Charlie Lee landed in India in 2001 to head the Seattle-based RealNetwork's Asia Pacific business and manage its flagship product Hello Tunes — later sold to Airtel. The nearly two-decade-long journey in the country has led him to find ways to tap its one billion un-banked population.
Lee began his entrepreneurial journey in 2006 with a value-added services (VAS) company, Access Mobile. After wrapping its operations in 2014, he launched Balance Hero, which runs mobile balance and recharge app True Balance.
In 2016, the Korean entrepreneur secured funds from SoftBank, and sold his vision to a clutch of South Korean investors including Line Ventures, Naver Corp and Shinhan Bank. So far, he has raised USD 42 million.
True Balance touched USD 100 million in gross transaction amount last month. Lee says the target is to clock USD 300 million in FY2020.
In an exclusive phone interview from Seoul, Lee talks of his plans going forward and explains why Narendra Modi’s India is getting more attention from South Korean investors.
The Passage: How has your journey been in India in the last 18 years?
Charlie Lee: After RealNetworks, I started my own business, Access mobile, in 2006 to provide the various value-added services to telecom companies in India like Airtel, Idea and Vodafone. That was actually my first company. The B2C business application Balance Hero was spun out of Access Mobile in 2014.
We started offering True Balance September 2014 onwards. Until now we have around 70 million downloads. Since last year, we have started expanding our service to the payments business. We grew 50 times last year alone. With the recharge and utility payments, we have more than 2 lakh transactions a day. This March onwards, we began expanding our business to digital lending, pay later and recharge loan service. We are planning to offer various other financial services this year.
The Passage: What kind of value-added services was Access Mobile providing? Why did you start Balance Hero?
Charlie Lee: Value-added services like stickers and SMS. You can compare our journey to Paytm's parent One97 Communications, which was previously a value-added services provider. Later, Vijay decided to start the application business Paytm around 2012. I think he did it with a similar background and context. The smartphones game had come up, then social media services came up and the telecom business was going down. So we decided to start the application B2C business by ourselves. That's why we started the new company Balance Hero, to provide the True Balance application.
We launched the True Balance app as an alpha version in September 2014. The commercial version was launched in January 2015. India is our major market for now. We have a development, design and data teams in Korea. Most of our operations team sits in the Gurgaon office — for marketing, quality assurance, and risk and compliance. We have around 120 people in India and 70-80 in Korea.
The Passage: How did you manage to line up such esteemed investors — from Softbank to Line to Naver?
Charlie Lee: Our vision is to provide financial service to the billion unbanked users in India. So we are heavily focused on them. Unlike Paytm and other fintech companies, we are not targeting those from tier-1 cities. To achieve this, we have various kinds of strategies —we are educating our users, providing them gold membership (which offers cash backs), etc. So ours is a unique proposition valued by various investors.
To target the one billion users in tier 2 and tier 3, we started with balance checking service, a utility application and not a financial service. Late in 2017, we launched the extensive coverage of recharge and utility payments. We have grown 50 times last year alone based on the user base and transaction base. We started ‘pay later’ and digital lending service for recharge this year in March.
The Passage: How were you making revenue when you were only providing your balance check utility?
Charlie Lee: Recharge and utility payments is not profitable at all, getting less than 1% commission. Our major revenue model then was advertisements. But of course, that also was not that big. Post 2016-17, we began focussing on getting a user base half the size of the economy. So our major focus was not actually revenue, but to create the user base and use cases. Since our focus last year onwards has been payments business, the commission from it became our additional source of revenue.
We are working with ICICI bank right now to launch Peer-to-Peer (P2P) service in June. We will expand to other payments and financial services like lending and insurance. First we will launch P2P money transfer and then provide insurance products to our users. But we are not dealing with offline merchants.
In July, we are going to provide handsets on EMI. We aim to launch new financial service every month.
The Passage: You rightly said you don't make money doing recharges. But insurance and mutual funds don't make much money either, forcing everybody to get into credit. Is finding a sustainable revenue model is also a challenge?
Charlie Lee: No, I don't think so. Because our (targeted) user base is one billion users. They actually have a higher demand for credit, be it digital lending, instalments, EMIs. Once we launch additional products like grocery, small electronics, handsets, and then the fares through EMI and cash loans...I think, that's very good business because we are charging a good margin.
Once we have those product portfolios, it is a profitable business.
The Passage: For your credit business, what interest rates are you going to charge?
