Neo-banking startup Niyo, one of the early movers in the customer-focused neo banking space in India with an emphasis on the blue-collar segment, is yet to hit a critical scale despite its early mover advantage. In its fifth fiscal (FY21) of operations, Niyo’s revenue growth has been negative.
The company’s operating revenue dwindled 4% to Rs 24.30 crore in FY21 which stood at Rs 25.32 crore in FY20. Rs 20.8 crore—86% of its total operating revenue —came through service fees whereas support services contributed Rs 2.8 crore, making up 11.6% of its total operating revenue.
Significantly, Niyo’s ultimate holding entity is based in the US and its operations in India are owned and run by Finnew Solutions Private Limited.
Income from service fees increased 24.58% to Rs. 20.83 crore in the last fiscal from Rs 16.72 crore in FY20. At the same time, business support services shrunk by 66% to Rs 2.83 crore in FY21 from Rs 8.39 crore in the preceding fiscal year.
Niyo’s expenses were also reduced by 4% to Rs 112.22 crore in FY21 from Rs 117.19 crore in FY20. Salaries and other perks given to employees were the biggest cost centre for the Bengaluru-based firm in FY21, accounting for 65% of the total expenses.
Employee benefit costs jumped 29% to Rs 72.39 crore in FY21 from Rs 56.03 crore in the preceding fiscal year.
Direct expenditure which includes service fees, partner commission, data storage etc incurred by Niyo reduced 55% to Rs 11.9 crore in FY21 from Rs 26.63 crore in FY20. The company’s marketing spend was not significant but it surged by 38% to Rs 5.94 crore. Information technology (IT) cost rose 34% to Rs 3.21 crore while licence fee (paid to bank) stood at Rs 4.49 crore in FY21.
As a result of the reduction in scale and expenses, Niyo’s losses decreased 9% to Rs 79.95 crore during the fiscal ending March 2021 from Rs 87.67 crore in FY20. During FY21, Niyo had a negative cash flow of Rs 79.36 crore.
On a unit level, the company spent Rs 4.62 to make a rupee in operating income.
While the pandemic could be a primary reason for the reduction of Niyo’s scale in FY21, it looks like the scope of making money out of neo banking alone is not significant. Experts also outline that such businesses must add credit and other financial services to generate revenue.
The company also started offering mutual funds and stock investments via Niyo Money and NiyoX to tap into the millennial ecosystem. However, it remains to be seen how these initiatives help Niyo in generating revenue in the ongoing fiscal (FY22).
As far as its competition is concerned, its younger peers Jupiter and Fi remained in the pre-revenue stage during FY21. Fintrackr had decoded their financial health during the last fiscal in detail: here & here.