Finimize - 🤝 When Klarna met ChatGPT

What’s going on here?

Klarna slimmed its losses in the first half of the year, and a certain famous chatbot might’ve had something to do with that.

What does this mean?

“Buy now, pay later” (BNPL) schemes let customers spread out their payments over time with interest-free credit. That’s a tidy idea when money’s good and those designer shoes aren’t technically in the budget. A potentially risky one, though, when the cost of living has emptied folks’ wallets and rate hikes have made interest-free debt a much bigger ask. But so far, even more shoppers are using Klarna to make nice-to-haves more manageable, and what’s more, inflation hasn’t stopped them from keeping up with their debts. Klarna’s real success, though, came from its shrewd cost-cutting and leaning into AI tools like ChatGPT to improve efficiency. That slimmed losses by two-thirds in the first half of this year versus the same time last year, and Klarna even wrangled a month of profit.

Why should I care?

For markets: Go U-S-A!

Klarna’s business was particularly blooming Stateside, now boasting around 30 million users and three straight quarters of gross profit. That’s just the ticket: Klarna has always said it wants an established US presence before it lists on the stock market. And while markets aren’t exactly shining right now, that means Klarna – once Europe’s most valuable startup – could hit the public stage in a few years.

Zooming out: You’re techy and you know it.

ChatGPT’s impact on Klarna shows just an iota of its potential in the business world. And OpenAI – the tech’s creator – knows it, launching a corporate version of the chatbot with new features and privacy settings designed to lure businesses in. That should hoist ChatGPT’s revenue even higher, adding to the already $1 billion annual sales it’s headed toward.

What’s going on here?

Fresh data out on Thursday suggested that China’s economy might finally be making moves, if you wade through the bad bits, that is.

What does this mean?

China’s economy has been a real downer this year, and pundits will take what they can get at this point. So sure, an index tracking activity in the country’s all-important manufacturing sector shrank for the fifth-straight month in August. But hey, it wasn’t as much as economists expected and it edged a little closer to flatlining. These days, that’s a win. Mix in a measure of new orders creeping up in the sector for the first time since March, and whispers are spreading that the worst may be over. Maybe that’s because the government’s efforts are working or maybe it’s wishful thinking – but either way, it’s a tiny shred of hope for China’s manufacturing-heavy economy.

Why should I care?

The bigger picture: Good news, if you look hard enough.

Still, measures of non-manufacturing activity – think services and construction – are on the decline. But as we’ve learnt, you need to dig to find the good stuff: services like transport, accommodation, and entertainment did alright last month. The blame, then, may land on the country’s troubled property sector. If that’s the case, the government needs to ramp up targeted support initiatives, or risk seeing small victories give way to massive failures.

For markets: What goes up must crash down.

Each promise of government economic support seems to be followed by a market rally, but every time they fizzle faster than the last as investors realize that not much actually changes. That’s a toxic relationship, one that’s left China’s main index a little battered this year. So with jaded investors far from won over by existing measures, many analysts reckon the government needs to unleash its beast to win them over – potentially one like the half-a-trillion-dollar stimulus package it rolled out in 2008.