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Company that sacked 700 workers with AI now regrets it — scrambles to rehire as automation goes horribly wrong
Company that sacked 700 workers with AI now regrets it — scrambles to rehire as automation goes horribly wrong

Time of India

time34 minutes ago

  • Time of India

Company that sacked 700 workers with AI now regrets it — scrambles to rehire as automation goes horribly wrong

Klarna regrets replacing 700 employees with AI, now rehiring humans after customer service failures- Klarna, the popular Swedish fintech company known for its 'buy now, pay later' service, is walking back one of its most controversial decisions. After firing 700 employees and automating their jobs with artificial intelligence, the company now admits the move may have gone too far. Klarna CEO Sebastian Siemiatkowski has publicly acknowledged that while AI promised speed and cost savings, it came at the cost of customer satisfaction and service quality. The fintech giant, once valued at $45.6 billion in 2021, was one of the loudest voices championing AI in customer operations. But by 2024, the consequences of that AI-first approach were too obvious to ignore. Why did Klarna fire 700 employees and replace them with AI? Back in 2022, Klarna made headlines when it laid off around 700 workers, a significant portion of its workforce at the time. CEO Siemiatkowski was vocal about embracing AI tools that could take over tasks such as customer support, translation, content creation, and even executive-level decision-making. He believed these tools could match, or even exceed, human performance. In interviews and public statements, he claimed the company had managed to automate the equivalent of 700 roles. The move was framed as a bold step toward innovation and cost-efficiency during uncertain market conditions. What went wrong with Klarna's AI-only approach? Fast forward to 2024, and things didn't go as planned. Klarna began facing a surge in customer complaints, a dip in user satisfaction, and growing frustration with the AI systems that had replaced its human workforce. Live Events According to reports from Livemint and The Economic Times, Klarna's AI tools struggled with more nuanced support tasks — especially those that required empathy, discretion, or deeper understanding of user issues. Customers complained that automated responses were too generic, repetitive, or simply unhelpful when dealing with real-life problems. CEO Siemiatkowski later admitted the company's overdependence on automation led to a 'lower quality' customer experience. This public acknowledgment marked a shift in Klarna's strategy — from full-speed AI deployment to rebalancing the human element in service. Is Klarna now rehiring the people it once let go? Yes, Klarna is now actively rebuilding its human support teams, a sign that it recognizes the value real people bring to customer interactions. The reversal shows a clear change in Klarna's priorities: from purely chasing AI-driven efficiency to restoring trust, service quality, and brand reputation. Siemiatkowski's tone has changed as well. In his recent remarks to multiple media outlets, he admitted, 'We went too far.' He stressed the importance of striking the right balance between human workers and artificial intelligence, a lesson that could influence the broader fintech and tech industry. What lessons does Klarna's AI regret teach other companies? Klarna's experience serves as a cautionary tale for businesses rushing to replace employees with AI. While AI tools can offer impressive speed and cost savings, they still lack the human touch needed in complex customer service situations. Other tech firms and startups may now think twice before eliminating large parts of their workforce, especially when customer experience is at stake. AI is a powerful tool, but it's not a full substitute for people — at least not yet. Can AI and humans work together in the future of customer service? This incident has pushed the conversation toward collaborative models, where AI assists human agents rather than replacing them outright. Tools like chatbots can handle simple, repetitive queries, but when emotions, trust, or complex issues are involved, people still want to talk to people. Klarna's pivot back to human hiring is a strong signal that the future of AI isn't about replacing jobs — it's about enhancing them with smarter tools and better support systems. It's also a reminder that companies should listen closely to their customers, even when chasing innovation. Why Klarna's AI mistake matters The Klarna AI layoffs story isn't just about one company's failed experiment — it's about how tech companies around the world are learning what AI can and can't do. Klarna's $45 billion dream hit a reality check when customer complaints started flooding in. Now, with a more balanced strategy, Klarna is working to rebuild both its workforce and its trust with customers. The takeaway? Automation may be the future, but the present still needs a human touch. FAQs: Q1: Why did Klarna fire 700 employees for AI? To automate customer service and cut costs. Q2: Is Klarna hiring humans again after AI layoffs? Yes, due to poor service quality and customer complaints.

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