The headline of a recent TechCrunch article read: “The fintech layoffs just keep on coming.” Mobile banking service provider, Chime, confirmed 12 percent of employees were laid off this year. Real Estate FinTech, OpenDoor, 18 percent. Payment processing FinTech, Stripe, 14 percent. And the list continued from there.
Right on the heels of that article came the announcement that FIS is targeting $500 million in cost cuts less than a month after opening its new $115 million headquarters. A noteworthy quote from the FIS incoming CEO was that the cost-cutting details include “looking at rightsizing the workforce.” “Rightsizing the workforce” is a rather polite way of saying that layoffs are looming.
Personally, I believe there has been a lot of overzealous hiring going on since the pandemic. Business expansion and mass hiring are always good for some positive press. Shareholders love it, but there’s a huge downside if future growth has not been properly modeled and forecasted. Sadly, we are seeing that downside now. Regardless of the scapegoat, the grim truth is that thousands of people have already lost or will soon lose their jobs. And that is a tough pill to swallow. Particularly since it seems that whenever a company overspends or over-hires, the layoff playbook is pulled out pretty quickly.
Getting let go from a job is a devastating blow – no matter what the reason. Just ask anyone who has ever been a part of a RIF (reduction in force). Beyond the immediate impact on the lives of the laid-off employees, there is a ripple effect that extends all the way to the FinTech’s SaaS partners and their customers.
If you are a SaaS provider that partners with or more of the FinTechs involved in recent layoffs, expect it to affect your business in a few different ways.
Rarely does the layoff playbook call for dismissals within the C-suite or among their direct reports. And, since many of the recent FinTech layoffs are within public companies that must answer to shareholders, staff reductions may focus on non-revenue generating areas. Customer Service is an example of one such area.
Cuts in customer service staff are quite common with RIFs. I’ve heard countless stories recently of local service reps suddenly disappearing. As a result, the customers they had been serving were left in lurch. One example that sticks out in my mind is a retailer whose ecommerce capability abruptly went down. It took them four days to get ahold of a customer service person who could help. As it turned out, the problem was caused by the payment provider, and it took 10 minutes to fix the issue. Particularly disconcerting with this story is the significant revenue hit this merchant suffered from the loss of online sales.
The impact of a payment company’s s inaccessible or sluggish service reaches much further than just the merchant. It impacts you, the SaaS provider as well. You have the payment integration, so issues that are encountered – particularly unresolved issues – are a direct reflection on you. That can be a sobering realization that warrants an assessment of your current partners and the stability of their service model.
The same service issues accompanying FinTech layoffs also can be a byproduct of FinTech mergers and acquisitions. There has been unprecedented M & A activity in the payment space over the last few years. Again, back to shareholders. These newly merged companies need to quickly demonstrate revenue growth and cost efficiencies to their shareholders. Translation: higher prices and shrinking focus on service.
Your “dominant hand” is your software, no doubt. That said, payments are such an important aspect of your customer’ business that properly leveraging that capability requires partnering with someone whose dominant hand IS payments. Utilizing their knowledge and experience frees you up to focus your attention on what’s most important to you – your software.
FinTechs that are laying-off staff will not have the resources who will spend time with you strategizing how to best leverage payments to grow your business. They’ll not be there to analyze and modernize your payment environment, customer onboarding, or plan what’s next for payments in your software. That leaves you to rely on your own internal resources for that. And, as stated earlier, it’s just not your area of expertise.
FinTech layoffs are cost-cutting initiatives designed to impact their bottom line. Another way to affect the bottom line is to raise prices. Price increases are typically not announced to SaaS partners or their customers. They can be rather stealthy and appear as added fees that get buried in your customers’ processing statements. I’ve seen these added fees listed with the card brand line items so they could be easily overlooked by the merchant. Slipping in vague fees is becoming a common practice in the payments industry, I am sad to report.
Definitely keep an eye on your customers’ experience with your payment partner. Even if your partner hasn’t announced staff layoffs, reach out to them to see what’s going on. Ask them about their service and whether they’ve noticed an increase in fees. At a minimum, you’ll be demonstrating to your customers that you care.
If you hear there are challenges, try reaching out to your payment on your customers’ behalf. I’m not overly confident you’ll make much headway, though – unless your customers are large enough to merit the attention of your payment partner. You may need to explore giving your customers another option when it comes to payments through your software.
Look for a payment partner that is playing the long game rather than simply racing for profits. Spikes in hiring and firing often are signs of profit-focus rather than people-focus. You and your customers can count on a people-focused payment partner. They are intentionally stable and exhibit steady growth as opposed to meteoric rises in staffing and revenue.
Related article: Five Things to Look For in a Payment Partner
As the head of an integrated payments company, I can sympathize with my counterparts at FinTechs that are going through layoffs. Nobody ever likes to layoff their people. That said, I’d love to see layoffs happening as a completely last resort versus an easy out for poor forecasting and overspending.