- Key insights: Block last week cut 40% of its staff and attributed the layoffs to artificial intelligence, leaving many to wonder whether Jack Dorsey’s payments company was a bellwether for widespread AI-driven layoffs.
- What’s at stake: Forrester Research predicts that AI automation will take 6.1% of U.S. jobs by 2030.
- Expert quote: “The most severe AI-driven headcount reductions will inevitably target the operational layers that manage friction rather than generate revenue,” Eric Grover, principal of Intrepid Ventures, told American Banker.
It was the combination of “layoffs” and “artificial intelligence” that stoked broader concern for an AI-driven shock to the labor market, leaving many to wonder whether Jack Dorsey’s payments company Block was a bellwether for mass AI-fueled firings, or merely a one-off.
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Block last week cut 40% of its staff and attributed the layoffs to artificial intelligence. The layoffs came with a prediction: More companies will follow suit.
“Within the next year, I believe the majority of companies will reach the same conclusion and make similar structural changes,” Block CEO Jack Dorsey wrote in the company’s fourth-quarter shareholder letter. Markets were receptive – as of midday Monday, shares of Block, which trade on the New York Stock Exchange, had increased more than 17% since market close on Feb. 26, when Block reported its fourth-quarter earnings and announced the layoffs.
AI takeover, or a traditional downsizing?
But analysts and industry experts have been hesitant to hail the move as a catalyst for widespread reductions in workforce, noting many fintechs added jobs during the e-commerce wave that accompanied the COVID-19 pandemic.
“Wall Street clearly loves the AI narrative, and there’s no question the technology will drive meaningful productivity gains across customer service, dispute resolution, and junior engineering,” Eric Grover, principal at Intrepid Ventures, told American Banker. “That said, I’m skeptical that AI is the primary catalyst for Block cutting 4,000 jobs. The company has been performing well, so there wasn’t a wave of external pressure to reduce headcount. But if leadership sees a need, acting early is better than waiting.”
Prior to the cuts, Block’s workforce had ballooned from roughly 3,800 employees in 2019 to nearly 13,000 by 2023, leading to a self-imposed cap of 12,000 employees that same year. Last March, Block cut 931 people, or about 8% of its staff, and in January 2024, laid off approximately 1,000 employees, or roughly 8% of its staff.
“This looks far more like a long‑overdue correction to a massive pandemic‑era hiring binge,” Grover said. “While Block’s cuts are severe by percentage, the absolute numbers don’t touch the real records. They pale in comparison to IBM laying off 60,000 employees in 1993. Even more recently, UPS eliminated 48,000 roles, and Amazon is currently in the process of laying off 30,000 corporate employees.”
Sanjay Sakhrani, a senior analyst at Keefe, Bruyette and Woods, also said that the layoffs at Block were likely unique to the company, rather than the proverbial canary in a coal mine.
“AI-driven job displacement will be an evolution, not a revolution,” Sakhrani said. “While AI will inevitably reshape the work force over time, we think the big, bold moves like the one made by Block are unique to its circumstances and leadership, and are likely to be the exception rather than the norm over the intermediate period.”
Consultancy firms have been split on AI’s ultimate impact on the labor market. Forrester Research said in January that AI and automation would take about 6% of U.S. jobs by 2030. Gartner, on the other hand, said AI would produce more jobs than it destroyed by 2028.
The narrative that AI will wipe out a majority of jobs is one that is easy to lean into, Sakhrani said. “We do believe this is a trend worth watching carefully. AI is clearly improving productivity, automating certain workflows, and reducing the need for some repetitive or lower-value tasks. Over time, that will inevitably reshape parts of the workforce. However, reshaping is not the same as collapsing.”
Leading by example
There is some concern that Block is setting a precedent for other companies looking to capitalize on the promise of artificial intelligence, Aaron Press, a research director at IDC, told American Banker.
“I do have some worries about the message the stock bump sends to other companies in the industry,” Press said. “While I’m willing to believe Block is likely far enough down an AI deployment path to have at least some understanding of the impact, I fear that other companies will cut first and claim that AI will make up the difference, all while having no real idea how that’s going to be accomplished.”
Block is not the first company to attribute AI to staff cuts. Klarna’s CEO Sebastian Siemiatkowski said in August 2024 that AI had contributed to cutting its headcount to about 3,800 employees, down from about 5,000 in August 2023. That reduction largely came through attrition, rather than layoffs, a company spokesperson previously told American Banker.
“This reminds me of the Klarna announcement that they were going to use AI rather than humans for customer service, cutting headcount by a similar percentage, which ended with a retreat following a stock price decline, with the CEO admitting that they went too far, and that you still need people to handle complex or sensitive situations,” Aaron McPherson, principal of AFM Consulting, told American Banker.
“I suspect the same thing will happen here, and Block will discover that it cut too deeply. Rather than being an example for others, Block will become a cautionary tale, as their aggressiveness reveals the limitations of today’s generative AI systems,” McPherson said.
But that doesn’t mean there aren’t areas of payments ripe for AI-powered automation.
“Looking across merchant acquirers, processors, payment facilitators, networks, and issuers, the most severe AI-driven headcount reductions will inevitably target the operational layers that manage friction rather than generate revenue,” Grover said.
Back-office reengineering with AI is the low-hanging fruit, Richard Crone, CEO of Crone Consulting, told American Banker.
“That’s what you’re seeing [with Block],” Crone said. “AI has been around in earnest for about two years now, and it has been shadowing workers and workflows. Workers have really been skiing with AI right next to them, and now we are ready to pull out of manual labor and depend at least for 30% to 50% of those labor intensive functions on AI. That’s what you’re seeing.”
For payment companies, including payment facilitators like Block, Adyen, Stripe and PayPal, almost a quarter of costs are associated with customer support, disputes and charge-backs, all of which are historically labor intensive and could be streamlined with assistance from AI.
Know-your-customer and anti-money-laundering compliance are also great use cases for AI, Crone said.
“Underwriting, merchant onboarding, digital account opening, risk, fraud, AML and compliance require manual review for roughly 40% of approvals, but AI is cutting those cycles in half, permanently resetting cost per approved account and reinforcing the merchant of record automation model invented by PayPal and followed by all other payment facilitators,” Crone said.
