Abu Dhabi, UAEMonday 10 August 2020

Careem CEO charts ‘aggressive’ expansion as it sets sights on profitability

Mudassir Sheikha says ride-hailing company will provide app users with financial services, ability to move retail goods and more mass-transportation this year

Careem launched its Super App last month, a foray into FinTech for the ride-hailing giant. Courtesy Careem
Careem launched its Super App last month, a foray into FinTech for the ride-hailing giant. Courtesy Careem

Careem is aggressively expanding its services across the Middle East, North Africa and Pakistan this year to include digital payments, the transport of retail goods and a deeper push into mass transport to help it become profitable as quickly as possible.

The evolution – following its $3.1 billion acquisition by US rival Uber last year – will complete its journey from its ride-hailing origins in 2012 to what it is calling a “super app” platform that provides for the transport of people and things as well as offering financial services.

The expansion will require cost-cutting that will involve the loss of 5 per cent of existing roles and the reassigning of 10 per cent of staff to more critical technology development areas, Mudassir Sheikha, Careem’s chief executive and co-founder said.

This is because of the new capabilities that will need to be built to support its strategy. It will, however, hire for some roles this year.

“There are real people involved so these are never light decisions or easy things to undertake,” he said. “We cannot just keep raising money and keep hiring people to make this thing happen. We have to operate in a slightly more efficient way.”

Some aspects of operations have been fully automated such as managing driver incentives using data science and predictive software. Customer discounts and promotions have also been automated.

The goal is to “power a consumer internet business … from Morocco to Pakistan”.

“You saw a little bit of it last year when we launched our food delivery business, we launched our bus business and we also launched some use cases on Careem Pay,” he said.

In the area of transport, Careem will make its services more affordable through buses and add inter-city journeys. It will also build up its corporate and high-density locations – such as airports and malls – businesses and is exploring school transportation.

It will also move a wider range of consumer goods beyond food delivery to include retail items such as groceries and e-commerce shipments.

“In many parts of the region, outside of the UAE, there is a lot of informal retail and you can basically point to any store, any location, and say ‘get me some things from here, drop off a few things there, drop this parcel for me’ and so on and so forth,” Mr Sheikha said.

Mudassir Sheikha, chief executive and co-founder of Careem says the Uber deal offered an opportunity to fast-track the company's vision to reduce friction in daily activities for as many people as possible across the region. Courtesy Careem
Mudassir Sheikha, chief executive and co-founder of Careem says the Uber deal offered an opportunity to fast-track the company's vision to reduce friction in daily activities for as many people as possible across the region. Courtesy Careem

Financial services represent the third and most critical part of Careem’s expansion strategy.

“If you speak to any online services provider in the region where credit card penetration is low, you realise payments, or the lack of digital payments, is a big, big bottleneck to enabling online commerce and we have seen the same challenges in scaling the ride-hailing business.”

Careem’s captains, the term it uses for its drivers, will serve as agents to enable payments.

The “super app” will be live in the 13 countries in which Careem operates by the summer although the range of services offered will not be consistent across all of them. Before the end of the year, Careem plans to open out the platform for other companies to use to provide their own services to its customers.

A new division is working on this open architecture.

“The delivery of things is already in place with Careem Now, Careem Pay is already in place, we have the mobile top-ups, bill payments are coming, gift cards are already in place. With some of these things, we experimented and took the first steps on last year. Now with the [Uber] deal behind us the plan is to supercharge these efforts and run towards it in a pretty aggressive way.”

Careem is developing artificial intelligence technology in-house to make its expanded range of services function properly on a single app.

“There is a lot of AI enablement that needs to happen to make sure these services are available and provided in the most efficient and reliable way possible," he said.

"Even before you open the app and request a ride, we can predict that someone will open the app from this location and the drivers have been notified already through heat maps that they should actually go to these locations because at this time of the day these locations get more business. We can extrapolate this to other services.”

Globally, the tech start-up sector has been hit by the failure of WeWork to go public last year and a subsequent nosedive in the company’s valuation. Major investor SoftBank has admitted that it made a mistake in backing it.

“We are operating in a slightly different environment than, let’s say, the start-up ecosystem was in a year ago, or two years ago or five years ago,” Mr Sheikha said.

The cuts being made will be in support services such as finance, branding and human resources, predominantly at its head office in Dubai.

Careem is also stopping operations in Oman and Turkey as the result of regulatory environments that it says are not conducive to ensuring their success in those countries.

“There is a lot more focus on profitability. Our efforts to make this vision come to life are going to be a lot more organic. There will be parts of Careem that will grow and there will be parts of Careem that will shrink.”

Careem’s expansion strategy will require about $50 million in investment, largely to be made this year.

Following the Uber acquisition, Careem’s board includes three representatives from the US company as well as Mr Sheikha and co-founder Magnus Olsson.

Uber also provides Careem with the funding it needs until it can generate enough cash to re-invest into the business itself.

“The role that they are playing is a bit more of an investor, governance at the board level and some collaboration and knowledge-sharing in areas where it makes sense,” he said.

Mr Sheikha said that he and Mr Olsson’s aim when they started Careem was to help people in the region to simplify their lives and to build an organisation that can inspire others.

“At the current scale that we are at, we are simplifying the lives of less than 1-2 per cent of the people that live in this region and only in … mobility. There are many other things in their daily lives that they need help with. On the second aspect … we are still super-early in building an institution that can outlast all of us,” he said.

There is still plenty of work to be done towards achieving these twin goals, he said. So when the opportunity to do a deal with Uber arose that also allowed Careem to remain independent, Mr Sheikha saw a chance to more quickly “leapfrog our region into the digital future … with a partner that understands this business and can support us”.

In countries across the region, such as Iraq, where there is an opportunity for technology to reduce the friction that exists in daily activities and transactions, there is not necessarily the infrastructure available to support the growth of digital services. Careem hopes the infrastructure it is offering will provide a short cut for other service providers.

“In a region that has … so many cities with so many needs … we can provide that basic platform that allows people to leverage all the infrastructure we have built, all the customer engagement that we have, the trust that we have built in our brand and get these things happening at a much, much faster pace than they would happen organically.”

The Uber deal has also boosted Careem’s brand recognition outside of its traditional markets and has encouraged those from a broader pool of talent to join the company.

Updated: January 23, 2020 05:40 PM

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