Expect more layoffs as the Fintech Winter draws in

The weather in the City of London is, to quote the UK’s Meteorological Office, “exceptionally mild” with the country’s capital set for a record-breaking 18 degrees celsius over the weekend. 

The capital’s mildness in its weather contrasts starkly with a deep chill setting for fintechs in both Europe and North America where a second round of mass layoffs appears to be establishing itself. 

Meta’s 11,000 thousand job cuts and Twitter’s firing of 50 per cent of its workforce in recent weeks have naturally been the dominant tech layoffs story of late. 

This week, however, there have been some notable examples in the European and US fintech space too.

Pleo, the Danish spend management fintech company that employs c.1,000 people, announced this week that it would be cutting c.150 jobs, around 15 per cent of its workforce.

Jeppe Rindom, the CEO and co-founder of Pleo told employees the company was shifting its aggressive growth strategy over the past few years - that saw it launch in 12 new countries in as many months. 

It is no longer pursuing a “growth first mandate”, according to a blog post and instead would be operating “growth through focus and efficiency”.

Similarly, as exclusively revealed by AltFi, Railsr - the fintech formerly known as Railsbank - is planning a 16 per cent reduction in its workforce in the next month.

Both companies have raised relatively large recent funding rounds with Pleo landing $200 less than a year ago and Railsr only last month netting $46m. 

Nigel Verdon, CEO and co-founder of Railsr told AltFi in an email statement regarding the cuts that it was necessary owing to the macro environment. 

“We’re not immune from the market downturn and we have to focus on our route to profitability. We’ve had to make some tough decisions about our business. The playbook is to focus on our strengths – and that has meant downsizing in some markets and saying goodbye to good colleagues.”

This week’s bad news - which it is is always worth remembering is not simply a trend but a personal catastrophe for hundreds if not thousands of people concerned about their financial situation - follows another week of similar stories. 

Stripe said it would be letting go 14 per cent of its workforce, while Credit Karma, part of Intuit, said it was ‘pausing hiring’.

Fintech’s first big round of cuts of course came earlier in the year in May and June amid rapidly changing sentiment in the wider macro environment, soaring inflation and no quick end to the Russian invasion of Ukraine. 

While there are reasons to be optimistic, given some signs inflation is slowing in the US and Ukraine's gains in Kherson, it is unlikely sentiment is going to shift quickly back to a growth-above-profitability mindset any time soon.  

Dozens of large fintechs are still growing rapidly and continuing to hire but the direction of travel points to more bad news in the coming months. Wrap up warm for Fintech Winter.