Broking platform is completion of financial services strategy: PhonePe CTO

As the co-founder and chief technology officer, Rahul Chari has built PhonePe into one of India's fastest-growing and largest fintech companies. Chari is also an active stock investor and has been using various stock-broking apps recently to learn more about the stock market and competition. Chari is now on a mission to scale up PhonePe's stock broking platform 'Share.Market', which the Walmart-owned firm unveiled on Wednesday. In an interview with Peerzada Abrar, Chari said that building a broking platform is a natural completion of PhonePe's financial services strategy. Edited excerpts:

Q. What are the technology and innovation bets that PhonePe is making?

We've always been very clear about the fact that we want to build and win for payments on the merit of being the most scalable and reliable payment platform. There's been a lot of innovation that has gone into scaling up payments to the population level reliably. In the zero-to-one phase, it is actually easy to build any product that is extremely reliable. To maintain the same level of performance as you scale to the population level is the toughest thing any engineering team and chief technology officer can face. Also, getting into financial services was always something that we had said we would do at a point at which payments themselves, as a two-sided network of merchants and consumers, reach a level of scale at which introducing any financial services becomes almost the natural step leading to financial inclusion. Even in that, we've taken our approach of serialising our bets and innovating deeply. We started with only mutual fund distribution; then we entered into insurance. We felt these were solving needs at a large consumer level. The association of insurance with PhonePe is much better (has reached scale) now. We have entered into merchant lending and now stock broking. We would also foray into consumer lending.

Q. What led PhonePe to foray into stock broking?

We feel that addressing wealth, whether it is through mutual fund distribution or through building a broking platform, is a natural completion of our financial services strategy. If you look at the consumers that are engaging with us, there's a very broad spectrum across the population who are engaging purely at the peer-to-peer (P2P) level for money transfers. They're graduating towards recharge and bill payments. There's a large swathe that has already graduated through that and is actively doing merchant payments. As we become more ingrained for a large part of our user population as the payment platform, it becomes natural for them to think about us as the one-stop-shop for financial services and everything to do with money. We are going to try and ensure that we continue to simplify stock broking and wealth for the population.

Q. How big is this opportunity?

The number of retail investors will swell over the next decade. There are going to be a lot of first-time retail investors. The opportunity is to guide them, and be an information conduit and an enabling platform to see whether their participation can be more continuous. A lot of our core capabilities translate seamlessly to build the best product on the 'Share.Market' platform. The opportunity on the payment side is very different than the opportunity on the stock broking side for 'Share.Market.' By the year's end, we are expecting to reach 500 million registered users from the 480 million users that we have today. What that really means is that you have every cohort. Looking at that set and applying the intelligence of graduating them into the stock broking app 'Share.Market' and offering products that are tailored for their life stage as an investor, as well as their appetite for investing, is the opportunity.

Q. What would differentiate your stock broking platform from players such as Zerodha, Upstox, and Groww?

This is one space where we are very cognisant of the fact that there is already competition, which is extremely credible from scale, product, and understanding of the market perspective. There are players who are doing really well. Our belief is that we can differentiate from the existing players with quant-based models and curated portfolios. Also, our strategy of continuing to simplify and make payments utilitarian for the masses will set us apart. It is not necessarily given that we will be able to compete with all of these players on day one itself. We will find product-market fit and see where our product does differentiate. I think the retail participation in the equities market in India will continue to see significant growth over the next 10 years.

Q. Do you invest in the stock market?

Yes, I significantly do cash investments (short-term investments with low-risk options). I don't do derivatives. It takes more time and effort to participate in derivatives actively. But on large caps and mid-caps, I do invest. I look at my portfolio actively, which means twice a week at best. But for a cash-based portfolio, I think that is enough. I take a longer view. I don't believe in necessarily trying to either time the market or exit the market. I look at it from the perspective of whether am I diversifying from my investments enough by direct participation. Also, it is one way for me to learn more about the market. I have been using various traditional platforms. I have also been using various apps recently to understand the competition (other platforms) better.