Swastik Nigam, CEO of Winvesta, on building cross-border fintech

We are at a very early stage. We still think that across any of our products, we're quite some distance from product-market fit. But a few things, and we ran a few experiments, so for example, one is especially on the investing side, there's a lot of awareness that needs to be created.

Less than 0.3% of Indian wealth is invested beyond India's shores, so there needs to be a great amount of investor awareness to be create before the product itself starts selling. So I think there's one part of it there. And the other part inside this is the ability to remit money overseas is also quite difficult. You need to go back, log into your bank account, and then send money for all capital account transactions.

There are certain, I say, points of friction in the process which reduce traditional product-market fit expectations. What we then started looking at shortly after we launched banking per se, the multi-currency accounts, was that we actually want to put a bit more friction into the process to see which are the customers that will really be attracted to our product proposition?

We did that by actually having customers pay for the bank accounts. Rather than giving a bank account for free, which is the usual standard expectation pretty much globally, our customers pay a sign-up fee, pay a monthly fee, starting to receive this as an account. So that gave us a better idea of who is this product better suited for? What are the kind of customers, what are the solutions that these customers are really looking for?

That’s a key part, but that also gave us a much stronger control on recognizing what true monetization will look like for these customers. When you give a product for free, you've got no idea how valuable this customer might be. You have to only run your experiments for quite a period of time and then look back to figure that out.

That started helping us move more and more towards thinking from a revenue first angle as well, and thus if you've got one segment of a customer who's paying X in value, then you get someone who's paying a little bit more, how do we start thinking of cultivating a different kind of customer sets?

Across both of these products, one of the things is that for most of our customers, we were the first product they've interacted with in that space. Whether it was the investing app, whether it was the multi-currency accounts, they've historically not had a product like that before. I think that's one of those points where we still see, in terms of tracking as a metric, how much a customer is engaging with their accounts, how frequently they're using it.

Some of the traditional proxies in investing across still stand, like transaction volume and whether that's increasing and so on, but people might get lost a bit in the noise because a lot of transactions, volume in the brokerage industry is depending on how the markets are performing. In bull markets, you have a lot more activity. In bear markets, people start getting cold feet.

It doesn't become a great point for true investor behavior and customer behavior to speak of how well the product is possibly doing as well. So I'd say these are some of the points where we see a distinction between banking and investing. And banking is primarily focused upon the true value that we're getting and then reaching in better towards monetization and investing some of the heuristics that many in the industry do, we feel is not ideal for our product that, also given the multiple points of friction, that do exist.

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When it comes to remittances, are the big issues UX friction or infrastructure friction? And if it's infrastructure fiction, what is leading to that kind of friction in outbound remittances?

It's definitely an infrastructure issue. And then infrastructure also got a few hooks on the back because of the regulatory landscape where the regulators put in certain guardrails to say, what would broadly be a free capital convertibility?

Those guardrails have resulted in certain processes within banks which have resulted in operationally higher costs, and those operationally higher costs then make it to customers as well. Outward remittance is being dictated more due to the infrastructure, which is dictated by regulations.

You will continue to have user UX/UI challenges as well. While some banks may completely digitize the process, they might still be in high economic cost, but there might be a digital process to it. Others still maintain a paper-based and physical form-based process as well. So they've not yet digitized that, and they may have not done it because it may not be as lucrative a customer set, or they might just not have had the technology bandwidth to do it.

In the last two years, we've seen a great amount of digitization on the outbound remittance while the cost is still a question mark. We did a couple of experiments, like the UPI, and we could discuss that a bit later as well, but I think that's one of the key parts in the space.

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What are the use cases that you saw which require a multi-currency account? And how different is that from remittances?

The multi-currency account that we launched is the first of its kind for India. We've not got similar examples here. You mentioned remittances, and you used that particular instance where, "Hey, I could just send it to my friend, and then when I'm traveling, you just give me cash," for example.

What does the multi-currency account do? One is it gives you much greater control on your international investments and wealth per se. When you invest into listed securities, that's a well-troden path. But if you want to invest in anything beyond listed securities, like private market investments, it becomes a lot more difficult and a lot more complicated because your bank in India or the person who is doing it may not be that savvy, the bank may not have the specific port properly done and so on. So it's a lot easier for you to actually fund your international account and then make your international investments from that. So people say we're using an Angel List to invest, or other private market investments globally, but then it radically reduces the friction.

This is completely compliant because the RBI allows you to use your international account for making these payments as well. So that's one significant use case with respect to individuals that we see. And to answer the other part, it does give you a lot more control. You don't need to rely on someone else for your international expenses. 

How it also differs from remittances is that you're trying to push money out. You already have a particular use case, and then it becomes almost imminent that, "Hey, I have to give someone money tomorrow," and then you have no control on the FX rate. It is what it is as of today.

