In a recession, there is less liquidity in the market. Less liquidity means people spend less which means less revenue for payment providers. Crypto is also hit from lack of liquidity in the market. People had disposable income so they were buying and hodling crypto, now people are getting laid off, fewer people buy such speculative assets. Most crypto companies make money from ppl buying cryto so that means dwindling revenue. Credit tightening means high interest rates which means less revenue from any credit and loan products. Companies also get less financing to originate loans. PayPal has already started layoffs in waves and they’re keeping it quiet possibly expecting more to come. Fast has folded. Bolt has had layoffs and Coinbase is talking bankruptcy. I have been in fintech for 10 years, fintechs are in the business of money and recession means less money to go around. Less money means Fintechs have nothing to sell because they’re in the business of selling money. Fintechs are going to be the first and the worst hit in a recession because unlike banks they don’t have billions in reserves. Now is a good time to switch when there’s still jobs in the market.
Bolt also started layoffs
There will be a lot of consolidation and layoffs from fintechs. Most just can’t survive without raising and have no path to profitability. Private company valuation lag public companies. A 70% -90% reduction in valuations for some of the fancy fintechs in the next few months shouldn’t be surprising.
And Capone and other big banks are looking to snatch some of these fintechs at steep discounts.
What about Square/Block?
Square doesn’t hire in bulk and has done a decent job of diversifying their business. So i imagine if and when they have layoffs it will be in operations and sales.
Interesting. Well I’m going there next so hopefully it’ll be good. CashApp specifically. Mobile developer.
Disagree. Not every fintech is selling hype like Coinbase and Bolt. Stick to the boring stuff and you’ll be fine. I can say with certainty those that sell banking software like Temenos and Backbase will survive just fine. FIS and Fiserv will be fine too.
It may not go out of business like Fast but the volumes will reduce and that does mean cuts in at least operating costs
Paypal is still making massive revenue and profits but they’re still having layoffs, thats just the name of the game. Management does layoffs in response to low numbers to please investors with layoffs. To show they did something
Anybody selling anything other than money, as long as they’re not hiring too many people will definitely survive
Thoughts on Brex/Ramp?
I don’t know their businesses well but they can’t be in a great position right? Their customers are startups that will start failing or cutting costs = less money flowing through their cards, possibly loss of subscriptions
Uber gets it! That’s exactly the logic
What about PE or VC firms?
VC capital is drying up in recession what will you do there
Out of liquidity as well. Valuations also going down. LPs are more picky and selective with how they want GPs to deploy the remaining capital.
Bloomberg should be safe hopefully 🤞🤞🤞🤞 (i am joining bbg soon)
I’d watch out for companies that raise rounds really fast. Like if you raised a Series B then 6 months later a Series C. That’s usually a red flag. Yes, you could be growing that fast but it’s really easy to over-hire and not plan for downturns with that pace. I like companies that raise a round every 12-18 months.
This depends on whether they’re raising money to have extra cash in the bank, or they’re raising money to spend it. When markets are tight, former is prudent, the latter is exceptionally reckless.
There will be no Vanguard bonuses!
What! This has to be a key marker for recession onset
At least not in Germany