Mukesh Kalra has busy Thursdays. The founder and CEO of the wealth management app ETMoney spends half a day handling customer queries himself. He says his priority is to understand customers and make it easy for them to understand mutual funds. Kalra claims that ETMoney is the largest online wealth management app in India.
Earlier this week, ETMoney announced that it crossed Rs 2,000 crore (USD 280.4 million) worth of transactions in mutual funds and investments and that it is adding more than Rs 150 crores (USD 21 million) of new investment transaction value every month.
“We are 3X of our next competitor when it comes to total Systematic Investment Plans in a month. SIP is the most dominant way the consumers will invest money,” he says. Kalra spoke to The Passage at length, revealing for the first time the journey of ETMoney. Here are the edited excerpts.
How did ETMoney come into existence?
I was part of the core startup team at InMobi. We built the product from scratch and it was a great experience for three years. Then I started Moneysights, an online wealth management company, in 2010. It was way too early and we ended up doing all the rookie entrepreneurial mistakes. But we were probably one of the first few companies which raised money from Blume Venture when they were starting out in India. We ran it for two and a half years. Then we became a part of Times Internet, which acquired us in December 2014.
When we were running Moneysights, we wanted customers to start using our platform. So we went to the Economic Times and proposed to power their mutual funds content and also enable transactions for users. It was a strategic partnership. They eventually started liking us and said it makes sense to build together. It made sense because to me because I had two options then — either I could raise a very small USD 500,000 kind of fund and keep it running or I could have had access to a huge consumer base. The odds of creating a huge impact was much higher (becoming part of Times Internet). It essentially boils down to the chances of success at the end of the day.
It was a one- or two-member team at that time. That is how ETMoney came into existence. We had a lot of insight running Moneysights, whether it is about consumers or the industry, we put them into play at ETMoney. It is very evident that our choice was right.
How did you get into the mutual funds space?
The ETMoney app organises all your money in one place. It auto-categorises all your spend to help you see where you are spending. It aggregates all your bills in one place so that you know which bills are due. And it aggregates all your mutual fund investments. Soon you will see your insurance policies and everything in one place. That was the first step. We actually built it as the first product out of the ETMoney table and after a year we realised getting all your money in one place automatically is great, but how do we help you grow it? And that is how mutual fund investments came into play.
Our growth engine in mutual funds is a product called SmartDeposit. A lot of money is still stuck in savings accounts. I call that a sure shot way of losing money because the inflation is at 8% and you are going to get 4-5% interest at max. But then there are liquid mutual funds where the risk you take is significantly low. But nobody knows about those mutual funds and they have always been restricted to HNIs (high net worth individuals). Because they don't make a commission for agents, none of the traditional players and agents ever sold it to the masses, or even made an attempt to make them understand that there is a possibility of you earning close to 6-7% interest or returns annually without many risks.
We created SmartDeposit while working with Reliance Mutual Funds. It was an instant redemption product, taken to the consumer with the very simple concept that it is better than savings accounts because you get double the return. It is less risky as it is not investing in equity market. And whenever you need your money, you get it with a single tap. That helped us create a very strong consumer base. Soon other companies also started doing it.
As of today you can invest in mutual funds of 25 asset management companies (AMCs) at absolutely no cost to the end user. In September last year we switched to direct mutual funds. As there is no commision for the distributor, our consumers get higher return.
How did the idea for LoanPass come about?
We started seeing a lot of consumers on our platform, who were largely millennial, running out of money by the end of the month. This need was arising multiple times in a year. To bridge that need we created LoanPass six months ago. Based on your profile, it creates a line of credit for you — a pool of money that is available to you 24x7. Once you are approved for the line of credit, you can withdraw as low as Rs 3000 (USD 42) and as high as Rs 500,000 (USD 7000) from that pool of money based on the limit we have set for you. Banks do not serve small loans because the cost of disbursing a Rs 10,000 loan is much higher for them.
We simplified KYC norms by video and paperless authentication. We never relied on Aadhaar because while the tech is good, regulations were not very clear. That actually helped us get more consumers and expand the market. Around 55-58% of our users today are investing in mutual funds for the first time.
What are your interest rates?
We charge anywhere between 13-19% annually. Nobody else is giving a short term loan less than close to 28-29%. We have the lowest acquisition cost in the industry. If I compare it to companies like EarlySalary or ZestMoney and other guys, our disbursal rate is almost half of them on a monthly basis.
Tell us about ETMoney’s major catchment areas.
The popular perception is digitally savvy people with a lot of money opt for our services. We were completely surprised that 44% of our users are not from the top 15 metros. That is because we are mobile first. A tier 2, tier 3 users’ affordability is not as high as the urban user. In such markets, no agents will come to you for Rs 1000 (USD 14) SIP. This is where the perfect combination of technology and access through mobile comes into play. We have around 5.8-5.9 million users on the platform. A lot of users come for the money management application. The next big user set is for mutual funds.
What are the challenges you have faced while starting out?
Firstly, we may have the best product, best team and best investors, but the question we really need to ask ourselves is, do we have the market power? Unfortunately, at that time, there were not many online consumers and those who were online were not doing a lot of transactions and a few who were doing transactions were not into financial products.
Secondly, if you look at the industry, the cost of acquiring a customer is significantly high, and you have to figure out a way to get users organically. The monetisation of users in the financial category is very high, but it happens over a period of time.
For users to come and invest their hard earned money, trust is paramount. Thanks to Times Internet, we already have good access to a huge consumer base and the ET in our name translates to good brand value. Lastly, you need to have a longer gestation period and a long term plan.
How do you leverage the advantage that come from being part of Times Internet?
Times Internet is a strong strategic investor. However, ETMoney is not a completely Times-owned company. The real leverage comes from integrating the capabilities of ETMoney onto the network.
If you go on ET.com, you see a listing of top 10 ELSS mutual funds. You can do the transaction and invest in those mutual funds without leaving ET.com.
Times Internet has close to 400 million monthly active users. We are just close to 6 million. The next phase of growth is going to come significantly from the former’s user chunk.
What are your plans for this year?
We have a strong focus on personalisation. Because we are mobile -first, we can do 50x better personalisation in India now than five years ago. For instance, once you are inside ET money, we give your risk profile and the portfolio of mutual funds you should be investing in. And you can get it done in one click. We have a very strong data science team for customised solutions. Similarly for insurance, based on the inputs you give, we pick the the best plan for you.
We have our own proprietary system to check creditworthiness. Of the 200 member team, 70-80 are in the product and tech development, of which one-third is focused on data. We are taking personalisation to the next level. The cost is very high to get a transacting user for mutual funds or insurance or lending as you have to figure out when the user is going to be in the market. We have to preempt the need of the user and offer simple solutions. We also focus on democratising the access to masses. Technology should level the playing field.
Are you also looking at credit lending at POS?
We have been exploring the space but our view is all the transaction ecosystems have products of their own. Players like Amazon and Flipkart are in the best position to have POS based purchases enabled through loans. All of them have applied for NBFCs. While there is a huge upside on POS lending, we are not looking at the POS space in a very big manner until we figure out our own USP to enter the marker.
Areas such as education lending are risky as the default ratios are high. It’s still early days for online lending. We haven't seen anyone with breakout success in B2C space.
We are already on a very strong growth path, but the external factors should align as well. The market condition can impact our growth trajectory.
What, according to you, will be the biggest trend of 2019?
I think wealth is going to be a big space. There is this whole concept of financialisation of assets. We believe 2019 is the year of wealth tech. From a disruption perspective, it is a huge opportunity.