SUMMARY
Cherry, a curated tech-led investment management platform of the Kotak Group, has onboarded over 2 Lakh customers since its inception
Mutual funds contribute the most to the revenue kitty of Cherry, which is currently available free of cost to investors, but fixed-income products are gaining traction
Kotak Cherry CEO Srikanth Subramanian said that the platform is looking at partnering account aggregator and it would itself start curating products once it gets the necessary licences
As it continues to gain traction, Kotak Cherry, a platform for curated investment products from the Kotak stable, is looking to add new products and is keen on taking the advantage of account aggregation for devising clearer solutions for its investors.
In a chat with Inc42, Kotak Cherry CEO Srikanth Subramanian said that the tech-led platform is “evaluating the landscape of partnering with one of the licensed account aggregators”.
The Cherry platform, which at present hosts baskets of mutual funds (MFs), fixed-income products (bonds, MFs), and stocks, among others, will also have investment solutions in the insurance space by the first quarter of next year.
How Cherry Stands Out
Thanks to rapid digitisation, the investment tech space in India has been growing at a fast pace. A study by Inc42 earlier this year estimated that the Indian investment tech was valued at $9.2 Bn and was projected to touch $27.5 Bn by 2025.
The space is crowded with the presence of Zerodha, Groww, ET Money, Upstox, smallcase, and Cube Wealth, among others, with most of them betting big on the discount brokerage model.
When asked how Cherry, which has onboarded over 2 Lakh customers (2,27,186 to be precise) in its 10-month journey, is different from the new-gen investment companies, Subramanian said that the curated approach to investment, backed by domain impetus, makes it stand out.
“We found two kinds of issues. Some of the new-gen companies are solving very different problems which may or may not be primary problems for the customers. For example, most of them are solving for only zero commission or discount broking or an extremely quick onboarding or a very good UI/UX, all of which are very important from a user engagement point of view. But when it comes to dealing with financial planning and money management, I think somebody with a reasonable amount of expertise and domain is important,” Subramanian said.
Cherry identified early on a big gap in the investment tech space — most players here lack in domain. Subramanian said there is nothing wrong in that because knowledge in a specific sphere comes with experience only.
Kotak Cherry believes that while technology is critical in a serious business such as money management, there is an equally important role that domain experience will play.
“We thought it was time for us. Having done wealth management for over two decades, both the team and the group which is Kotak, we can offer investors a fresh perspective where we can combine all the good things technology companies have shown us and also have enough impetus on domain,” he said.
Cherry’s Revenue Model
The Cherry platform is currently available free of cost to investors. When an investor buys a mutual fund basket, commissions get accrued which, Subramanian said, is within the permitted limits.
“We are awaiting our mutual fund distribution licence. We are just waiting for all this to culminate but we don’t intend to charge the investor till we have the requisite regulatory licence to be able to charge investors,” he said.
At present, MFs contribute the most to the revenue kitty of Cherry, but fixed-income products are gaining traction. Stocks, which went live late, are behind MFs and fixed-income products.
“The highest traction is towards MFs but that was very intuitive because in this segment it was expected that MFs will be a large contributor. One trend that I’m seeing currently is fixed income, both through bonds and MFs,” Subramanian said.
The trend being seen in fixed-income space is reflective of the general market mood that current levels in the equity markets will have limited upside, he said.
Of the 2 Lakh customers Cherry has onboarded so far, 82% are in the age bracket of 18-35 years. Subramanian, for sure, has a fresh insight into the investment pattern of youngsters.
It is perceived widely that the general cycle of holding a particular investment is shorter compared to what the previous generation did.
It used to be a buy-and-hold strategy and it used to be a 10-year cycle which has shortened now, according to Subramanian. Most of the new-gen investors are smart to see that the trends and cycles are shortening.
“In general, the trend is that they don’t hold things for very long period of time and they are slightly more transactional in nature,” Subramanian said, adding that as they see different market cycles and some of their investments taking losses, many will learn the virtue of holding investments for a period of time.
DIY Platform To Soon Have Higher Capabilities
Cherry hosts asset management companies which offer their baskets on the platform. ICICI Prudential, UTI Mutual Fund, Kotak Mahindra, Edelweiss MF, Navi MF, Mirae Asset have their baskets on the Cherry platform. Some of the baskets are for beginners while others are for experienced investors.
“Curation is done by the mutual fund houses. But Cherry’s technology allows them to host their baskets and Cherry customers get the benefit of seeing some of these baskets and buying them on a single click,” Subramanian said.
A do-it-yourself (DIY) platform at present, the Cherry platform is available to all MF houses to curate their best products and offer them directly to customers.
Cherry, which has an average transaction size of INR 95,000 since inception, will itself start curating products once the necessary licences and regulatory approvals are in place. “My licence is restricted to execution only, do-it-yourself. As we build our scale and volumes, we will be trying to take different licences which will allow us slightly higher capabilities than what is today’s capabilities,” Subramanian said.
Betting Big On Account Aggregation
Emphasising that technology is the most democratic level-playing field, Subramanian said account aggregation is becoming a big talking point.
The account aggregator network is a financial data-sharing system to facilitate investing and ease access to finance/ credit. The final layer of the digital infrastructure will give consumers access and control over their financial records.
An account aggregator is a non-banking finance company (NBFC) that collects financial information pertaining to a customer from financial information providers (FIP).
“Look at the role technology can play through account aggregators. Through technology, people can use customer data, upon customer consent, to give them highly personalised solutions for each customer,” Subramanian noted.
The big advantages of account aggregation include a much lower transaction cost and greatly minimised risk of financial fraud while sharing the data.
The Reserve Bank of India-licensed aggregators are establishing themselves now after the central bank came out with a detailed account aggregator framework last year. The Securities and Exchange Board of India (SEBI), the capital market regulator, is also adopting account aggregation.
As on date, 94 financial institutions have onboarded themselves on the account aggregator platform as financial information users (FIUs) and 26 financial institutions as financial information providers (FIPs).
