There’s an old business adage that says you can’t trim your way to profit. Chime and its digital counterparts will put that maxim to the test.
The promise of neobanks, or digital-only players, was always that they would upset the banks. And now the disruptors are being disrupted, and staff is reducing in what may be a last-ditch effort to transform red ink into black ink on the operating line.
According to an email from Chime, the digital bank is laying off 12% of its employees due to market conditions.
Though the neobank stated in its statement that it is well-capitalized, market dynamics indicate that the “conventional” sources of capital that might enable it to weather the long term are not as readily available as they previously were.
This includes institutional finance, as CB Insights data shows that as of the end of the September quarter, FinTech funding was down 38% quarter over quarter, amounting to $12.9 billion, a multi-quarter low.
In general, as the Fed and other central banks continue to raise rates in an inflationary climate, investors seek greater returns — and, by extension, larger returns on money invested in the FinTech sector.
