When it rains, it pours, especially regarding layoffs in the finance industry. Affirm is the latest entrant to reduce its staff by nearly 20%. The company will also shut down its cryptocurrency initiative for undisclosed reasons.
It is very rough to survive as an innovator in the finance industry. That problem becomes even more significant during times of inflation, like today. Many companies thrived during the COVID-19 pandemic due to shifting consumer behavior and requirements. However, they are often ill-equipped to deal with the post-COVID world.
BNPL, or Buy Now Pay Later, was in high demand when people went through another lockdown. Buying online was the only viable option for millions of people. However, most consumers preferred to pay for purchases over time instead of having the amount debited in one go. As such, numerous BNPL providers emerged in 2020 and 2021, yet their reign has ended.
Affirm is the latest BNPL entrant to make tough decisions. First, the firm will lay off 19% of its employees in the coming months. That message was shared by CEO Max Levchin, who cited “significant changes since mid-2022. Although the shift in consumer spending can’t be ignored, Levchin blames Federal Reserve’s rate hikes. Those decisions have dampened consumer spending and made borrowing more expensive for companies like Affirm.
As a result, the company will need to restructure and ensure the remaining employees are well-equipped to handle their responsibilities. The restructuring is expected to set the company back by up to $40 million. Shareholders aren’t too happy with the news, resulting in Affirm’s stock dropping by over 17%.
A second leg to the changes at Affirm includes shuttering its crypto arm. Known as Affirm Crypto, it allowed users to seek exposure to select cryptocurrencies. However, customers never owned these assets, nor could they transfer them off the platform. It was a custodial service that seemed in high demand but never generated sufficient revenue.
Other initiatives will be shut down, although the company has yet to provide additional details. Affirm grows the list of tech and finance firms letting employees go in droves. It is unclear how many people will be out of a job following the announcement. However, Equitybee, another Finance firm in the SF Bay Area, announced a 25% staff cut the same day.
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