Managed wealth is less than 8% in India - quite underpenetrated and none of the existing players in the wealth management market is solving the real problem.
Ibibo founder Ashish Kashyap is back with a new venture ‘INDWealth’, an artificial intelligence and machine learning-based wealth management platform for high net worth or affluent individuals. Slated for January 2019 launch, the startup raised $30 million from Hong Kong-based hedge fund Steadview Capital to build technology infrastructure and acquire users. In an exclusive interaction with Sandeep Soni of FE Online, Kashyap opens up on the new venture, the market opportunity, learnings from the past.
What caught your attention in the wealth management space?
I believe that I should understand the problem area in a particular industry or have gone through the bad experience of using a particular product or service to build a solution for that. I build Ibibo because when I used to reach the hotel that I had booked on a travel website, I often faced trouble getting the room. I build PayU because customers’ payments used to fail every time with the third party payment system we had. As a customer of a wealth management product, a lot is broken in India. I have often been mistold about various products. Managed wealth is less than 8% in India – quite underpenetrated and none of the existing players in the wealth management market is solving the real problem.
So, where exactly is the gap?
Today a company can manage its income statement and assets and liabilities, build future cash flows and business forecast, and manage taxation. However, this doesn’t happen for individuals. They are like mini-companies with cash inflow and outflow, asset, liabilities, tax implications, and also future goals. There is no platform or technology system to manage all that for individuals in India. Most of the wealth management industry works on excel sheets but this is not an ‘excel sheet problem’. This is what prompted me to build a full-stack service for individuals.
Do you think there is a transparency issue on the customer end in the industry?
I think so. Today when most individuals invest in a large-cap portfolio of stock or in a liquid fund, they think it is the zero cost of investment. However, for every Rs 1 crore that a person invests or the cost on every Rs 1 crore invested is almost Rs 30 lakh over seven years since wealth management is about long-term. Nobody in India knows this, which made me realize of the lack of transparency in the industry. There is no digital service where the compounding cost is Rs 30 lakh over a long-term for Rs 1 crore investment.
How do you see the market size growing?
I look at two areas to measure the market size. First, the asset under management (AUM); and second, number of unique users who do activities beyond fixed deposit and savings account. I believe that India has a total AUM size of about $350 billion which is expected to grow to $3 trillion in 4-7 years. The number of unique users who participate in financial markets outside of saving account and fixed deposit is around 24 million out of which around 17 million are active users. This number is very less but will grow to more than 60-70 million in next few years. Moreover, the number of taxpayers will increase by up to 150 million from 55 million. So, there is a great opportunity.
Whom are you targeting at INDWealth?
If I look at India’s wealth pyramid, my view is that a person earning at least Rs 15 lakh per annum is a wealthy person. We are targeting this group. We are working on a separate solution which I can’t disclose right now, for individuals earning less than that annually.
Does it look like a winner-takes-all market?
No, because unlike markets like messaging, e-commerce, and accommodation which are a winner-takes-all or probably two-players markets, wealth management has a lot of consultative element to it for the customers. So, there is room for multiple players. My aim is to build the market and bring wealth management to people who haven’t experienced it either because no one reached out to them or weren’t consulted in a transparent way.
What has been the biggest learning from your previous venture?
I learnt from the past that building multiple businesses at the same time is very tough. At Ibibo, I was building businesses which weren’t related to travel. For example, I built an automobile portal called Gaadi.com which was sold to CarDekho. Then I created a classifieds/e-commerce business. There I got defocused. By 2012 I realized of focusing on building just the travel business when we started getting recognized by customers and later made great acquisitions like redBus.
Where are you right now ahead of INDWealth’s launch?
We have already hired 25 machine learning and data science engineers for the backend and are currently hiring our business teams. By end of March 2019, we should be about a 100-people company. The key metric for me initially to focus on would be the net promoter score with high customer satisfaction. Once I have that, we can scale the business fast.