Launch HN: Piggy (YC S17) – Investment App for India
Historically, public sector employees vastly outnumbered private sector ones in India. Those public jobs came with pensions, so no one had to think about investing their own money. In 2016, for the first time, the private jobs overtook the public. People have to invest their own money now, and it's complicated and expensive. We built Piggy to help solve those problems.
This new Indian middle class is searching for good places to invest, which is why the mutual fund market is growing so quickly - assets grew by 40% in just the last year to $300B. Every one of these new investors has a smartphone, which is why Piggy is mobile first.
The app has quick online account setup, easy to use interface, built in user support (in app chat, email and call). Users can access all the fund houses in a single app. Transactions cost less than $10 a year and there are options for lowering that cost. The app charges a flat fee of 50 cents per buy transaction. We take no hidden commissions from asset management firms, unlike most services in India. Saved commissions mean higher returns for our users.
Ankush and I have fixed income analytics experience at an investment bank, and Kunal has worked with Amazon. When we started working, we got limited advice from our family on where to invest, mostly in traditional bank-based saving products with low returns. We also saw many of our friends fall prey to bad financial products. When we did learn about mutual funds, there was nothing out there that was easy to sign up and use, that didn’t charge a bomb or hidden commissions. We got together over many late night conversations and decided to build it ourselves.
We’d love to answer your questions about Piggy and love to discuss fintech in India and emerging markets!
60 comments
[ 5.5 ms ] story [ 134 ms ] threadWe don't take these hidden commissions. We charge a one time fee.
Also Scripbox offers a limited set of funds while we offer products from all fund houses. So even an expert user would be able to use us and wouldn't be limited by an algorithm.
This is a massive claim. Any source?
http://economictimes.indiatimes.com/mf/analysis/direct-plans...
Second link does not mention scripbox at all!
How do you differentiate between the two plans? Look for the word 'Direct' in direct plans of mutual funds.
Same with FundsIndia etc. I would say, avoid any MF that is not direct. the long term hidden cost is staggering.
@Nikhil Congrts and just a feedback: I would have been very much interested if you had a monthly fee plan like Zerodha Coin and also offered advisory and analytics like Invezta, ORO etc. They all offer direct plans.
Also We focussed on building an easy to use app with seamless transaction platform that supports all fund houses first. The cake is in place. We will be adding a lot more over this.
Thank you for taking time out for all the detailed feedback!
And password length only 12 max? That's serious.
Looks like the app is still in beta or alpha. Anyway good luck. Not the time to put my money there yet. It's just a feedback and I am talking about iOS app.
Important Difference. 1. Coin is based on Zerodha's kite platform and requires a demat account for investments. There are multiple disadvantages of using a demat account for mutual funds, one of them being transaction costs on every transaction from demat as well. The others are difficulty in estate planning and also your movement options to other services would be restricted if you don't like Zerodha services. 2. Try searching for popular Franklin funds on Zerodha! :) 3. Piggy is mobile first.
Would love more feedback from you!
Also, could you please expand upon demat disadvantages? How much is that demat txn charge? I think it's kinda insignificant.
Also, from a user point of view, if one has a demat account with Zerodha they can also do stocks with the same account without having to pay for demat again with another provider, right?
We focussed most of our efforts on mobile till now because as a country we skipped desktops and jumped to mobile first.
Regarding demat for Mutual Funds let's look at it this way. NonDemat MutualFunds is also paperless and you get consolidated mutual fund statements nowadays. So there is no additional advantage of investing in only funds via Demat route plus you have to pay for it.
Less than 1 % Indians have participated in capital markets and mostly through mutual funds. So at this point our focus is on keeping things simple.
Also regarding your investments. They are all in your name. You get the final allotment statements directly from the fund houses to your email. You can also generate consolidated investment statements by yourself. So in absence of Piggy you can still buy and sell your investments. We've just made it easier for you to do so.
how is the the KYC done ? ( what documents are needed )
how much time does it take to get the account setup ?
any plans on creating a web app ?
Account opening is completely online. We need your PAN card, Address Proof, Photograph, Signature on app and a Bank account proof.
Since we do the full KYC it will take upto 3 business days for your account to be active.
For an existing KYC user the account is activated on the same day.
The web app is getting ready as we speak! It should be live in a week.
Our current target audience are working professionals between the ages of 25-35. A lot of them invest in substandard products and get ripped off or just let their money lie in their bank accounts
Having said that we get users from a wide spectrum from older business professionals in small remote towns to students looking to start saving early.
Our power users understand various kinds of mutual funds, basics of asset allocation and know that direct plans will definitely earn more returns. These users would love Piggy's ease of use, automated portfolio tracking and powerful search and filter options.
My two cents: AFAIK, Indians still believe in traditional investment methods like bank deposits and gold. Along with providing the facility to diversify their investments, you will also need to educate your users about investing basics (which I see you already do in your FAQs), why they should diversify, is it safe to invest in mutual funds, and how the traditional mutual funds system operates (demat accounts, fees, etc). In short, why they should diversify and why should they choose you. Because people are normally driven away by the confusing and overwhelming fine print materials, you have an opportunity to not only provide an easier investing method, but also an easier self-educating method for your users. Make the most of it :)
I really never felt comfortable with any service with which I can have complete control and freedom to transact. I had tried IIFL back in the day and after 3 months putting decent amount of money I wanted to sell some SUZLON shares one day when the price was at 5x of what I had bought at. Transactions failed, kept failing throughout the day. 7 days later I got a one line response saying it was a glitch. Exited after few days and closed the account. Never went back to trading again.
