As companies begin to cut costs, thousands of employees in the emerging financial- technology industry are losing their jobs.
Affirm Holdings Inc., a “buy now, pay later” lender, and online platform Upstart Holdings Inc. are firing one of every five workers — and other firms have made deeper cuts. As borrowing has become more expensive, they joined a bevy of fintech companies that have reduced payrolls.
“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 had a boom in the early stages of the pandemic, fueled by low-interest rates, consumer debt hunger, and ambitious growth plans. Since then, decreasing demand and rising Federal Reserve interest rates have led to a drop in earnings and a reduction in companies’ stock prices, including LendingClub Corp.
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 simultaneously that the lender disclosed a bigger-than-expected net loss for its most recent fiscal quarter. The president of an executive search firm Alliance Consulting, Paul Sorbera, stated in an interview that “if they don’t hit their objectives, they have to lay people off -it’s just the way it is.”
“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. She said that the financial services industry has much room for growth, and consumers will continue to prefer digital offerings.
“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.”
