What credit union leaders can learn from Klarna’s AI-fueled growth spree

Klarna, the Swedish buy now, pay later (BNPL) fintech, just posted its fourth straight profitable quarter.

So what?

Klarna is doing three things credit unions must do to fulfill their mission and return as much value to their members as possible. They’re leveraging AI, automating processes and collaborating to better serve their customers.

Credit unions are not-for-profit organizations that must run their organizations in the best interest of their member-owners. There’s a huge difference between a not-for-profit (in which a business is self-sustaining, but profit is not the primary goal) and a nonprofit (which survives on donations and cannot earn a profit).

That distinction is critical, and profitability is essential for credit unions. How did Klarna do it?

Most credit unions will never adopt a model like that, and rightfully so. However, credit unions must compete with the Klarnas of the world, which offer credit with immediacy and manageable payment schedules. There are lessons for credit unions to learn from the fintech’s success.

Credit unions can adopt some of the same technology it’s using, but to support staff, not cut them. Assign menial, repetitive tasks to preserve and even enhance high-touch service and community engagement. Let’s take a closer look.

Klarna’s AI-first strategy delivered a 152% increase in revenue per employee since Q1 2023 and a 40% drop in customer service expenses. According to the company, customer satisfaction didn’t slip.

Credit unions’ takeaway is that AI doesn’t have to mean gutting your staff or losing member service satisfaction. It can reduce manual work by automating tasks like balance inquiries or appointment scheduling to allow your team to focus on the complex member needs you’re known for. AI can improve your credit union’s efficiency and create scale.

Credit unions talk a lot about collaborating. It’s complicated and messy. Still, the rewards can be amazing. While your credit union won’t add the 150,000 new partnerships Klarna did in its first quarter, you can add them at your own pace and scale. And these partnerships might not be the size of Walmart or DoorDash, but you can leverage them to expand your credit union’s reach.

Partnering with fintechs, CUSOs, local nonprofits and other mission-driven organizations can help grow your loans, deposits and members exponentially. Leaning on partners, like Salus, for support is much better than going it alone.

Scaling effectively is a smart investment of your members’ money. It can help your credit union to improve profitability and serve your members even better. Klarna is earning nearly $1 million in revenue per employee.

Smart tech investments can allow smaller teams to serve more members with less friction. That’s especially helpful for small- and midsize credit unions trying to do more with limited resources.

Obviously, most credit unions won’t reach Klarna’s scale, but what is your goal? Do you have one? You should.

Consumer behavior around money is evolving dramatically. BNPL, earned wage access and small-dollar loans are incredibly attractive to millennials and Gen Z. Consider Klarna’s growth. This company didn’t even exist before 2005 and operated under a different name until 2010. Now, it’s a household name.

Consider how microloans, earned-wage access and other small-dollar solutions fit into your lending strategy and how you can offer them without skyrocketing charge-offs. Alternative data analytics can measure a member’s creditworthiness well beyond their credit score. Using transactional and other data, we can predict with a high level of certainty who is likely to repay their loan, regardless of their credit score.

Klarna’s playbook doesn’t map perfectly to the credit union business model, and it shouldn’t. However, its success is undeniable and offers a glimpse at how financial institutions can harness AI and collaborate to streamline operations and remain relevant for the modern financial consumer.