I mean I see the numbers and % of returns I will get but how can I trust the industry where interfaces, that I want to be in that industry, are so unreliable.
Infact this has been our prime focus at Piggy. We have been optimising and automating our operations as much as possible to ensure that the users never face any trouble. And we completely support our customers with any issues and sort them out as we work closely with the exchanges and other intermediaries.
Its an app focussed in India, I was wondering why would you need YC. It certainly must be a great experience and is a brand among people in startup world (doubt beyond it), but unless you have imminent global plans does it still make a compelling sense. And does the YC brand help you establish a trust factor in India, more than TV advertisements, or celebs like a cricketer or etc as your brand ambassador.
I would certainly want to YC, if I had a product that I want people in US/Canada/Europe to use.
Also it does make me happy to see more Indian startups being a part of YC.
Why YC made sense to us was because of it's network of super smart people who have seen a lot, done a lot. We want to build a really good product that solves a big pain point in India. YC helps tremendously in building good products with it's people and resources at hand. Also it is a great environment for founders to learn things in a concentrated way beyond tangible sources such as books, videos and blogs. It becomes like a bootcamp for us. In the end founders are people who need to keep up to build a great company! :) YC gives a jumpstart. All the trust building with customers will come by providing a great service first, then by all the traditional and non traditional media means.
So piggy turns out to be cheaper for most people who would start an SIP with 2-3 mutual funds. Since I guess most people won't have needs that extend beyond this, piggy is probably the cheapest platform to buy mutual funds. However, for someone expecting a larger number of transactions or SIP with more than 6 funds, zerodha would turn out to be cheaper. Also, if instead of an SIP, for some reason you wish to invest a different amount every month, zerodha would turn out to be cheaper.
A big advantage of having a zerodha account is that I can also invest in index ETFs which I feel are much safer than mutual funds for the long term. Index mutual funds have very high expense ratios of more than 1%, but in comparison the index ETFs have lower expenses, like the NIFTYBEES etf has an expense ratio of just 0.1%. The SBI NIFTY etf has an expense ratio of 0.05%. There are no exit loads or transaction charges. These are passive funds that just track the basket of companies in the NIFTY index.
I think index ETFs should also form an important portion of a person's long term/retirement investment portfolio, apart from mutual funds.
Also, for this monthly charge Zerodha doesn't provide any analytics or advisory while many other direct fund providers, at a similar monthly cost, do (and couple of them won't even ask you to have a demat a/c and pay for it).
But there are no transaction charges in zerodha on buying equity (delivery) or MF. So it is still cheaper than piggy for someone wishing to make a large number of transactions or someone who doesn't want an SIP but wishes to invest manually every month.
Also, if you need a demat account for some other purpose - like investing in ETFs or equities then maybe it makes more sense for some people.
If all you are doing is an SIP with a couple of mutual funds, which is what most people around me do, piggy is probably cheaper. You can always have a zerodha (or equivalent) account for equity/ETFs/etc. and piggy for MFs.
But for someone like me with slightly different requirements, zerodha would be cheaper. I have a variable income so SIPs are not an option for me. I invest money as a percentage of my income so the amounts vary every month. In this case zerodha turns out to be cheaper despite the demat charges.
Regarding your point on ETF you're correct. ETFs are a low cost option in the long run and are ideal for retirement. But that is primarily true in developed markets currently where it is difficult for most managers to beat the indices. In India atleast for now actively managed mutual funds are providing more returns than the index. As our markets develop we would converge with the trends of the developed markets.
Having said that we would definitely be adding meaningful products for our customers on the app! Do give it a try and let us know what you think.
About buying mutual funds or anything else in demat form, anyone who has used demat accounts will know is a lot more convenient. Yes, Franklin will come soon, but almost all the others are already there. Setting up SIP without NACH, flexibility to move from one demat to another, single portfolio view across all asset classes, easy inheritance to nominee/dependents and more. But yeah, this is up for debate. :)
My question for you though is a little tricky, and I am asking this to every startup building a business around MF in India -especially the direct MF kinds.
How will the business make money?
For Zerodha, selling MF is not the main business. After getting to 150 crores of AUM in 2.5 months selling direct MF (maybe the fastest any online platform has gotten this much AUM ever in India), I am not sure if there is a viable standalone business model to run this at Rs 50/month or say Rs 30/transaction or even upto Rs 2000/year that some other direct MF platforms are charging. I can run it because MF contributes to less than 0.5% of our business and there is no acquisition cost or running cost since this is extension to how we settle stocks in demat. If cost of acquisition is between Rs 500 to Rs 1000 (considering minimum advertising/salary and doing full KYC), and you take 1 to 2 years or more to just recover that cost. How will the business sustain? Is the plan to sell advisory at a higher fees like others, if yes how much?
Have been in this for 20 years, I can also tell you that when markets starts to trend down, people stop investing. Won't your transaction fees model put stress on your balance sheet then?