Brex announced a hefty downsizing on Tuesday, making it the latest financial services company to engage in
The cuts reflect a new economic reality for fintechs and their clients, but there may be a light at the end of the tunnel for payment firms, according to fintech analysts.
Brex terminated 282 people, or about 20% of its staff, according to a
"I realized we grew our org too quickly, making it harder to move at the speed we once did," Franceshi said in the memo.
Other payment-oriented fintechs have also
If a recent
"As the Fed starts to reverse its interest rate hikes in 2024, we should see a bounce back in hiring," said Aaron McPherson, a principal at AFM Consulting.
Brex has expanded over the past two years, bolstering its offerings for
Brex also picked up thousands of former
Technology firms are in a "batten down the hatches" mode, making changes to corporate strategy and staff to "get to the other side," said Richard Crone, a payments consultant.
When and if interest rates decline, that will make it easier for the mix of technology and smaller businesses that are a large part of Brex's client base, according to Crone.
Brex is also using generative AI in an effort to streamline employee expense reporting. A new product called
"These companies will benefit from declining interest rates and a more consistent economic outlook," Crone said.
Michael Tannenbaum, who Franceshi said was Brex's second employee, is transitioning from COO to a Brex board member.
"This year, we decided to take a hard look at our current structure, and reduce the number of layers between leaders and the actual work that affects customers," Franceshi's memo said.
Franceshi's memo also mentioned Brex's gross profit grew by more than 75% over the past year, driven by the company's focus on financial software.
"While we're proud of those accomplishments, we still have a way to go to ensure high-velocity growth and profitability for years to come," Franceshi said . "Combined, these changes enable us to get there and become cash flow positive with the money we have in the bank."
The departing staff will get 8 weeks of severance, with two additional weeks of pay for each additional year of service, and Franceshi said Brex would focus on long-term growth over short-term gains in its compensation structure.
Brex's public relations department referred questions to Franceshi's memo, and said the company has a runway of about four years.
"I see this as the continuation of a trend of layoffs in tech, which I blame more on high interest rates chilling the funding environment for fintech companies," McPherson said.
The decline in forced a lot of fintechs to trim their staff to avoid having to go back to the VCs at a lower market capitalization, McPherson said.
"The overall economy remains strong, with the stock market at record highs and unemployment still very low, so this is more focused on the fintech sector and the tech sector more broadly, which had been flying high in 2021," he said.
