It's late 2020 in London, England. Influencer Ohosa Ovienrioba lets out a squeal as she hits send on an email. She's just sent a batch of videos to a brand's marketing director for approval. Once they sign off, she'll post them to her Instagram stories and officially become a brand partner for one of the biggest companies she's ever worked with. Ovi and Ryoba started posting on YouTube back in 2010, mostly giving beauty and lifestyle tips. At first, the posts were a fun, creative outlet while she studied law at school, but now it's her full-time job. And this latest deal is a major financial milestone. Ovi and Ryoba can't sit still, so she picks up her phone and calls a friend. Hey, how's it going? Oh my gosh, you won't believe who I'm partnering with. This is my biggest deal yet. Oh, yeah? Who's it with? Klarna. I'm doing Instagram stories about how I use it to buy my favorite beauty products. Hello? Are you there? Yeah, I'm still here. Did you hear me? I just signed a deal with Klarna. Isn't that cool? How much do you know about Klarna? I mean, I've used it here and there. It seems like a good service. It lets you divide payments up over time. Hmm. Well, yeah. For some people, it's great. But I've heard about a lot of people getting into real financial trouble. Not just with Klarna, but with other pay later services, too. Oh, I had no idea. Some people think the apps make it too easy to buy more than you can afford. I just read an article about people who are deep in debt because of these services. Can you send me that article? Yeah, yeah, yeah, yeah. sending it now. I feel terrible. I don't want to give bad financial advice. I'm sorry I didn't mean to rain on your parade. I am so proud of you. This deal didn't come out of nowhere. Klarna wants to work with you because you've worked so hard to build your audience. Honestly, I'm glad you told me. It's too late for me to get out of this deal, but I will never work with them again. OVN Ryoba hangs up the phone. deflated. Klarna has always had a positive reputation with her audience, millennials and Gen Z. But is that starting to change? She feels terrible knowing she's about to promote a product that she now has serious doubts about. There are strict rules governing how credit cards are allowed to operate. So why don't those same rules apply to buy now, pay later services? From Wondery, I'm David Brown, and this is Business Wars. In 2003, a 21-year-old entrepreneur named Sebastian Chemiatkovsky had an idea. E-commerce was exploding, but consumer trust was still fragile. So he started Klarna, a company that would pay for purchases up front, then collect payment from consumers within 30 days. Consumers could receive an item, inspect it, and decide if they wanted to keep it before paying for it. The model worked. Klarna was immediately profitable in its home base of Sweden, and soon, Semyakovsky's ambitions grew. He didn't just want to make online shopping easier. He wanted to disrupt the entire banking system. In 2019, Klarna arrived in the United States. Then came 2020. The pandemic shut down brick-and-mortar stores, and online shopping took off. Klarna's revenue increased 40% that year, passing $1 billion. But by 2021, clouds were forming. A shifting economic outlook and increased governmental scrutiny would soon put Klarna's business model to the test. This is Episode 2, Maxing Out. It's March 2021, and as the United States passes the one-year mark of the pandemic, Klarna is booming. The company raises a billion dollars from new investors, including heavyweights like Silver Lake Partners and BlackRock. By June, Klarna's valuation hits over $45 billion, tripling its worth in just nine months. It's now the second most valuable fintech company in the world. Only payment processing company Stripe is worth more. There are rumors that Klarna will soon hold an IPO, joining its competitors Afterpay and Affirm as a publicly held company. But there's trouble on the horizon. In February 2022, Russia invades Ukraine, causing energy and food prices to spike, especially in Europe, Klarna's home turf. In the United States, inflation jumps to 9%, raising the prices of food and other consumer goods. This is bad news for Klarna. Consumers mostly use buy-now-pay-later to pay for discretionary purchases like concert tickets, designer jackets, new TVs. In a downturn, these are the first things people stop buying. But that's not the only problem. During the pandemic, governments slashed interest rates to historically low levels to encourage people to spend money. This was a boon to Klarna and other buy-now-pay-later companies. Klarna relies on borrowed money from banks to front consumer purchases, and low interest rates made it possible for them to borrow lots of money and still turn a profit. But now, countries around