In February 2023, buy now, pay later company Affirm Holdings Inc. announced a significant layoff, cutting 500 employees, or 19% of its workforce. This decision came after the company built a larger team than it could support and faced challenges such as reduced consumer spending and rising interest rates. In this article, we'll discuss what happened, why it happened, and the potential future impact of these layoffs on Affirm and the industry.
Affirm's decision to lay off 19% of its workforce was driven by a combination of factors, including building a larger team than it could support during the early part of the pandemic and facing economic pressures. The company's second-quarter earnings fell below analyst estimates, and Federal Reserve policy changes dampened consumer spending and increased Affirm's cost of borrowing. CEO Max Levchin called the decision the most difficult one and stated that the layoffs would be effective immediately.
As part of the restructuring, Affirm offered severance packages to laid-off employees. U.S. workers received a minimum of 15 weeks base pay, a $5,000 health stipend, and six months of employee healthcare coverage. Non-U.S. employees were provided severance and healthcare benefits in line with local practices. The company plans to keep its headcount essentially flat for the foreseeable future, adjusting to the economic and industry challenges it faces.
Affirm, in its recent restructuring initiative, anticipates incurring up to $39 million in costs. This restructuring aligns with its strategy to streamline operations and focus on core financial products.
Affirm's adjustments are part of a strategic effort to refine its product offerings and strengthen its market position. This is evidenced by their optimistic outlook and increased Gross Merchandise Volume (GMV) forecasts, indicating a focus on growth and customer loyalty enhancements, especially through their Affirm card.
The layoffs at Affirm could indicate a potential slowdown in the buy now, pay later sector and a possible shift in focus for companies in the industry, leading to further consolidation and restructuring in the finance industry. Affirm's layoffs may also have a ripple effect on the finance industry, as other companies might follow suit in cutting costs and streamlining operations, potentially resulting in job losses and a slowdown in growth for the industry as a whole.
Affirm's layoffs were driven by overstaffing and economic pressures, resulting in 19% of its workforce being cut. The company faces restructuring costs and an uncertain financial future. These layoffs may signal a slowdown in the buy now, pay later sector and lead to further industry consolidation. Affirm's standing in the market could be affected, and their next steps might involve focusing on specific products or markets to regain stability and growth.
