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Fintech giant PayPal has said it will cut 2,000 jobs – about 7% of staff – as it expects the current challenging economic conditions to continue.
PayPal is a well-established fintech business, founded in 1999 by entrepreneurs including Elon Musk.
PayPal is one if the darlings of the global world, growing fast as consumers increasingly move to online payments and digital wallets to manage their money. For example, according to recent research from Juniper Research, more than five billion people – 60% of the world’s population – will be using digital wallets by 2026 as “super apps” like PayPal drive adoption.
But despite lofty market predictions, companies such as PayPal are having to react to the current economic climate, which is squeezing consumers and businesses alike. The underlying economic conditions, including high interest rates, make fintechs focused on lending vulnerable to reduced demand.
PayPal CEO Dan Shulman said in a statement: “Over the past year, we made significant progress in strengthening and reshaping our company to address the challenging macroeconomic environment while continuing to invest to meet our customers’ needs. While we have made substantial progress in right-sizing our cost structure, and focused our resources on our core strategic priorities, we have more work to do. We must continue to change as our world, our customers, and our competitive landscape evolve.”
He said the cuts would be made in “the coming weeks” but did not specify where they would be made, only that “some organisations [would be] impacted more than others”.
The fintech sector, which has attracted huge investments over the past few years, is currently cutting back. There has also been a slowdown in the growth spurred by the Covid-19 pandemic, when many more people began using fintech during lockdowns.
For example, UK payments infrastructure financial technology firm Paddle is reducing its workforce of over 350 by 8% as a boost to its business during the Covid-19 pandemic comes to an end.
The company, which provides payments infrastructure to software-as-a-service providers, said it experienced “incredible levels of growth” during the pandemic when people and businesses began working remotely and digitally. But it said this boost to business has been replaced by new challenges, which are having the opposite effect.
Last month, US fintech firm LendingClub also announced cuts, with 14% of its workforce set to go as high interest rates stifle demand for its lending services.
The UK fintech sector has been backed by the government as a future growth industry. In a recent statement about the UK fintech sector, Paul Scully, digital economy minister, said: “Despite global headwinds, British fintech firms showed great resilience last year, and helped boost the UK’s status as a world leader in tech – delivering jobs and huge benefits for our economy.
“In 2023, we are focusing on maintaining that lead by supporting startups, boosting digital skills and making this country an even more attractive destination to found, grow and invest in tech businesses.”
Read more about the fintech sector
- Investment in UK fintech firms increased by 24% to $9.1bn in the first half of 2022, compared with the same period in 2021.
- UK fintech sector attracted the most investment ever in 2021, following a slowdown in 2020.
- Innovate Finance reveals decrease in UK fintech investment, but report methodology leaves this open to change.