Charlie Lee: For now, we are charging 10-20% for 10-20 days. Most of our products are for short-term, like one, two or three weeks. Although, we don’t charge late fee, our interest rates are not low, it's almost 1% a day. Once we launch additional products that involve high denominations, maybe we can start charging late fee.
The Passage: What is the average value of loans your active users apply for?
Charlie Lee: For now, the lending is less than Rs 10,00. That is very unique. Most digital lending companies are targeting Rs 10,000. Soon, we are going to have various portfolios — EMI for commercial products and cash loans.
The Passage: Which companies have you tied up with for credit service?
Charlie Lee: Currently, we are working with an NBFC (non-banking financial company) called Happy. We are looking to work with various partners as well.
The Passage: Are you looking to get into e-commerce as well?
Charlie Lee: Yes, but not directly. We are going to work with various e-commerce players, who already have merchants and products. We are not going to deal with the merchant directly. It is going to be like a marketplace.
Indian market is getting a lot of attention in Korea lately. Japanese and Korean investors like Line, and other VCs are looking for good startup companies in India
In July, we plan to start selling handsets, starting with Samsung phones. Later we are going to get more brands, followed by small electronics and FMCG products.
The Passage: Is cross-border e-commerce on the plate as well?
Charlie Lee: Our users' expenditure is mostly on essentials and utilities like grocery, small electronics and smartphones. We are not planning to offer various kinds of products. We are going to focus on essential living products. So I don't think we are going to do cross-border.
The Passage: How have the challenges for you evolved in India?
Charlie Lee: The biggest challenge was funding. We needed funds to grow almost every year. Another challenge is that when we planned to provide financial services in India, because of regulations, Aadhaar e-KYC (electronic-know your customer) and other things, our services were delayed.
The Passage: What advantage do you have over your competitors in lending and credit space?
Charlie Lee: Mostly wallet and platform companies provide digital lending to users. We are not limited by these services.
Having our own database for an alternative credit scoring system is one of the biggest advantages. Based on our own credit scoring data, we will ascertain users’ credit limit — how much cash we are going to lend to unexplored users. Our loan business is based on our alternate credit scoring system. That's the biggest difference between us and other platform companies.
I don't see any big company compete against us because our value proposition and the target user base is not the major focus of many fintech companies, as it's very hard to make money from those users.
But companies like Truecaller, Shareit, Battery Doctor and 360security, which offer utility services, do target these users. They have a lot of user base from tier-2 and tier-3 cities, but can they really expand and evolve into financial services? Is it a natural progression? That's my question for them. From my understanding, it is not that natural to move from file sharing service, battery management or memory management services into financial services. I think they can try to challenge. We are in a much better position.
There are other companies like Meesho and Krazybee. They are into vertical play, which is the right direction as compared to utility providers.
The Passage: Media reports say you are looking to raise money to the tune of USD 50-70 million.
Charlie Lee: Yes, we are planning to get some fund this year from existing investor as well as the new investors. We're talking to some of them.
The Passage: Though Balance Hero is headquartered in South Korea, your focus is India. Why not your home country?
Charlie Lee: Even though I was born in South Korea, my professional career was mostly focused on the Asia market — India and the Southeast Asian market. It is more familiar and comfortable. But the most important reason to pick India, of course, is the size and the speed of growth. It is the best market for global business. And I strongly believe that the Modi government has been doing great reforms. The Indian economy is on the right track.
The Passage: Do you have plans to get into other countries?
Charlie Lee: We don't have any such plan at least for the next few years.
The Passage: Do you think South Korean investors Line and Naver are getting more interested in the Indian market?
Charlie Lee: Yes, definitely. Actually, the Indian market is getting a lot of attention in Korea lately. Japanese and Korean investors like Line, and other VCs are looking for good startup companies in India. It's been happening gradually. In the last few years, the Korean president visited India and many Korean companies like Samsung, LG and Hyundai are doing good business in India. Compared to China, it is a little bit slow, but it's happening for now.
The Passage: How do you see the changes in India, since you’ve been here for 18 years?
Charlie Lee: As a foreigner who lives in India, I see the last five years as amazing. Because, frankly speaking, governments have done things for the last twenty years, but it's very hard to do something right. I mean, the reforms.
The Modi government has done it almost every year — Aadhaar, UPI, demonetisation and GST reforms. It is actually a very big reform activity. I think these reforms are moving India in the right direction.
As a foreigner, I do not have any political stance, but from the point of view of pure economic reform, I think the last five years were amazing.