With this multi-currency account, you can plan a lot better. You know that something's going to rise in the future and FX rates are favorable right now; the rupee is strong, I will send money out and fund it right now, and then I'll use it with luxury. I don't need to worry about what might happen to the FX rate between today and that date when I know this impending liability will arise.

When I'm adding money to my multi-currency account, is it equivalent to say that I’m remitting money to it in banking parlance and so the costs of money remittances apply to these transactions? Or are costs different? How does it work?

The costs do apply to these remittances as well. But one of the things with the remittance industry, is that the higher the value, the lower the net average cost.

Rather than making ten $1,000 payments, you can make one $10,000 payment, and the total cost for you will be much lower because you've mitigated the fixed costs. You can probably negotiate a better FX rate as well. That outbound flow is going to be determined by your Indian bank when you're sending the money, but you're in far more control of that cost structure there.

Once it's in the multi-currency account, you can use it at almost negligible cost to make local transactions. It's just similar to how if you think an NRI would use for any of his Indian expenses. He will have opened an NRE account or an NRO account and then made one bulk payment and used it for all his RTGS, NEFT and possibly even UPI payments. This is just a corollary to that.

What are the customer segments from which you have been seeing higher traction for multi-currency accounts?

On the multi-currency accounts, we broadly service two customer personas: one is as individuals, and the other is as businesses. For the individuals, it is where customers are looking to primarily invest beyond just the listed securities markets.  

A second persona, even within individuals we see, which is emerging, but is not yet there is, parents, as a way to save up in dollars, just keep a small nest egg in dollars, pounds, for example. There might be emerging expenses in the future, but that's what we use it for. A lot of our customers who use brokerage accounts for US stock investing also have a multi-currency account.

For them, there's a very important value. So say you'd use your Indian bank to send money out, and you've done really well on your portfolio of investments, and now you want to liquidate that and use it to pay for your kids' education.

Unfortunately, due to the global AML rules, you can't just send the money back from your US brokerage account to a new international account because the broker will say, "Hey, this money has come from this Indian account in particular, I can only send it here."

It'll move from US dollars back to rupees, get converted, and then you need to, again, convert it back to dollars. There's a lot of friction and cost as well, and you're using your LRS twice. Instead of that process, customers tend to fund them at a Winvesta multi-currency account and then their brokerage account. That's another important part which is integral to this use case.

On the business side, we see customers, who are primarily exporters which use it as a way to collect their foreign currency and then bring it back to India with a lot more control, a lot more speed, and settlement within a day. There's better clarity in terms of receiving it.

It reduces the cost for the payer as well because the payer is now making local payments in their geographies, in the US, UK, Europe, then you're bringing it back locally to India as well. There's significant speed, pricing, transparency, and value addition to customers.

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You offer investment accounts which is something we have seen other companies such as Groww and IndMoney launch in India. What do you think is unique about Winvesta’s offering here?

It is a hot market, but I also think it's going to get commoditized very quickly. And that's one of those reasons why investing broadly in people's lives till today is a feature, even with domestic investments. So now we are taking it one degree further to say not just domestic, but international investments as well. So that's a fairly easy, quick plugin for those which are unique to us.

Our expectation is always that this will be fairly commoditized in the longer run, and where we are looking to really build value is by virtue of providing the multi-currency account as the core banking solution and then provide multiple products around that, including the US stock investment accounts and so on.

We see that this is at a very early stage for India and Indians. So the US stock investment, stays a constant and very important part of it. We have a great fascination for real estate in urban India, and I think people will start discovering global real estate as a next asset class as well. I think that will be a constant trend too.

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Can you talk about your current GTM? How are you reaching out to your different customer segments?

We've got a reasonable client base from just the traditional methods like digital marketing, but we also started a slightly B2B2C approach. We've got wealth managers that we work with. Those wealth managers provide our products to their end clients, helping them add value to their client portfolios, and add value themselves as our partners. 

Based on the product, we've got differentiated GTM strategies. So I think the business banking product, which is for the exporters, is a very complex problem to solve, and we want to keep understanding the client better before we would pull in a large number of intermediaries to move this model into a different way. While on the retail side, we’ll keep adding newer and newer products as well, but I think distribution will eventually move more from a B2B2C side, especially for a bit more specialist product creator like ourselves.

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Can you talk more about your recently launched UPI and banking-based remittance service? How does it differentiate from the existing services in the market?

One of the biggest points of friction is sending money out. Some folks have chosen to help you open a neo-bank account with another bank and then deposit money there, and then that bank maybe is just slightly better than your regular bank in terms of sending money out. So that's one flow.

We thought that doesn't really solve the client's problem from a sustainable point of view, which is why the RBI had a cohort, which was the regulatory sandbox aimed at cross-border capital flow. 

We partnered with the payment provider and an AD-1 bank to provide our end customers the capability, the first of its kind in India, where customers could send money using UPI into an international account that we had.

