Swedish fintech firm Klarna is planning to cut its employee headcount by 10% amid an increasing regulatory crackdown in the buy-now-pay-later (BNPL) segment.

Klarna CEO Sebastian Siemiatkowski said that the firm is forced to re-evaluated its organisational setup in “a tumultuous year” marked by tragic and unnecessary war in Ukraine, a shift in consumer sentiment, a steep increase in inflation, a highly volatile stock market and a likely recession.

Siemiatkowski told Klarna employees said in a blog post: “I want to start by saying that the vast majority of Klarnauts won’t be impacted, and will continue to be part of Klarna’s journey. However, unfortunately, some of you will be informed that we cannot offer you a role in the new organisation.”

Klarna employees in Europe impacted by the redundancies will be offered associated compensation while the process will vary for those working outside Europe.

The news follows a recent report by WSJ about the fintech firm seeking to secure funds at about a third less than its current valuation.  

Klarna become the highest-valued private fintech in Europe last year via $639m in a funding round, which took its valuation to $45.6bn.

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The firm is now in talks to secure up to $1bn from new and existing backers in a deal that could value it in the low $30bn range, the WSJ report said citing people familiar with the matter.

Earlier this month, Klarna said it would start to report how UK customers use its services to credit reference agencies as the BNPL sector faces increasing regulatory scrutiny.

This February, the Financial Conduct Authority (FCA) in the UK ordered Klarna, along with other BNPL payers Clearpay, Laybuy and Openpay to make changes to their contract terms.

The FCA urged the firms to amend their consumer contracts after identifying potential harm to consumers because of the way some of the terms were drafted.

In December last year, the US Consumer Financial Protection Bureau launched an inquiry into BNPL credit, and asked Klarna, PayPal, Affirm, Afterpay, and Zip to submit data on the risks and benefits of their services.