the world are raising interest rates to combat inflation, which means Klarna's costs are going up. Klarna took on losses to expand into the United States, and its path to becoming profitable again is getting harder and harder. With prices going up and consumers feeling squeezed from all sides, they're more likely to default on their loans, losses that Klarna has to absorb. You know, this is what cheap money does to business judgment. We've seen this pattern over and over. Low interest, easy to obtain mortgages, anyone? When borrowing is easy, losses can feel temporary. Expansion gets framed as strategy instead of risk. But at some point, the math stops being so forgiving, and suddenly every shortcut shows up on the balance sheet. For small businesses, the lesson is brutal, but important. If your model only works when conditions are perfect, well, it doesn't really work, does it? Not over time, and not in the real world. Klarna's competition is also intensifying. In 2021, the point-of-sale company Square announces it will acquire Afterpay. By 2022, the deal is complete. Thanks to the merger, Square adds a buy-now-pay-later option to the 4 million merchants who use its point-of-sale services. Meanwhile, a firm, started by PayPal co-founder Max Lepchin, is gaining on Klarna in the United States. Even credit card companies are jumping in. Citi, Chase, and American Express roll out their own pay-over-time features, often with lower interest rates than their card standard rates. It's a perfect storm of bad news for Klarna. In spring 2022, Klarna CEO Sebastian Shemiotkovsky sends a pre-recorded video to all Klarna staff. He tells them that 10% of the workforce, roughly 650 people, will be laid off. He encourages them to work from home and says they'll receive a calendar invite to find out if they still have a job. Publicly, Shemeyetkovsky spins the downsizing as a necessary move to shore up Klarna's business model in an increasingly tough economy. But by summer 2022, Klarna's valuation collapses, shrinking from $45 billion to just $6.5 billion, an 85% drop in value. Once again, Shemeyetkovsky feels like Klarna is teetering on a precipice. He's felt this way before, when he tried to pivot the company to be a broader payment platform, and during the rocky U.S. expansion. If Klarna is going to survive this downturn, he needs something new. Luckily, inspiration strikes. It's November 2022 at Klarna's offices in Stockholm, Sweden. Shemmy Atkovsky walks down the hallway and knocks on the door of one of his top executives. He wants to go over the latest revenue report. Come in. Shemmy Atkovsky enters and sees the executive grinning at the computer screen. Why are you grinning? I just asked ChatGPT to explain wormholes, design a workout regimen for me, and put together an itinerary for my trip to London next month. Looks like he's nailed all of it. Shemmy Atkovsky takes a seat. Is that good? Oh, yeah, it's pretty amazing. Honestly, I think we all might be out of jobs in a few years. Well, we've known AI was coming. It just a matter of when Now it looks like it arrived I guess we either panic or we make it work for us What do you mean Well I sure it could bring more efficiency to how we operate don you think And we can make AI work for our users, too, by integrating it into our customer service solutions. Shemi Atkovsky stands up, feeling excited about the opportunity at hand. You know, the more I think about it, I think we should do it. Working with open AI could keep us ahead of the competition. If you can't beat them, join them, right? Exactly. Yeah, it's an interesting idea. But it would mean collaborating with another company. Yeah, there's that, but I think it's worth trying. Shem Yitkovsky heads back to his office, excited about the possibility of making a deal and seeing what AI can do for Klarna. The first time in a while, he feels like he's ahead of the moment rather than scrambling to keep up. In fall 2022, Klarna signs a deal with OpenAI, the maker of ChatGPT. Klarna will allow OpenAI to test out a variety of AI products on Klarna's public-facing software, as well as its backend. By the summer of 2023, Klarna is experimenting with 14 different AI initiatives, including customer service chatbots and real-time price comparison tools for consumers. But even as Klarna innovates, some users are becoming disillusioned with the concept of buy now, pay later. They're realizing that there's an inherent contradiction in the service. These companies market themselves as being good for consumers by helping them avoid credit cards and pay for products they might not otherwise be able to afford. But buy now, pay later's focus is actually on the merchants. These apps earn money by taking a percentage of every transaction. So the more consumers spend, the more