Is the global economic downturn threatening Fintech growth?

The current economic climate is hitting the technology industry where it hurts – in its scaling strategy.

As inflation roars to highs that have not been seen for decades, public spending falls and besieged supply chains force prices up, the employment boom in 2021 could well have started its downward journey.

Fintech Klarna could be hit while Stripe is working on IPO plans

Some experts have suggested that Klarna may have lost 30% of its valuation – although the BNPL giant says it still maintains a value of $ 45.6 billion and that any decline in value at this time is unconfirmed and “pure speculation”.

Stripe CEO Patrick Collinson has publicly stated that fintech’s valuation of USD 95 billion is possible, not an exact figure based on the current economic climate and marketplace.

Earlier this week, insurtech leader Policygenius gave 25% of its employees in an effort to reduce costs. According to reportsUS technology and crypto companies will release more employees in May than in the previous four months combined.

Figures show that despite the ‘war on talent’, there were 4,044 job vacancies in the technology industry last month, compared to 500 redundancies in the first four months of 2022. The data show that fintech companies made 1,619 cuts in May, compared to 440 from the period January to April.

The biggest players in the market have been affected by the economic crisis, with Elon Musk announcing earlier this month that even Tesla cut 10% of its paid workers to reduce production costs because the company had “been overstaffed in many areas.”

The news is in sharp contrast to previous annual reports on the growth of the technology industry.

Insurtech Policygenius loses 170 employees

The effect on the insurtech industry seems to dampen investment enthusiasm. The New York-based Policygenius, founded by CEO Jennifer Fitzgerald, is one of the leading digital insurance companies globally. As part of the announcement, Fitzgerald shared further LinkedIn a list of “Policygenius alums” that other companies should look at hiring.

The move is all the more surprising because it comes just three months after Policygenius raised $ 125 million from investors. The company also launched a second headquarters in downtown Durham in 2019. Policygenius opened the office after receiving a $ 5 million incentive package from the state.

The reduction in staff will complicate the scheme as reports say that part of the agreement was that Policygenius agreed to hire 377 new employees in the Durham area from 2024.

Speaking about staff reductions, Jennifer Fitzgerald described the layoffs as a “sudden and dramatic change in the economy.” She said: “After careful consideration, we announced the difficult and necessary decision to reduce the size of our workforce. With these changes, we remain confident in the future of our company, our continued innovation and the excellent service we continue to offer our customers every day. “

High interest rates affect fintech growth

Andrew Challenger, senior vice president of Challenger, Gray & Christma, also spoke Print“Many technology startups that saw tremendous growth in 2020 – especially in the real estate, finance and delivery sectors – are beginning to see a decline in users, and combined with inflation and interest rate concerns, are restructuring their workforce to cut costs.”

His words were born in announcements from Microsoft that slowed the hiring process across Windows, Office and Teams chat and conference software groups. The actions were mirrored by Coinbase, which also said that it stopped hiring “in the foreseeable future” due to the current economic climate. According to reports, Coinbase even withdrew job offers from recently accepted hires.

The Insurtech markets are experiencing a decline compared to early 2022

The news comes in sharp contrast to reports in April this year, when global insurance technology financing reached $ 2.2 billion. But the UK economy alone has shrunk by 0.1% since March, proving wrong experts who said the figures showed that growth in the insurtech industry showed no signs of slowing. This follows 2021, when global insurtech financing reached $ 15.8 billion for the year – the highest annual capital injection ever and more than 2020 and 2019 combined.