There’s an old cliché in business that states you can’t cut your way to profit. That maxim will be put to the test by Chime and its digital competitors.
The promise of neobanks, or digital-only players, has always been to upend the banks. And now the disruptors are being disrupted, and personnel is being reduced in a last-ditch effort to turn red ink into black ink on the operating line.
According to an email from Chime, owing to market conditions, the digital bank is laying off 12% of its personnel.
Though the neobank said that it is well-capitalized, market dynamics imply that the “traditional” sources of capital that may help it weather the long term are not as readily available as they once were.
According to CB Insights statistics, as of the conclusion of the September quarter, FinTech financing was down 38% quarter over quarter, totaling $12.9 billion, a multi-quarter low.
In general, as the Fed and other central banks continue to raise interest rates in an inflationary environment, investors seek higher returns – and, as a result, higher returns on money invested in the FinTech sector.