companies like Klarna make. Yeah, this is the quiet truth most companies don't advertise. Klarna talks to consumers, but it answers to sellers. And that difference shapes everything, from how you get your pitches, to where they pop up in the buying process, or even the incentives to spend more. Truth is, plenty of businesses do this. Social media platforms, delivery apps, even what can seem to be free services. And when someone else is footing the bill, well, your priorities can tend to drift. You know what I mean? And that works until your end users, the consumers, get wise to what's happening. It's in Klarna's interest to encourage consumers to spend more and more. And some users have had enough. It's winter 2023 in New York City. Fashion editor Alicia Berman sits at her kitchen table, staring off into space. A half-finished martini is in her hand. Her laptop is open, and a notepad filled with calculation sits beside it. Earlier this afternoon, Berman went into a department store and bought a designer coat on sale. She's wanted a coat like this for a long time and was excited to score the deal. But when she went to pay for it, she discovered she had maxed out all of her buy now, pay later apps. Berman knew she used them a lot, but she was shocked to learn that she had hit the limit on all of them. Ever since she got back to the apartment, she's been trying to figure out just how much money she owes. When she finally finishes her calculations, the answer is horrifying. And now, her husband has just returned home. She knows she has to tell him about the financial hole she's gotten herself into, but she's terrified about how he'll react. The apartment door opens, and her husband calls out, Hey, honey. Berman is so nervous, she feels like she can't catch her breath. She tries to answer her husband, but she just can't manage to find the words. Alicia? Her husband walks into the kitchen, does a double take when he sees her. Hey, hey, what's wrong? You look like you've just seen a ghost. Honey, I need to talk to you. Her husband takes a seat, his eyes never leaving her. Okay. Berman opens her mouth a few times to say the words, but nothing comes out. Hey, honey, you're scaring me. Berman knocks back the rest of her martini and says the words as fast as possible. I'm... I'm $50,000 in debt. What? Wait, how? I don't know. I mean, I do know. It's the clothes, the shoes, the handbags. I paid for them using a bunch of buy now, pay later apps, and I just didn't realize how out of control it had gotten. The apps didn't tell you? Not really. The payments all come out of your account on different days and at different times. Like on Monday at 8 a.m., Klarna takes a $250 payment from the account. And then at noon, Affirm takes a $40 payment. The next day, Klarna takes another $200, and it's not obvious how to view the full picture and find out the total amount each app is taking. Hey, that doesn't seem right. It's not. But I have a plan. I've looked into it, and I can use my 401k to pay back what I owe. And then I can pay back my retirement funds with interest on a manageable schedule. Okay. I'm so sorry. Hey, hey, hey, it's okay. It's okay, there's a reason for richer or for poorer is one of the vows, right? Come on, I'm here for you. Berman wipes tears from her cheeks. She can't believe how compassionate he's being. I promise I am never going to use one of these apps again. Berman isn't the only one finding herself confused and vulnerable after relying on buy-now-pay-later apps. It's becoming a widespread problem, so much so that the United States government starts paying attention. In May 2024, the U.S. government cracks down on the buy-now-pay-later industry. For years, Klarna and its competitors have operated in a legal gray area. Their core product, short-term loans paid off in four installments or less, has fallen through a regulatory loophole. Because of that, they weren't subject to the Truth in Lending Act. That law lays out strict rules that credit card companies have to follow. It requires clear disclosure about interest rates and fee schedules, and it gives consumers a formal process for resolving disputes. It's meant to prevent exactly the kind of confusion that Alicia Berman experienced around not knowing exactly how much she owed. But that law hasn't applied to buy-now-pay-later companies. Until now. In May 2024, Rohit Chopra, the head of the Consumer Financial Protection Bureau, holds a press conference announcing a new interpretation of the Truth in Lending Act. He says that buy-now-pay-later customers are entitled to the same protections as credit card users, including clear disclosures about payment structures, fees, and dispute resolution. Just because they don't issue a rectangular piece of plastic to their customers doesn't mean they're