Automation Impact: Paytm’s Strategic Shift Leads to Large-Scale Layoffs

The emergence of Artificial Intelligence (AI) has revolutionised various sectors, enhancing speed and efficiency. However, alongside its advancements, concerns have arisen regarding its impact on the workforce. As AI gradually assumes routine and repetitive functions, apprehensions about potential job displacement have surfaced.

And it seems like it has already started happening. Paytm’s parent One97 Communications has undertaken a strategic restructuring and reportedly laid off thousands of employees across multiple business units including operations, lending, and marketing. These layoffs aim to streamline expenses amidst a strategic shift in focus areas.

The company’s heightened integration of AI automation is positioned to replace various job functions as part of its drive for operational enhancement. Highlighting a move towards AI-powered automation, the company foresees a reduction of 10-15% in employee costs, surpassing its initial performance estimates.

According to The Economic Times, these layoffs, occurring over recent months, represent one of the most substantial downsizings within an Indian tech firm this year.

Paytm’s Workforce Restructuring

Reports suggest that a significant portion of the recent layoffs at Paytm targeted its lending department, comprising about 30% of its workforce. Alongside this move, Paytm has recently ceased its small-ticket loans and Buy Now, Pay Later (BNPL) services as part of cost-cutting measures.

However, despite these changes, Paytm Money, their lending division, continues to exhibit robust performance. With the integration of AI-driven chatbots streamlining much of the workload, the company aims to redirect its focus towards expanding its business horizons.

“We are transforming our operations with AI-powered automation to drive efficiency, eliminating repetitive tasks and roles to drive efficiency across growth and costs, resulting in a slight reduction in our workforce in operations and marketing,” a Paytm spokesperson said.

Paytm’s billionaire CEO is alleged to have engaged in extensive hiring to bolster the company’s services and revenue amid the pandemic. However, since its $2.5 billion IPO in 2021, the company has experienced a significant decline of approximately 70%, attributing it to intensified competition from rivals like PhonePE.

This instance is not the first occurrence of large-scale layoffs by One97 Communications-owned Paytm. In 2021, the company parted ways with around 600 employees based on performance evaluations. Such periodic assessments and cost-cutting measures are deemed essential by the company as part of its ongoing strategy.

Hiring Continues

The company further emphasised its intention to bolster its core payments business by recruiting an additional 15,000 individuals in the forthcoming year. Stating its strong foothold in the payments sector and a validated profitable business framework, the company affirmed its commitment to ongoing innovation in India. Additionally, it outlined plans to broaden its business scope by venturing into domains such as insurance and wealth management.

Consequently, as the company streamlines repetitive positions and addresses underperforming roles, it’s concurrently seeking fresh talent to propel growth within emerging business segments.

The layoffs at Paytm come shortly after the company’s declaration to scale down its small-ticket loans, limiting Paytm Postpaid to higher-value loans of over Rs 50,000. Following this announcement, the company experienced a substantial decline in its stock value, dropping by 20%, as multiple brokerage firms highlighted potential negative repercussions from the decision.

AI and Paytm

In November, Paytm unveiled its collaboration with Amadeus, aiming to introduce AI solutions into its travel platform to enhance and streamline the travel experience. This move signals the company’s potential inclination toward automating various customer-centric operations. Notably, Amadeus employs IBM’s Watson platform for its generative AI tools and hybrid cloud.

In 2022, Paytm initiated a partnership with AWS to provide upskilling opportunities for 2,800 employees, including IT architects and developers.

CEO Vijay Shekhar Sharma has been encouraging his employees and engineers to utilise Microsoft and Google’s AI tools to streamline development processes, possibly resulting in increased layoffs. During the latest earnings call, Sharma emphasised the necessity for Paytm to transition into a fully AI-driven company.

During the recent GPAI Summit, Sharma advocated for India to create its proprietary AI solutions rather than depending on Western technology. He highlighted the vast potential of AI in healthcare, education, and financial services. Additionally, he initiated a $3.6 million fund dedicated to investing in AI and electric vehicles.

Paytm stands out as one of the initial companies openly attributing its staff reductions to the expanded utilization of AI, notably accelerated following the ChatGPT launch in 2023. However, it’s widely recognised that nearly every contemporary enterprise is integrating AI across various operational facets, aiming to enhance efficiency and curtail expenses simultaneously.

Concerns regarding AI replacing jobs have been mounting. During a podcast with Lex Fridman, Sam Altman expressed that AI could handle tasks akin to those performed by remote co-workers behind a computer, even encompassing learning complex skills like medicine or coding.

Altman’s remarks hint at the possibility of many roles being replaced by AI. Emulating Altman’s stance, Suumit Shah, the founder of Dukaan, faced criticism for dismissing 90% of his workforce to substitute them with an AI chatbot, a move he later defended as a “no-brainer.”