Pathao rode high and then lost steam. Now its new CEO plans a turnaround with fintech

From its relatively humble origins as an app-based courier service in Dhaka, Pathao burst into the limelight with its trailblazing motorcycle ride-hailing service.

It has since gone on to become one of the most recognisable tech startups in Bangladesh.

In the space of six years, the business has branched out into food delivery and e-commerce logistics services, operating not just in four major cities in the country but also in Nepal's Kathmandu.

And now, with a new man at the helm, the company is looking to further expand its business.

In an exclusive interview with bdnews24.com, Fahim Ahmed, the new managing director and chief executive officer of Pathao, shed light on the company's journey over the past six years and outlined his vision for the future.

The startup grew rapidly after its inception in 2015 but found it difficult to maintain the upward trajectory.

Having grabbed the headlines for attracting new investment as well as a noticeable downsizing of its staff in recent years, Pathao decided to promote from within to steer the company forward, with Fahim taking charge in November.

Fahim, who joined the company in 2018 as the chief financial officer, replaced Pathao co-founder Hussain M Elius.

While the coronavirus pandemic-induced economic slowdown posed numerous challenges to the firm, it has managed to ride out the storm.

“Pathao has reached a sustainable level in its business in the last two and a half years. We’ve been turning profit from the third quarter of 2020 and the business is larger than it was pre-pandemic,” said Fahim, who just turned 40.

And now, the company has its sights set on financial technology or 'fintech', with the aim of digitising consumer spending with easy access to credit.

To this end, the company rolled out 'Pay Later' – the country’s first 'Buy Now, Pay Later' service for consumers -- on Nov 16.

Nowadays, the trend is to bring people’s daily trading or expenditures online, said Fahim. Pathao's user base mainly comprises urban millennials -- students and young professionals -- with limited access to traditional credit and the service seeks to tap into that demographic to bridge the credit gap.

The Pay Later service is exactly how it sounds -- a short-term financing facility that allows consumers to make purchases and pay for them at a future date.

The service is currently available to the "most regular and loyal Pathao Food users", who received an initial spending limit of Tk 2,000 for 15 days. Users can repay the amount at no additional cost, after which, the account is replenished, Fahim said.

The company plans to expand the Pay Later service to Pathao Rides and its merchant partners.

“Pathao has received a no-objection certificate from Bangladesh Bank as a payment system provider,” said Fahim. He hopes the service will be launched full-fledgedly at the start of 2022 after the central bank provides the final approval.

Pathao is exploring the possibility of partnerships with VISA and MasterCard in order to transfer credit to its users, according to Fahim.

“A large segment of our population are young people with limited access to credit. Only 1.7 million of the 170 million people in Bangladesh use credit cards. Among them, the youth have very limited access to credit due to their low earning history. We want to address this deficiency through our Pay Later service.”

Pathao started its journey with a vision to bring the ‘offline’ activities in Bangladesh 'online’. And now, the company has more than eight million clients, the CEO said.

More than 300,000 drivers and food delivery men have joined a network of at least 10,000 restaurants and 30,000 small entrepreneurs. Among the entrepreneurs, 40 percent are women.

The new fintech service will offer a viable financial solution for young entrepreneurs, according to Fahim.

With plans of expanding the business afoot, Fahim took over the top job at Pathao on Nov 1, with his predecessor Elius moving to an advisory role.

Elius, who made Forbes' 30 under 30 list for Asia in 2019, is a tough act to follow but Fahim is unfazed by the task at hand.

He believes the skills and efficiency he displayed over the past four years drove the company to promote him. And he is firmly focused on the road ahead for the company.

“Pathao went through a transformation in the past two years. Efforts were made to make each business venture successful. My role as CFO at the time has ensured my present position.”

“We need to move together and we need to move fast. On that note, I was given the new responsibility.”

But Fahim was quick to highlight Elius' role and vision in shaping the company's fortunes. Describing him as an 'inspiration', Fahim added that Elius remains one of the brains behind the company's operations.

“We work pretty closely. Our growth will speed up further and our partnership will grow.”

But this was not the first major shake-up that the company has undergone. Back in 2019, Pathao made waves for the sacking of over 300 employees as part of "changes leading to cost optimisations”.

At the time, the company also said it planned to prioritise ride-hailing while halting some of its other services.

Explaining the drastic measure, Fahim said the focus of a business in its initial stages is more on growth rather than profit. "The trust of clients and expansion of the business are the priority. Sometimes, incentives are used to woo clients."

Pathao faced the same situation in its early years. But at one point, the company had to focus on cutting costs in a bid to make the business sustainable, the CEO said.

The company's top brass took a cautious approach to its expenses and took decisions after analysing the possible ‘returns', he added.

“That’s why we went through this transformation. We became a sustainable business and enhanced the quality of our services.”

Pataho has been on the frontline of the start-up ecosystem in Bangladesh and is primed for foreign investment, said Fahim. Firms from the US, the UK, Hong Kong and Singapore have already invested, he said.

So far, the company has received $35 million worth of investments with more on the way, according to him.

Pathao plans to spend the funds on expanding its new fintech facility while strengthening its existing services.

“The core businesses are now sustainable. That is how we worked in the past one and a half years. The new investment will now expand the base we already have. It will be used to launch and expand fintech and digital financial services.”