Block, the fintech giant behind Square, Cash App, and Afterpay, has announced a major round of layoffs that will affect about 1,000 employees, or 10% of its workforce. The move comes as the company faces slowing growth, rising competition, and falling revenues from its core businesses.
Why is Block laying off workers?
According to an internal memo from CEO Jack Dorsey, obtained by Business Insider¹, the layoffs are part of a restructuring effort to align the company’s headcount with its business and revenue growth. Dorsey wrote that “the growth of [Block] has far outpaced the growth of our business and revenue” and that the company needs to “focus on what matters most.”
Dorsey also said that the layoffs were done “at once rather than arbitrarily space them out, which didn’t seem fair to the individuals or to the company.” He added that “when we know we need to take an action, we want to take it immediately, rather than let things linger on forever.”
The layoffs will impact employees across Block’s subsidiaries, including Square, Cash App, and Foundational. The company also plans to cap its headcount at 12,000 by the end of 2024, down from 13,000 in late 2023.
What are the challenges facing Block?
Block, formerly known as Square, has been one of the most successful and innovative fintech companies in the past decade. It has revolutionized the payments industry with its sleek hardware and software solutions, enabling millions of small businesses and individuals to accept and send money easily and securely.
It has also expanded into other areas, such as peer-to-peer payments with Cash App, cryptocurrency trading with Bitkey, and buy now, pay later services with Afterpay, which it acquired for $29 billion in 2021.
However, Block’s growth has slowed down in recent quarters, as it faces increasing competition from rivals such as PayPal, Stripe, Toast, and Fiserv’s Clover. Its revenues from Cash App, its largest and most profitable segment, have declined sharply, as the demand for stimulus payments and Bitcoin trading has waned. Its Bitcoin revenue, which accounted for more than half of its total revenue in 2023, has also dropped significantly, following the slump in the price of the cryptocurrency.
Meanwhile, Block’s acquisition of Afterpay, the largest deal in its history, has raised questions about its valuation and integration. Afterpay, the leader in the buy now, pay later market, has seen its growth and margins erode, as it faces fierce competition from players such as Klarna, Affirm, and PayPal. Block’s stock price has fallen by about 30% since the deal was announced in August 2021.
What is Block’s outlook for the future?
Despite the challenges, Block remains optimistic about its future and its mission to create a more inclusive and accessible financial system. Dorsey said in the memo that the company has “a lot of work ahead of us” and that it will “continue to invest in the areas that will have the most impact for our customers and our purpose.”
Block has also launched several new initiatives and products to diversify its offerings and reach new markets. For example, it has added banking features to Square, such as checking and savings accounts, debit cards, and loans. It has also acquired Tidal, a music streaming service, and launched Bitkey, a self-custody Bitcoin wallet, in the form of a mobile app and hardware storage.
Block’s vision is to build a unified platform that connects the physical and digital worlds of finance, commerce, and culture. It aims to leverage its ecosystem of products and services to empower people and businesses to participate in the global economy, regardless of their location, background, or income.
Block’s layoffs may be a painful but necessary step to achieve that vision. The company hopes that by streamlining its operations and focusing on its core strengths, it will be able to deliver more value to its customers, shareholders, and society.
Block becomes the latest fintech to lay off workers | TechCrunch. https://techcrunch.com/2024/01/30/block-becomes-the-latest-fintech-to-lay-off-workers/
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