Monzo is cutting 120 jobs as the impact of the coronavirus begins to curtail the rapid growth of the fintech sector.
Staff were told about the decision in an internal memo, seen by Reuters, with the bank expecting a big hit from the looming recession.
Growing economic uncertainty caused by the coronavirus pandemic and Brexit has taken its toll on the fintech industry in 2020. Fast-growing startups, including unicorns such as Monzo, are being forced to curtail their spending, cut jobs, and even shutter parts of their business entirely. In February, Monzo announced plans to hire 500 people in 2020, but the global spread of COVID-19 and the inevitable recession have drastically changed its outlook.
"Unfortunately we haven't been able to achieve the goal of preventing the risk of redundancy at this time. It's genuinely heartbreaking to share the news," the memo said according to Reuters.
Monzo declined to comment but did confirm the accuracy of the report to IT Pro. The redundancies will hit the company's head office and it's operational teams, but employees that volunteered to be furloughed in March are not thought to be involved.
The cuts amount to around 8% of its workforce, suggesting a tough future for one of the UK's brightest startups. Before the outbreak, the company had made initial moves into the US, riding high on the success of the fintech market. But that now looks in jeopardy as the sector is facing a potential fall.
According to a report by US brokerage firm, Rosenblatt Securities, the big fish of fintech could be the worst hit, with 58 of the world's unicorns contracting by 15% – estimated to be a drop of around $76 million.
There were also signs of market trouble before the coronavirus, with a number of companies making strategic changes due to Brexit. In February, firms such as Revolut and Coinbase announced plans to invest in Dublin, where Ireland's fintech hub appeared to be benefiting from the UK's exit from the European Union.
Brexit was also cited by German digital bank N26, which announced it was pulling out the UK and closing more than 200,000 customer accounts in February. The decision came just 18-months after it had opened up operations in the country and was based on a licensing issue, according to N26. However, the Guardian reported that the decision was more to do with the cost of operating in one of the UK's most competitive markets.
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