Stripe and Chime in latest round of bruising fintech layoffs

Stripe and Chime are among the latest fintechs to be forced to announce mass layoffs as the sector faces a combination of macroeconomic challenges, a tighter investor landscape and a downturn from record levels of consumer adoption at the height of the pandemic.

Stripe, the San Francisco-based payments fintech, has this week announced that it will get rid of 14% of its staff – the equivalent of over 1,000 people. The company had been one of the biggest fintechs to avoid mass layoffs so far, although Stripe president John Collison had previously admitted he “didn’t know” whether the firm could still justify its $95 billion valuation.

In an email to employees, Stripe CEO Patrick Collison blamed the move on “stubborn inflation, energy shocks, higher interest rates, reduced investment budgets and scarce start-up funding”. He continued: “We have always prided ourselves on being a capital efficient business and we think this quality is important to preserve. To adapt to the world we are entering, we must reduce our costs.

“About 14% of the people at Stripe will leave the company. We, the founders, made this decision. We overhired for the world we’re in … and it hurts us not to be able to deliver the experience that we hoped those affected would have at Stripe .”

Time for fintechs to accept ‘the world has changed’

Banking fintech Chime has also announced layoffs this week, revealing to employees that it would make 12% of its workforce redundant – roughly 160 employees. In a memo, Chime CEO Chris Britt committed the firm to reassessing its marketing costs, cutting ties or renegotiating contracts with contractors, and suggested it could cut jobs.

“But we also need to adjust the size of our organization as we increase our focus and move towards profitability,” says Britt.

Meanwhile, billing and subscription fintech Chargebee is reducing its workforce by 10% – around 142 people – as it “proactively refocuses resources to set a strong foundation for continued … growth”.

And European fintech Pleo, which provides card services to businesses, announced yesterday that it would cut up to 150 employees, representing 15% of its workforce. It’s a significant increase after a solid year of growth for Pleo, which in the past 12 months has expanded its focus to 16 countries and reached 1,000 employees.

Pleo CEO Jeppe Rindom summarized the market challenges in a memo to employees: “The world has changed and our next chapter will look different. We no longer operate under a ‘growth first’ mandate, but rather a reality of ‘growth through focus and efficiency’. Focus on the many markets we now serve and focus on driving efficiency in everything we do. And what got us here is not what will get us there.

“We have made our priorities and laid out our strategy for the coming year. And unfortunately this affects 15% of our roles, up to 150 of our colleagues may have to leave. Everyone has played an important role in making Pleo what we are today.”

A “painful” recession now looks almost inevitable

Nigel Green, chief executive of the deVere Group – an independent financial advisory and asset management group – believes we are seeing the signs of an inevitable recession. He points to a number of indicators from recent weeks, including a chorus of warnings, the strength of the dollar and rising inflation.

Green says: “Companies around the world are tightening, suggesting earnings will be lower as demand falls, supply chain issues remain and borrowing becomes more expensive as central banks, determined to control inflation, raise interest rates.”

He adds that recessions are always painful, and says that a global recession is widely expected in 2023.