Amidst significant workforce reductions at Paytm, CEO Vijay Shekhar Sharma has asserted that the demand for employees may dwindle due to the company’s increased focus on artificial intelligence (AI).
In response to the recent layoffs affecting numerous Paytm employees, Vijay Shekhar Sharma, CEO of the fintech giant, has unveiled an extensive plan for 2024, centered around substantial upgrades in Artificial Intelligence (AI).
Sharma addressed a question regarding the payment company’s AI strategy aimed at enhancing efficiency, resulting in the recent layoff of over 1,000 employees from the operations, sales, and engineering teams.
During the earnings call on January 19 to discuss Q3 results, Sharma stated, “Instead of expanding more business functions, we are trying to add capabilities of machines and systems on our platform. These capabilities will continue to grow, meaning there will not be as much demand for the number of people we need in a linear way.”
Having utilized AI tools to streamline operations, reduce staffing needs, and enhance efficiency, the fintech major has decided against increasing its on-ground salesforce.
Madhur Deora, President and Group CFO, mentioned, “We added a lot of people in Q2 due to the festive season. We have seen a moderate expansion in the salesforce and now have decent penetration. We will not see more expansion now compared to previous quarters.”
With a focus on boosting efficiency, cutting costs, and accelerating product development, Paytm places significant importance on AI integration. The company plans to augment machine capabilities on its platform, potentially decreasing the need for a larger workforce, as CEO Vijay Shekhar Sharma highlighted.
Sharma stressed the significance of AI in customer care operations and disclosed ongoing efforts to customize user experiences using AI tools from Microsoft and Google.
This AI-oriented approach aligns with Sharma’s anticipation of a reduced workforce, aiming for a 10-15 percent decrease in employee costs through automation. According to Sharma, “AI has actually delivered more than what we expected it to”.
The recent layoffs at Paytm reflect a broader trend in the tech industry to streamline operations and adapt to the swiftly changing market.
Demand for Business Loans, Insurance Focus
In the third quarter, Paytm recorded a notable 38 percent surge in consolidated revenue, reaching Rs 2,850, and saw a reduction in losses to Rs 222 crore.
The decision to scale back postpaid loans had a partial impact on Q3 earnings, evident in the decrease of the total loan value from Rs 16,211 crore in Q2 to Rs 15,535 crore. Postpaid loans, specifically, experienced a 17 percent decline to Rs 7,469 crore (QoQ).
Despite the contraction in postpaid loans, the overall revenue from financial services increased by 6 percent, buoyed by strong performance in other credit categories such as personal and merchant loans.
Paytm remains cautious about postpaid loans while intensifying its focus on high-ticket lending. While acknowledging the merits of postpaid as a product, CFO Madhur Deora highlighted its marginal contribution to profit and indicated that high-ticket loans are offsetting the loss in Gross Merchandise Value (GMV).
Paytm anticipates a further dip in postpaid gross margin contribution (GMC) in Q4, with stabilization expected by the end of Q4 or early Q1FY25.
Paytm has attracted 20 million users to its waitlist for the re-launched high-ticket personal loans product and is currently collaborating with two lenders, with plans to expand its partnerships.
CEO Vijay Shekhar Sharma noted, “We have been able to source and build high-quality loans, including home loans. We also have demand for business loans.”
Encouraging trends are observed in Credit on UPI, prompting Paytm to intensify its focus on wealth management and insurance verticals.
The CEO expressed optimism about the insurance business’s performance, which surpassed expectations, making it a key Key Performance Indicator (KPI). Additionally, according to Sharma, the equity trading segment presents significant cross-sell opportunities.
AI Impact on Jobs
The integration of artificial intelligence (AI) in various industries, as exemplified by Paytm’s strategic shift towards AI-driven efficiencies, raises concerns about potential job displacement.
The emphasis on automating processes and streamlining operations, while beneficial for enhancing productivity and reducing costs, could lead to a shrinking demand for certain types of employment.
The Last Bit, As companies like Paytm increasingly rely on AI to drive innovation, the balance between technological advancement and job preservation becomes a critical consideration and striking a thoughtful equilibrium between AI implementation and job creation remains a paramount challenge in navigating the future of work.
Paytm’s financial strategy for the third quarter reflects a nuanced approach towards its lending services.
The decision to curtail postpaid loans, coupled with a focus on high-ticket lending, illustrates a strategic pivot in response to evolving market dynamics.
Despite a decline in postpaid loans, the overall financial services revenue grew; the anticipation of further declines in postpaid gross margin contribution emphasises the company’s cautious outlook.
Paytm’s commitment to diversifying its offerings, especially in areas like wealth management and insurance, demonstrates a forward-looking approach to maintaining growth and relevance in the competitive fintech sector.
As the company balances, how effectively it can negate risk and innovate in its pursuit of sustainable financial success remains to be seen.
