[Asia Economy Reporter Yujin Cho] As concerns over an economic recession materialize, the wave of layoffs among U.S. tech companies is expanding from big tech to fintech, with large-scale workforce reductions underway.
On the 12th (local time), Bloomberg reported that Affirm and Upstart are conducting high-intensity restructuring by cutting 20% of their total workforce, resulting in thousands of job losses in the fintech industry over the past three to four months.
Affirm's CEO Max Levchin announced during a conference call following the earnings report on the 8th that the company would reduce its workforce by 500 employees, accounting for 19% of its total staff. This layoff announcement came after the company posted earnings below market expectations. Affirm disclosed a net loss of $322.4 million (approximately 411.7 billion KRW) in Q4 of last year. The loss nearly doubled compared to the same period the previous year ($159.7 million), significantly exceeding market forecasts.
Prior to this, PayPal, a U.S. easy payment service provider, decided to lay off about 2,000 employees, representing 7% of its global workforce, to reduce costs. PayPal, which began a broad review to cut various expenses last year, planned to reduce costs by $900 million last year and $1.3 billion this year. Anticipating a deepening recession, the company also lowered its annual revenue forecast for this year.
Together with PayPal, Stripe, one of the two major players in the U.S. online payment industry, cut 1,000 employees, accounting for 14% of its total workforce. During its fundraising last year, Stripe was valued at $96 billion (approximately 121 trillion KRW), earning the title of the most valuable startup worldwide, but its valuation recently dropped to around $63 billion (approximately 80 trillion KRW). According to a Wall Street Journal (WSJ) report, Stripe is exploring funding options through an initial public offering (IPO) or private equity due to dwindling liquidity.
Blend Labs, specialized in the mortgage sector, began restructuring in November last year by cutting 28% of its total workforce, the largest reduction among fintech companies. Blend Labs, which expanded its business by partnering with major U.S. bank Wells Fargo in the mortgage lending sector, shifted to downsizing after its performance shrank due to high-intensity tightening measures. Despite the pandemic boom, Blend Labs failed to turn a profit as losses increased with rising sales. Additionally, Plaid laid off 260 employees in December last year, and Chime reduced its workforce by 12%.
Foreign media have evaluated that the fintech industry, which rapidly expanded during the early COVID-19 pandemic fueled by abundant liquidity, has been hit hard by the shift to tightening and inflation. In the worsening macroeconomic environment, high-intensity restructuring is continuing, including not only workforce reductions but also the liquidation of existing businesses and simplification of business structures. Charlotte Principato, a financial services analyst at Morning Consult, noted, "The fintech industry, which has produced numerous unicorns due to concentrated venture capital investment in recent years, has entered the restructuring phase faster than expected," emphasizing the need for a pace adjustment considering the industry's maturity.
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