In April 2015, when Snapdeal acquired FreeCharge for an estimated USD 400 million, Kunal Shah took a good two-year break before starting another company.
In this time, Shah made sure he travelled — specifically to China, where the tech ecosystem has much to teach.
The trips helped him understand how investors and startups in China think, work and capture the pulse of customers. He used that know-how and insights from industry bigwigs to execute his next big project, CRED.
This is the second part of Kunal Shah’s exclusive interview with Moulishree Srivastava and Ruiyao Luo.
While in the previous interview Shah spoke of the reasons behind launching CRED, its revenue model and future plans, in the last series he speaks extensively of his connection with the Chinese startup ecosystem and the trends shaping up the fintech segment in India.
The Passage: Do you think it is easier for you to raise money, now that you have proved your mettle with FreeCharge?
Kunal Shah: It is easier but it also comes with more responsibility to give it back. We are in a zone where we are thinking whether this can create value for people. If you look at all the major successes in China, all of them are second- or third-time founders now. Most of them. And you make new mistakes, not the old ones.
The Passage: How has your learning as an entrepreneur grown over the last decade?
Kunal Shah: A lot of times we accept the truth given to us by the media, but sometimes the truth is different. You learn that through experience. Often, when you believe some numbers and look at numbers from the past, you cannot see the future clearly. We are living in a world where things are changing every three to five years. If we are not going to be prepared for the future, we’ll be outdated.
I am already saying people will move from UPI to credit. It is not happening today, but it will happen in two to three years' time. That's where you have to take a bet. It has become more important for me to be right about the future.
The Passage: What do you think the Chinese investor sees in you?
Kunal Shah: The company has some traction, they like it. The VC network is very connected with each other. The information flows very quickly. So a lot of inbound interest is coming primarily because the company is being talked about. We never said we wanted to raise money. I think they like that I can understand how Chinese companies work. That’s because I have spent a lot of time researching and have a team of Chinese interns who give me information about the Chinese ecosystem. If you can explain why WeChat works more than Alipay in some cases, they understand that you get the game.
The Passage: What value would Chinese investors bring to you? How do you think they differ from US investors?
Kunal Shah: The biggest learning I have had traveling to China is that Chinese investors are okay with one company doing 20 things horizontally. For American investors, it is not a natural thing.
Hypothetically, if I tell Chinese investors that I am planning CRED education on the app, they could say it’s a good idea. American investors would think it’s crazy because they have not seen any success stories.
Horizontal is a better strategy in Asian countries. I think the US is all about focus. People do one thing and they do it really well. For example, Uber does only one thing, but Meituan does multiple things. Uber came up with UberEats as a different app. Chinese companies will never make separate apps for cabs and food. The US is a deep market, and you can take one thing and make a multi-billion dollar company out of it.
The Passage: Do you think the payments battle is shifting from P2P to P2M?
Kunal Shah: In my view, the UPI battle of P2P is going to be won by WhatsApp even if they launch a year later because this country trusts WhatsApp more than anything else. UPI as a standard works perfectly well with WhatsApp. So P2M is the only way to survive, since WhatsApp may not aggressively go to merchants for QR code sign-ups.
But BharatQR code, which works fine with WhatsApp, can become an advantage for the company. If you go to China, Alipay and WePay have separate stickers. Through Bharat QR, the government of India has given the option of one sticker, one QR code. So if standardisation of QR code happens, I don’t think P2M is an option because WhatsApp will win again. All you need is the app you are on all the time. Just like WeChat.
I believe payments services are going to be just utility. It’s going to be hard to make money on. My view is that credit is the only opportunity and all the players are going to be involved in it one way or other in the next two years. Paytm has launched Paytm Postpaid. I am sure others like Google and PhonePe will do something.
The Passage: Fintech companies are also turning to wealth management. How do you see that transition?
Kunal Shah: Wealth management will be one of the services. Some may sell insurance or do lending, everyone will take a different path, but cross and upsell of financial services is the only way to make money in payments. I think, in anything to do with UPI, making money on payments is not possible. Online lending is going to be a big feature.
The Passage: Do you see Chinese fintech companies as competitors?
Kunal Shah: I think there is still a regulatory challenge which Chinese companies will face. They can come but the regulator over here is much stricter than the Chinese regulator, so they may let it happen and one day they may say it is not allowed. Like what happened with wallets. They had to do KYC suddenly. They all came because P2P lending stopped in China, so they want to build a business over here and create an app-based ecosystem to collect and give money, which is harder.