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Klarna, a Swedish fintech company, once bragged that its AI could replace 700 customer service jobs, but is now scrambling to rehire human workers after its chatbot experiment backfired. Just months after freezing hiring and letting its workforce shrink by 22% through attrition, CEO Sebastian Siemiatkowski admitted the company’s aggressive AI shift sacrificed service quality.

“Investing in the quality of human support is the way of the future for us,” Siemiatkowski told Bloomberg, according to a recent report, reversing course on a strategy that had slashed Klarna’s headcount to 3,500 employees. The buy-now-pay-later company, valued at $14.6 billion, is now recruiting students, rural workers, and loyal customers for fully remote customer service roles.

The u-turn comes after Klarna’s AI chatbot, launched in early 2024, quickly handled 75% of customer chats, 2.3 million conversations monthly, but drew criticism for robotic, scripted responses. Users complained the bot acted as little more than a “filter” to funnel complex issues to human agents.

Siemiatkowski, who had claimed on an X post in January that “AI can already do all our jobs”, has now claimed to Bloomberg in a recent interview that replacing humans with AI has “led to lower quality”. “Investing in the quality of human support is the way of the future for us,” he said to Bloomberg.

Klarna had initially championed AI as a cost-cutting marvel, with Siemiatkowski telling staff in late 2024 to rely on AI to fill gaps left by departing colleagues. But after the chatbot struggled with nuanced tasks like refund negotiations and multilingual support.

The reversal highlights the limits of AI in customer service, even for tech-forward firms. Klarna, which helped popularise BNPL loans and recently partnered with Walmart, now faces the delicate task of balancing automation with the human touch its large user base demands.