Indian Fintech Founders Expect Up to 50% Layoffs Driven by AI

The fear of layoffs is palpable among Indian developers. AI takes it to new heights, especially considering that the financial industry or BFSI (banking, financial services, and insurance) is always on the verge of making its developers, quite ironically, bankrupt. In the next few years, we are expected to see an even bigger impact of AI on the fintech industry. 

If automation is already underway in the fintech industry, this begs the question of how the job market will be affected. To understand the same, Abhishant Pant, a full-time investor and founder of The Fintech Meetup, reached out to over 100 fintech founders, over 50 BFSI, and several VCs over the last week to understand the upcoming change in the landscape over the next three years. 

As per the results of the survey that Pant shared on LinkedIn, 30-50 % job loss is the base case impact of AI on BFSI.

Furthermore, Pant explained that 65% of the fintech founders believe anywhere around 30-50% of job loss occurs in the L1 category, which is the first line of support, including the help desk or global services desk. This is similar to the IT industry, where the support and services jobs are also under the threat of AI.

“Next year, we are targeting a 30% reduction in the workforce. In India, we are underestimating what’s going to hit us. It will hit hard,” Pant said that a founder told him.

In the BFSI industry, 70% of senior professionals at the CXO level believe job losses will be in the range of 10-30%. Because of better monitoring and coding tools, the developers’ jobs would definitely be affected, even though they expect that the impact would be minimal and only a boost in productivity. 

A Surge of Layoffs?

AIM spoke to Pant to understand more about the survey. Without revealing the names of the respondents, he said that the surveyed startups were all fintech companies with at least 100 employees. “Most of the people who are, for example, [in] web designing or tech support would be the most affected,” Pant explained.

Referring to the employees who are not critical for the code and basic programmers as “peripheral pieces”, Pant said they might get pushed to make the existing developers faster and better.

According to the survey, while some believe that AI will make existing developers three to five times faster and more efficient, others think that new jobs would be created that would be all about managing a team of AI agents with a lesser number of humans in the loop. 

However, not everyone is aligned on the same thought. For example, Zerodha CTO Kailash Nadh earlier told AIM that the company came up with an AI policy and job security since its employees were afraid of losing their jobs to AI.

Nadh clarified that Zerodha is one of the few companies that ensures there will be no job losses due to AI or any other technological advancements. “Last year, during the peak of the LLM hype, we made a decision to implement a policy explicitly stating that no one at Zerodha would lose their job solely due to the adoption of a particular technology.”

“Instead, we would provide avenues for employees to migrate to other roles,” he said, emphasising a human-centric approach to technology.

Sharing the perspective of The Fintech Meetup, Pant said that the financial industry could get recalibrated over the next one to three years due to the impact of AI, leading to job losses that could rise to 20-25%. Semi-skilled jobs would sustain the most impact, which he said “happen in a cushion environment” or “AC rooms”.

Pant fears that avoiding layoffs is going to be difficult since there is very little time for people to upskill. “There will be a period, maybe sometime [in] late 2025 or early 2026, from where there will be a churn, and that churn will be bad for one or two years. Maybe it will look less bad.”

This directly means that a surge of layoffs is expected in the fintech and BFSI sectors over the next few years as they continue to adopt AI tools.

Pant predicted that companies that are not publicly listed and are not under pressure from investors might be able to hold off layoffs for a while but will surely start laying off as soon as the pressure hits them in another two to three years.

“AI provides you with an advantage to reduce your cost…For companies that are living under the pressure of the market and are questioned by investors, their biggest expense is people,” Pant said, adding that these companies will have to remove some people from the organisation. 

The Impact is Clearly Visible

Most fintech companies are experimenting with generative AI in some way or the other. According to market research and data platform Tracxn, startups like INDMoney, IDfy, Perfios, PagarBook, CASHe, GoKwik, and several others are using AI tools for fraud detection and several other workflow tasks. 

In another survey, Moody’s Investor Service reveals that the fintech sector in India is at the forefront of adopting AI for risk management and compliance. While 18% of fintech participants reported active AI usage, the overall adoption rate across all sectors surveyed stood at just 9%. 

For example, Sharan Hegde, the founder of the 1% Club, recently cut 15% of his workforce to reduce costs by leveraging AI. Another similar example was Suumit Shah, CEO of e-commerce company Dukaan, who laid off 95% of his customer support team to replace them with AI in early 2023.

In October, PhonePe also cut 60% of its support staff as AI was able to drive its transaction speed by 40 times. This affected around 1,100 agents. “This efficiency was achieved by increasing automated customer service issue resolutions, powered by AI-driven chatbots, to over 90%,” PhonePe stated in a report.

In December last year, Paytm laid off around 1,000 employees, citing, “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.” 

The spokesperson further added that this way, the company would be able to save 10-15% in employee costs as AI delivers better results than initially anticipated. 

Paytm CEO Vijay Shekhar Sharma had then said that he has been urging his employees and engineers to use Microsoft and Google’s AI tools to reduce development time and costs.

It is clear that there will be layoffs in fintech next year, and most of them will be due to AI and automation in lower-level jobs.

The post Indian Fintech Founders Expect Up to 50% Layoffs Driven by AI appeared first on Analytics India Magazine.