VadimGuzhva - stock.adobe.com
Fintech LendingClub has cut its workforce by 14% as high interest rates stifle demand for its lending services.
This is the second round of major cuts for the established peer-to-peer (P2P) lending fintech, which was set up in the US in 2007. In 2020, when faced by a slowdown during the Covid-19 pandemic, it cut its workforce by 460, about one-third of its total workforce, and announced temporary pay cuts for senior executives.
On the latest cuts, LendingClub CEO Scott Sanborn said: “We remain committed to championing the financial success of our customers while generating long-term profitable growth amid an increasingly challenging economic environment.
“We have proactively implemented various measures to make this happen, including the very difficult decision to reorganise and reduce our workforce,” he added. “These measures enable us to more closely align our expense structure to loan volume and revenue, while ensuring effective execution against our strategic priorities and long-term vision.”
While the current cost-of-living crisis has spurred people to look at alternative finance providers to help them budget, the underlying economic conditions, including high interest rates, make fintechs focused on lending vulnerable to reduced demand.
Another peer-to-peer lending pioneer, Zopa, moved away from this market in 2021, when it announced it was closing its peer-to-peer lending to focus on becoming a digital bank.
At the time, Natasha Wear, peer-to-peer CEO at Zopa, said: “Over the past few years, customer trust in P2P investing has been damaged by a small number of businesses whose approach led to material losses for customers investing in those platforms. Linked to this, the changing regulation in the sector has made it challenging to grow and remain commercially viable.”
LendingClub will not be alone in the current global economic slowdown, with inflation, high interest rates and energy costs leaving consumers with less cash.
Investors in fintech, a sector that has attracted huge investments over the past decade, are more cautious with investment falling.
In its latest figures for global fintech investment, UK trade body Innovate Finance revealed that global investment in fintechs had fell 30% last year compared with 2021, with $92bn invested.