exempt from following the law. He also says the Bureau will continue to monitor these services and take action if they feel it's necessary. Chopra then points to research the Bureau conducted. It shows that most people who use Buy Now Pay Later apps are already carrying debt. So these services are not necessarily replacing credit cards as promised, but instead are being used in addition to them. And because Buy Now Pay Later debt usually doesn't show up on credit reports, lenders aren't getting the full picture when they run credit checks. Klarna quickly puts out its own press release in response. The company assures its customers that it already adheres to many of the guidelines issued by the CFPB and that it welcomes regulation in the buy-now-pay-later industry. But Klarna pushes back on one key point. The company argues that buy-now-pay-later is fundamentally different from credit cards and that comparing the two is like comparing apples and oranges. In a weird way, the CFBP's new scrutiny on the buy-now-pay-later industry is an image win for Klarna. In its announcement, the CFPB acknowledges that buy-now-pay-later companies are now a major part of the United States credit market. Back in 2005, when Shemmy Atkovsky started his company, he vowed to disrupt the financial industry. And this is proof that he has. By June 2024, one study shows that 50% of Gen Z and 47% of millennials have used a BNPL service at least once. And in 2024, Klarna is profitable for the first time since 2019, bringing in $21 million in net profit. Then, in January 2025, Donald Trump is inaugurated for the second time, raising hopes that the regulatory pressure on Klarna and other buy-now-pay-later services might ease. Trump campaigned in part on abolishing the Consumer Financial Protection Bureau. So in March 2025 Klarna makes a major move and files to go public on the New York Stock Exchange With an IPO planned for April CEO Sebastian Shemiatkovsky takes a number of steps to ensure it a success First, he starts by going on a press blitz. Since 2022, tech investors have placed increased importance on profitability over growth, and Shemiatkovsky leans into this message, emphasizing that Klarna is keeping costs as low as possible, ensuring long-term profitability. His main talking point is that Klarna has reduced its workforce by 40%, in large part thanks to artificial intelligence. Now, in case you haven't picked up on it, this is investor theater. Ahead of an IPO, companies don't just present results, they present a story. To investors, Klarna isn't selling growth anymore. It's selling discipline. Cost-cutting becomes evidence of a company's maturity, even when it's reactive. But the danger here is believing your own pitch and mistaking market optics for fundamentals. In interviews, Shemi Itkovsky openly brags that the company is shrinking. In December 2022, Klarna employed over 5,000 people. Now it's down to about 3,500. He says AI chatbots are doing the work of approximately 700 customer service reps. They're currently handling roughly two-thirds of customer service calls. And he claims the customer satisfaction scores are roughly the same between bots and humans. Shemeyetkovsky tells interviewers he anticipates further gains from AI, saying 90% of Klarna's staff uses AI in some capacity every day. But it's not enough just to show low overhead. Klarna also has to show increased revenue, which means signing deals with more and bigger merchants. Shortly after the company announces it's filed for an IPO, Klarna announces a major coup. It will become the exclusive provider of buy-now-pay-later loans for Walmart. Shemey Akofsky calls this win a game-changer. Not only is Walmart the biggest retailer in the United States, But in the process, Klarna has booted its biggest rival, Affirm, as Walmart's partner. Affirm, for its part, tries to downplay the laws. They point out that Klarna will be underwriting the loans, but customers will be interacting with Walmart's own buy-now-pay-later service to shop. They say it's not an arrangement they would ever make. Furthermore, they argue that losing Walmart will have little effect on their bottom line, as the retailer represents less than 1% of their income. But a firm's stock price tumbles in response, nonetheless. And Klarna isn't done signing partnerships either. In March, they announce a deal with the delivery service DoorDash. A DoorDash executive highlights that this move is meant to help customers use DoorDash to buy high-ticket products like electronics. But DoorDash is mostly known for delivering takeout. And the response online is swift. But the insane thing we're talking about today, the new partnership between DoorDash and Klarna, which means you can now go into debt for Crunchwrap Supremes, Chipotle burritos, and the Big