The fear of layoffs is palpable among Indian developers. AI is reaching new heights, especially as the financial sector or BFSI (banking, financial services and insurance) is still on the verge of putting its developers, ironically enough, out of business. Over the next few years, we should see an even greater impact of AI on the fintech sector.
If automation is already underway in the fintech sector, it raises the question of how the job market will be affected. To understand the same thing, Abhishant Pantsfull-time investor and founder of The Fintech Meetup, reached out to 100+ fintech founders, 50+ BFSIs, and several VC firms over the past week to understand the upcoming change in the landscape over the three next years.
According to the results of the investigation carried out Pants shared on LinkedIn30-50% job loss is the base case impact of AI on BFSI.
Furthermore, Pant explained that 65% of fintech founders believe that around 30-50% of job losses occur in the L1 category, which is the first line of support, including help desk or customer service. global support service. This is similar to the IT industry, where support and service jobs are also under the threat of AI.
“Next year we are aiming for a 30% reduction in staff numbers. In India, we underestimate what will happen to us. This is going to hit hard,” Pant said, according to what a founder told him.
In the BFSI sector, 70% of senior professionals at CXO level estimate that job losses will be in the range of 10-30%. With better monitoring and coding tools, developers’ work would definitely be affected, although they expect the impact to be minimal and only increase productivity.
A wave of layoffs?
AIM spoke to Pant to know more about the investigation. Without revealing the names of those interviewed, he said the startups interviewed were all fintech companies with at least 100 employees. “Most people who, for example, work in web design or technical support would be most affected,” Pant explained.
Calling employees who aren’t critical to the code and core programmers “peripheral pieces,” Pant said they could be pushed to make existing developers faster and better.
According to the survey, while some believe AI will make existing developers three to five times faster and more efficient, others believe new jobs would be created that would consist solely of managing a team of AI agents with a number fewer humans on the team. loop.
However, not everyone is aligned with the same thinking. For example, Zerodha CTO Kailash Nadh said earlier AIM that the company has developed an AI and job security policy since its employees were afraid of losing their jobs because of AI.
Nadh clarified that Zerodha is one of the few companies that guarantees that there will be no job losses due to AI or any other technological advancement. “Last year, at the height of the LLM hype, we took the 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 offer employees the opportunity to migrate to other roles,” he said, emphasizing a human-centered approach to technology.
Sharing the view at the Fintech Meetup, Pant said the financial sector could be recalibrated in the next one to three years due to the impact of AI, leading to job losses of up to 20-25 per cent. . Semi-skilled jobs would be most impacted, which he said would “happen in a cushioned environment” or in “air-conditioned rooms”.
Pant fears it will be difficult to avoid layoffs because people have very little time to upskill. “There will be a period, maybe late 2025 or early 2026, from which there will be churn, and that churn will be bad for one or two years. Maybe it will look less bad.
This directly means that a wave of layoffs is expected across 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 traded and not under pressure from investors might be able to hold off on layoffs for a while, but will surely start laying off workers as soon as the pressure hits them, in two to three years.
“AI gives you an advantage to reduce your costs… For companies that live under market pressure and are being questioned by investors, their biggest expense is staff,” Pant said, adding that these companies will have to remove certain people from their positions. the organization.
The impact is clearly visible
Most fintech companies are experience generative AI in one way or another. 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 actively using AI, 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 her workforce to reduce costs by leveraging AI. Another similar example is that of Suumit Shah, CEO of e-commerce company Dukaan, who fired 95% of his customer support team and replaced them with AI at the start of 2023.
In October, PhonePe also cut 60% of its support staff as AI was able to increase its transaction speed by 40 times. This affected around 1,100 agents. “This efficiency was achieved by increasing automated customer service issue resolutions to over 90%, powered by AI-driven chatbots,” PhonePe said in a report.
In December last year, Paytm 1,000 employees laid offquoting: “We are transforming our operations with AI-driven automation to improve efficiency, eliminating repetitive tasks and roles to improve growth and cost efficiency, 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% on personnel costs as AI would produce better results than initially expected.
Paytm CEO Vijay Shekhar Sharma later said he had urged his employees and engineers to use AI tools from Microsoft and Google to reduce development time and costs.
It’s clear that there will be layoffs in the fintech sector next year, and most of them will be due to AI and automation in lower-level jobs.