Source: Solarisgroup Presse&Medien
Solaris Bank is planning another round of layoffs. According to Handelsblatt, approximately 240 of the 700 employees will soon lose their jobs. This is one-third of the workforce. Employees of the British subsidiary Contis, which Solaris acquired at the end of 2021, are particularly affected. However, Solaris itself will also see around 15 percent of its positions reduced, affecting about 80 out of 540 employees.
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At the end of September, Solaris Bank management had already announced the layoffs. This step is necessary to stabilize Solaris financially and improve profitability. Job cuts are, of course, a common measure to reduce costs. Solaris had laid off about 50 employees in October 2022, with another 30 following at the end of 2022. The current wave of layoffs is the largest to date.
Reasons for dismissals at Solaris
These may be the main reasons for the new wave of layoffs at Solaris Bank:
IPO readiness
According to German newspaper Handelsblatt, Solaris is considering an IPO. However, in 2023 the company reported significant losses of €178 million—more than its total revenue for the same period. This is, of course, not an ideal situation for an IPO. The main driver for these losses were extraordinary factors, such as a €123 million write-off related to Contis. As a result, Solaris is shutting down most of the Contis business, though it will maintain certain partnerships, like those with Bitpanda and other collaborators. Insofar, the changes promised by management, particularly in staffing, are partly a consequence of the Contis business. However, they are also a response to operational losses. By cutting costs and improving efficiency, the company is obviously becoming more attractive to investors ahead of the IPO.
Watchdog supervision
Solaris is facing challenges on multiple fronts. In particular, the company has had ongoing issues with financial regulators over the past few years. The German financial authority, BaFin, has put significant pressure on Solaris, forcing the company to invest millions to meet stricter regulatory requirements. Since 2020, the fintech has been under constant supervision due to serious deficiencies in its anti-money laundering practices. This situation is far from ideal for the equity story of a potential IPO.
Despite these difficulties, Solaris managed to raise nearly €100 million in a funding round in March 2023.
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Other fintechs are also cutting costs
Other fintech companies, like the payment service provider Klarna, are also working to reduce their costs. According to media reports, Klarna plans to cut its workforce by half over the next few years. These savings are expected to come from increased efficiency through the use of artificial intelligence (AI). For Klarna, this is especially important as it prepares for a possible IPO since lower costs and higher efficiency make the company more attractive to investors. However, the situation is less favorable for employees, as many may lose their jobs.
Klarna claims that the use of AI has already been highly successful. For example, the company says its AI chatbot, ChatGPT, handled two-thirds of all customer conversations within its first month of use, a workload that would normally require 700 full-time employees. According to Klarna, customer satisfaction with the AI tool is on par with that of human agents.
