Fintech giant Paytm has said it has initiated workforce reductions, affecting over 1000 employees in its operations, sales and engineering teams as it implements more AI tools to increase efficiency. Parent firm One97 Communications’ stock fell at open following the announcement over the weekend.

What Happened: The company said it is leveraging AI-powered automation to enhance operational efficiency and streamline repetitive tasks and roles, leading to a reduction in its workforce in operations and marketing, according to media reports.

“We will be able to save 10-15% in employee costs as AI has delivered more than we expected it to. Additionally, we constantly evaluate cases of non-performance throughout the year,” a Paytm spokesperson was quoted as saying.

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The spokesperson highlighted the strategic expansion of Paytm’s platform into insurance and wealth, emphasising the evolution of their distribution-based business model. In 2021, Paytm had previously laid off 500 to 700 employees based on performance metrics.

Why It Matters: The recent layoffs are primarily concentrated within the lending team, sources told Moneycontrol. The lending business, which is a strong business, reportedly had a significant workforce, constituting more than 30% of the total employees. Under pressured to reduce costs, the company recently discontinued small-ticket loans and buy now pay later (BNPL) services within this segment.

On December 7, Paytm announced plans to scale back its small-ticket postpaid loans while focusing on expanding high-ticket personal loans and merchant loans. The decision has led to brokerage firms revising down revenue estimates for the company.

During its analyst meeting, Paytm clarified that even a sharp reduction in postpaid loans would not significantly impact margins or revenue. Postpaid loans, with the lowest take rate, are expected to have minimal revenue impact, the firm has said.

Price Action: Paytm’s share price was down 1.61% at ₹631.85 near the start of trade on Tuesday.

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