Zach snack meal. Because when I heard about it, I thought it was an April Fool's prank, but it's real. Yeah, you'll now be able to put your late-night food run on a four-payment installment plan. I think this is a horrible idea. If you're in dire enough streets that you need to split up your Taco Bell order, just don't order it in the first place. Yeah, I agree. On the surface, it's a punchline. But while the internet laughs at the idea of financing a burrito, regulators, investors, and competitors are watching closely. Just weeks before Klarna plans to launch an IPO. The timing, it couldn't be worse. And suddenly, a joke about tacos starts to look like a serious problem. In Stockholm, Shemiotkovsky huddles with his top executives to discuss how to address the bad press. He paces his office as the executives sit nearby, laptops open. One executive rubs his hand through his wavy blonde hair. You know, we might be overthinking this. We're the outrage du jour. Tomorrow, you know how it goes. The internet will be going on about something else. Shemey Atkovsky shakes his head. You know, ordinarily I might agree with you, but with the IPO approaching, we can't risk this backlash growing into a real problem. We got to address it. Another executive with thick glasses turns from the window to address the room. You know what? We got to start by stating the facts. These commentators keep talking about paying for a burrito in installments, but they didn't even bother to look into the terms. You can't pay in installments unless you're spending $35 or more. Yeah, I know that's true. We can point out that these so-called experts didn't even bother checking the details, I guess. The blonde executive nods. Yeah, we can also talk about how many Americans pay for takeout or groceries on credit cards. How's this any different? Shemmy Itkovsky points his finger at the executive enthusiastically. Yeah, you're right. In fact, I'd say using Klarna's better than putting recurring expenses on a credit card. Of course it is. They charge interest immediately. we only charge interest on longer-term loans or late fees. Shemi Itkovsky stops pacing and takes a seat. And this is just the kind of pushback you get when you're a disruptor, right? We're changing the way things have been done. People are reacting. He continues. I think we have a good set of talking points here. Let's get this over to comms and have them write a response. The other executives gather their belongings and return to their offices. Klarna pushes through the bad press from the DoorDash partnership and defends the collaboration. The company's focus stays on the upcoming IPO. It's anticipating a strong debut. But less than two weeks later, everything changes. And Klarna is forced to rethink their entire strategy. It's early April 2025 in Stockholm, Sweden. Kornas CEO Sebastian Chemiatkovsky sits at his computer watching CNN online. Earlier, President Donald Trump announced sweeping tariffs on almost all of the U.S.'s trading partners, including the European Union, India, and China. Although the president campaigned on instituting tariffs, what he's announced here is much broader and steeper than analysts expected. Trump is calling the day the tariffs go into effect Liberation Day. But investors don't seem to share this sentiment. Across the screen, CNN runs a chyron that reads, stocks tumble, dollar weakens as recession fears grip Wall Street. The anchor Wolf Blitzer echoes this in his analysis. And we begin with the breaking news from Wall Street. The trading has been underway now for just about 30 minutes, and nervous investors, very nervous investors, are weighing in on President Trump's historic new global tariffs. The early assessment, deep concerns. Shemiatkovsky mutes the video. He knows the responsible thing to do is to delay Klarna's IPO. It's not in the company's best interest to make a public debut in a turbulent stock market, and this exact scenario was flagged in Klarna's prospectus to potential investors. It specifically listed tariffs as a risk factor. Higher tariffs generally lead to higher prices, and higher prices mean consumers cut back, which is bad news for Klarna. Despite partnering with Walmart and DoorDash, Klarna is still used mostly for larger indulgences. But even though Shemiakovsky knew tariffs could derail his plans, it still stings. He's approaching 20 years since founding the company. His main competitors, Affirm and Afterpay, have already gone public. He wants to join them. And he's so close. But as red arrows flash across his screen and the major stock indexes plunge, the conclusion is unavoidable. The timing isn't right. He's waited this long and worked too hard to fumble this opportunity by rushing. Shemeyatkovsky picks up his phone to call his top executives. They're