If you have a hundred customers, all of that value will be put together, made as one bulk payment out, and then distributed out to the brokerage accounts. That was exceptional, because today, when you send money out straight from your bank account, and even if you open a neo-bank account, you're not able to collate all that capital because of regulatory requirements and send it altogether.

The regulator wants to see on a business-as-usual basis that each and every customer's flow is going out individually. That adds to a lot of fixed costs. You don’t get the benefits of pooling a lot of capital together and reduce the variable costs. It was very well lapped up by our customers. We took quite a few punches because we had a very short period of time to execute and to roll it out and to have it successful. There were glitches at every level, as one would expect, we tried to smoothen it as much as possible.

Every participant, including the regulator, was learning from this process. We're glad that we gave 100% assurance that we will cover the full experiment that they want to run in terms of customer acquisition for this particular part.

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How do you manage the KYC/AML of running a cross-border service with many multi-currency accounts?

One of the luxuries and privileges we have is that, as compared to traditional neo-banks, we have regulated ourselves to an extent in the UK. We have an India presence, and that gives us an ability to passport all of our KYC understanding across borders, and possibly the only one which is doing so, because others will ask you to dish out a passport because their counterpart bank will need that, or an SSN number or so on.

We don't need to do that because we are basically leveraging the PAN and Adhaar capability here in India. Local documents. No need to even have a passport for KYC. For that effect, we do leverage third-party KYC verifiers, AML checks, sanctions lists, adverse media, PEP checks across, because the other side is that we, being regulated, need to be absolutely sure that we are onboarding customers who are genuine and appropriate. And whenever we find there are gaps or we're not comfortable with the kind of risk, we will take remedial action there.

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How are you thinking about geographical expansion?

The regulatory part, especially in cross-border, is not the function of one geography, but two. It's where the product originates and where the customer sits. We've done a lot of work here in India, and I think that there's a lot of pent-up demand across multiple segments, stuff that we don't even know, which is now a blank spot.

There's an opportunity to double down, figure out multiple segments, get them all very well catered for before we start spreading our wings to nations beyond. Of course, that's a distinct strategy from a B2B2C one where you're not really trying to understand segments too much, but you can get a partner who gets them. While I would say that I'm not committed to any other geographies, I'm not ignoring any area, beyond India.

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What are your main levers of monetization, and how do you see these potentially evolving?

Beyond subscription costs, there are transaction costs, which are of two natures. One is when a person converts money, and another one is when you pay out money. These are the three levers of revenue right now. 

We don't provide cards right now, and so in the future, there are quite a few more regulatory requirements when you get into issuing cards, but when people actually travel or migrate, and stay customers of ours, we'd also be in a position to offer those kinds of products to them as well.  

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How do you see market size for cross-border fintech, especially for Indian geography, compared to domestic banking? And is that one of the reasons why you are focusing more on cross-border fintech? Was that one of the insights which got you started?

The TAM, of course, is going to be significantly lower than the domestic market. So the examples that you mentioned are primarily domestic banking providers, improved UX/UI onboarding, customer checks, and so on. The second thing, however, is that a broad part of neo-banking, not just in India but globally, is that when you do cosmetic changes, you are improving an otherwise available experience.

But the thing is that those neo-bank accounts are broadly secondary accounts because you would've had a primary account. And that is the challenge that has plagued much of the neo-banks globally as well, that they tend to, over a period of time, get relegated to being a secondary account.

The market that we have is having these accounts for the first time ever. So no one else is giving you a multi-currency account. A few are giving investment accounts, but those customers have come to us. We stay the primary investing account for them. So that is one distinction that, for the customer set, we are the first that they will have had.

There's a popular saying that banking relationships, at least, for example, in the UK, last longer than spousal relationships. We are in the very early stage of trying to gain that relationship which we think will only build over a period of time.

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What overlap of customers do you see between your investment accounts and your multi-currency accounts?

About a third of our multi-currency account customers will also have an investment account. That's definitely one. One of the things that I missed for individuals also is that many freelancers, for example, will tend to use us to collect their foreign income. So we, of course, touched upon it as business, but exporters are again of two types: individuals or businesses. They tend to use our product a lot more as well.

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Would you say you’re also in competition with products like Deel or Remitly that help with remittances?

We are not scarce for competitors across the world in multiple verticals.

While we don't have a singular positioning in the minds of some of our customers, what we do have is that at least when a customer comes on, he or she should recognize that there's a lot more value that I can add rather than just one product. And so the long term cost will stay the same whereas long term value that we keep unlocking is a lot more, even from a very early stage for some of our customers.

We see that. But the challenge of the other side, which a lot of fintechs tend to do is just do one thing and just focus on one segment for at least the first few years of their lives, is that when you try to add product through that, you don't get identified as being a default that I can also use, even if you might have an account with them.

That's where we see a slightly different tact to the way we want to build a business as being a diversified BFSI from our early days, multiple products for one client, one product for multiple clients from our very early days.

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