Thousands of employees in the nascent financial-technology industry are losing their jobs as companies cut costs for the first time.
(Bloomberg) — Thousands of employees in the nascent financial-technology industry are losing their jobs as companies cut costs for the first time.
Affirm Holdings Inc., a “buy now, pay later” lender, and online platform Upstart Holdings Inc. are firing one of every five of their workers — and other firms have made deeper cuts. They joined a bevy of fintechs slashing payrolls as borrowing has become more expensive.
“After several years of sky-high venture funding and more unicorn valuations than you can count on one hand, a lot of fintechs are being forced to mature and streamline more rapidly than they planned to, and job cuts are a quick way to do so,” said Charlotte Principato, financial services analyst at Morning Consult. “This was bound to happen at some point.”
Fintechs boomed during the early days of the pandemic, ambitious to grow and driven by low interest rates and consumer hunger for debt. Firms including LendingClub Corp. have seen earnings decline and shares slump since then, amid slackening demand and Federal Reserve interest-rate increases.
Since the beginning of November, Blend Labs Inc. announced it would cut 28% of its onshore jobs, Plaid Inc. fired 260 employees and PayPal Inc. said 2,000 workers would be dismissed. Stripe Inc. is cutting more than 1,000 jobs, or 14% of its workforce, and Chime Inc. is reducing its headcount by about 160, or 12% of its staff.
Affirm Chief Executive Officer Max Levchin said on an earnings call Wednesday that his company’s headcount reduction of about 500 represented around six months of engineering hiring. The dismissals were announced as the lender reported a bigger-than-expected net loss for its most recent fiscal quarter.
“If they don’t hit their objectives, they have to lay people off — it’s just the way it is,” Paul Sorbera, president of executive-search firm Alliance Consulting, said in an interview.
Doom and gloom aside, Morning Consult’s Principato doesn’t see the industry vanishing into thin air. There’s much room for improvement in the financial-services industry, and consumers will still want digital offerings, she said.
“Fintech will continue to be a big bet for investors, banks and technology companies, but the fintech innovations may start to come from more-traditional firms that are in stronger financial positions,” she said in an email. “Smart banks and large financial institutions will scoop up talent, products, ideas or even entire struggling startups and bring them in-house to make the innovations their own.”
(Updates with Chime, Stripe job cuts in fifth paragraph.)
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