postponing the IPO. Delaying the IPO isn't the only setback Shem Yatkovsky faces in spring 2025. For the past year, he's been touting the potential of AI in the workforce. He's speculated publicly that AI is capable of doing all human jobs. And he boasted about Klarna's cost savings after chatbots started answering 75% of customer service calls. At the end of 2024, he even used an AI-generated avatar of himself to deliver the quarterly financial results. Then, in May 2025, Klarna makes a surprising announcement. It's hiring humans as customer service agents once again. Even though chatbots saved money, Shemeyetkovsky now admits that customer satisfaction scores plummeted after the transition, a reversal from what he previously claimed. Social media is filled with people complaining that Klarna's chatbots don't actually resolve problems. They just root them to humans. And most people, it turns out, still want to talk to another person. Shemmy Adkovsky says the company overprioritized cost savings and didn focus enough on customer satisfaction So he bringing back humans I don know about you but for some of us who suffered through useless chatbot customer service sessions this day of reckoning hasn't been nearly as widespread as it should be, and likely will be. You know, the problem isn't automation. The problem is automation almost always looks great on paper. Fewer employees, faster responses, lower expenses. and maybe that'd be fine if customers only wanted speed. But we all want something more, like a serious resolution to our issue, not a text link to a webpage. A little human empathy would be nice too. For businesses, what's the bottom line when it comes to technology and customer service? Remove friction for customers, but don't replace that human relationship entirely. Nonetheless, plenty of businesses are still learning this by trial and error. Even now. And I'm looking right at you, AI. Shem Yatkovsky insists that Klarna is not walking back from using AI as a whole. In fact, they're currently developing a financial digital assistant for customers. His hope is that eventually the AI assistant will negotiate loan terms and insurance rates for customers. But there's no mistaking this as anything but a backtrack and an abrupt change in policy for the company. As the summer progresses, Shemmy Atkovsky begins maneuvering Klarna toward an IPO again. He decides the key to a successful debut is to make sure people see Klarna as more than a pandemic-era one-hit wonder. He needs to go back to his original dream of Klarna not just as a lending company, but as a bank. On July 4, 2025, Karna launches a debit card in the U.S., accepted anywhere that Visa is accepted. The card allows users to either pay in full from their bank account or use it to make four interest-free payments. Karna also announces plans to roll out premium tiers that offer rewards, like airport lounge access and cash back, similar to high-end credit cards, for a monthly fee. The card is an instant hit, with approximately 13,000 Americans signing up each day for the first two months. And with that momentum behind it, Klarna finally goes public. On September 10, 2025, Shemi Itkovsky stands on the balcony overlooking the trading floor of the New York Stock Exchange. He's wearing a Klarna pink jacket over a white t-shirt. The wall behind him is bubblegum pink, Klarna's signature color. And it's emblazoned with a company logo. And then he rings that famous bell. Trading is open. Last night, Klarna's stock was priced at $40 a share. And now he's about to find out if the market will drive it up or if the IPO will flop. The first round of investors spikes the stock up 30% to $52 a share. And as Shemmy Etkovsky makes the media rounds, he keeps returning to the same message. In the U.S., there's been a demand for an alternative to credit cards. People are tired of getting in debt, tired of the highest interest rates that they charge, and they want a better product. Klarna's IPO is a success, though a moderate one. The company raises $1.37 billion on its first day of trading, and its stock price closes up 15%, giving Klarna a valuation of $14 billion. That's well above its 2022 slump, but far below its peak in 2021. Some analysts say that Klarna's big innovation was removing friction. Consumers no longer need to go through the process of applying for credit and running a credit check. With Buy Now, Pay Later, that whole process happens with just a click. It makes spending feel almost insignificant. and breaking down payments into four installments feels less like going into debt and more like budgeting. But it is debt. And now, over half of Buy Now Pay Later users say they've used the service to pay for an item they otherwise couldn't afford. Among Gen Z Buy Now Pay Later consumers, this figure is 