallucinates. For example, there was a case in which Air Canada's AI chatbot told customer Jake Moffatt that he could purchase a bereavement fare at full price first and get the discounted bereavement fare if requested within 90 days. However, the chatbot was wrong. The airline had no such policy. Moffatt sued Air Canada and won, with the British Columbia Civil Resolution Tribunal ruling that Air Canada could not separate itself from the AI chatbot This isn't to say that Klarna is abandoning AI. In a post on X in March, Siemiatkowski compared the growth of the technology to that of mobile devices, saying, "just like when mobile came along, we talked about mobile first, now you need to be AI first."