60%. That's a sharp turn for a generation that grew up seeing their parents drown in credit card debt during the 2008 financial crisis and vowed never to repeat it. Oh boy, this may be Klarna's most powerful innovation and it's most corrosive when it comes to personal finance. Breaking payments into pieces turns debt into something that feels manageable and even responsible. Hey look, I've done this too, made the same rationalization, So don't get me wrong, this isn't a scold. But this is the same trick we've all seen before with subscription renewals or minimum payments. Hey, how many streaming channels do you subscribe to? Are you sure? You watch them all? Or did you just want to see The Office or Seinfeld or The Big Game so badly that night that you clicked the seven-day free trial, right? And by the way, those minimum payments. You know, you faithfully pay the minimum each month on time. You're following the rules. And yet that debt never goes away. At some point, we all feel the pain. It's not a question of if, but when. But there's an underlying issue here. Who should pay for that pain? The user or the enabler? Now look, however you come down, there's no getting around this much. Reasonable people can and do disagree. I mean, on the one hand, the borrower signed up for it. Case closed, right? On the other hand, consider the marketing. The use of big data, analytics, automation, the science of knowing exactly who's most likely to say yes, and whether anyone truly reads the fine print. Because the alternative is, well, it's like walking away from something that feels too good to pass up. And that's the power of buy now, pay later. Regulation continues to move slowly. In May 2025, the Consumer Financial Protection Bureau, now staffed with appointees made by President Trump, announced they would no longer enforce the Truth in Lending Act rules on buy-now-pay-later apps. This is a reversal from the Biden-era approach. But that same month, New York passes a law requiring buy-now-pay-later companies to obtain a state license, cap fees, and provide disclosures. And attorneys general in several other states, including North Carolina and Connecticut, begin investigating whether buy-now-pay-later companies have violated any of their consumer protection laws. Over the months following Klarna's stock market debut, its share price drops down to $30 a share, well below its IPO price. Then, in December 2025, a class-action lawsuit is brought against Klarna by investors who claim the company failed to disclose that many of its customers were experiencing financial hardship and that missed payments translate directly into losses that Klarna has to absorb, cutting into its profits. The plaintiffs argue that by downplaying these risks, Klarna overstated its financial health. Still, demand for Klarna and its new kind of debt shows no sign of stopping. On Black Friday, consumers made over $1 billion worth of purchases using Buy Now, Pay Later apps. It's the first time these apps have crossed that threshold in a single day. It's more evidence that Buy Now, Pay Later is firmly ingrained in the American payment ecosystem. But whether that's progress or a warning remains to be seen. A big part of what we've been talking about today is how easy it is to get trapped in cycles of debt, whether it's buy now, pay later, or paying off your student loans. Rachel Rogers knows this firsthand. When she graduated from law school, she owed close to $360,000 and felt like her future was over before it began. But seven years later, she was a millionaire. In the Audible original, Your Debt Plan, Rogers shares her framework, confront your debt without shame, negotiate with creditors, build side hustles to increase income, and learn how wealthy people actually use debt as a tool instead of a trap. Her message? You don't have to live your cheapest life to get out of debt. You need to live your most strategic one. Make sure to check out Rachel Rogers' new Audible original, Your Debt Plan, Reclaim Your Life and Get Paid. Just go to audible.com slash your debt plan to listen free with a 30-day trial. Amy X. Wang, published in the New York Times Magazine. Also, Making Sense of Klarna by Steve O'Hare, published in TechCrunch. And the interview with Sebastian Shemiakowski, conducted by Ben Gilbert and David Rosenthal on the Acquired podcast. I'm your host, David Brown. Austin Rackless wrote our story. Sound design by Josh Morales. Kyle Randall is our lead sound designer. Voice acting by Chloe Elmore. Fact-checking by Alyssa Jung Perry. Our producer is Tristan Donovan of Yellow Ant. Our managing producer is Desi Blaylock. Our senior producers are Jenny Bloom and Emily Frost. Karen Lowe is our producer emeritus. Our executive producers are Jenny Lauer Beckman and Marshall Louis for Wondery.
