There’s no need for any physical documents in today’s world. What’s your schedule like today? Let me check my Google Calendar. What do we need to buy from the supermarket? Let me check my Notes app. How much of your life’s savings have you pledged to the stock market? Let me check my investing app. No matter what we need to do, there’s inevitably an app for that. Although that offers a level of convenience that an increasing number of people can no longer live without, every once in a while something happens that shakes our trust in our digital overlords. That prompts many to decry the proliferation of digital systems in our lives and yearn for a return to simpler times. The latest in this long line of incidents is an alleged fraud by the digital investing platform – Groww.

A user alleged on social media that the platform had debited money from their account without making the intended investment. The user noted that the app showed the money as invested but didn’t allow them to withdraw it. These allegations led to Groww facing a significant backlash on Twitter – famously a haven for civil conversations where participants come armed with facts and figures to support their claims. In this article, we’ll take a closer look at this controversy, trace Groww’s path from its inception to where it is today, and touch upon the broader implications for digital investors.

Growing Unrest: Fraud or a Faux Pas?

Back in June, a Twitter user claimed that her sister had invested in a mutual fund scheme through Groww in September 2020. The app showed all the details including the folio number and investment amount like it would do for any other investment. However, when she tried to redeem her earnings from the fund, she was unable to do so. After failing to get a satisfactory answer from the company’s customer support team, the investor’s brother took matter into his own hands and posted a scathing fraud allegation about Groww on Twitter.

Perturbed the negative maelstrom of comments that followed, Groww acted quickly to refund the claimed amount to the investor ‘in good faith’. However, when Groww commissioned an internal inquiry into this alleged ‘fraud’ it was revealed that it was no more than a reconciliation error and no money had actually incorrectly changed hands.

According to Groww, the investor had initiated a transaction of Rs 10,000 in September 2020 and was assigned a Order ID as per normal. The error occurred when in the Registrar and Transfer Agent (RTA) files that Groww uses to verify transactions, there was another investment of Rs 50,000 for a different folio that had been assigned the same Order ID. As a result, when the initial investment transaction was processed by Groww, it took Rs 50,000 as the investment amount which reflected as additional units purchased in the investor’s portfolio even though the investor was only debited for Rs 10,000. During the inquiry process, Groww requested the investor to show bank statements which reflected the Rs 50,000 debit as they had claimed. Since no such debit ever took place, the investor was unable to provide proof. 

It’s simply a case of negligence from both parties. The investor was happy to see their portfolio grow over the last few years without checking the actual amount invested. They took Groww’s app information as gospel, without verifying details from the RTA. Groww, itself, was unaware of the data mismatch and likely would have remained so had it not been highlighted by the customer. How this technical error went unnoticed and how many more are still unnoticed is a matter of grave concern. Where do we go from here? To answer that, some context is necessary.

The Growth of Investing

While it may feel like investing has only really gone mainstream over the last few decades, the concept of investing has been around for centuries. Investing can find its roots in 15th century Belgium. With European powers at the centre of international trade, merchants start buying goods in the anticipation that prices will rise in order to net them a profit.

This continued until the first modern stock trading unit was created in Amsterdam in 1611. The Dutch East India Company became the first publicly traded company. As merchants began to make profits, investing spread across the ocean. A small group of merchants in New York began meeting daily to buy and sell stocks and bonds, a practice that eventually came to form the New York Stock Exchange.

India entered the investing scene in the 18th century when the East India Company began trading in loan securities. As more brokers entered the scene over the decades, Mumbai’s famous Dalal Street was born in 1874 with the group that is today the Bombay Stock Exchange set up a year later. Investing soon made waves across the nation with security exchanges being set up all over the country. For over 100 years, investing practices continued in India with a lack of transparency and undependable clearing and settlement systems. It was not until 1992 when the Securities and Exchange Board of India (SEBI) finally gained statutory power that the markets were regulated. 

In the years that have followed, a regulated market and the penetration of internet have democratized the process of investing for Indians. However, since the idea of investing in the country is still relatively new compared to developed countries, many people in India feel that the process of making an investment is still too complex and opaque. This is the insight that led to the genesis of Groww.

A Growwing Force

In 2016, four Flipkart employees – Lalit Keshre, Harsh Jain, Ishan Bansal and Neeraj Singh, quit their jobs to start a venture that made investing easy for the average Indian. They identified that there are close to 200 million people with investable income in India, of which only 20 million actively invest, leaving a huge addressable market. 

They pooled their expertise to set up Groww which started operations in 2017. Lalit became the CEO of Groww, looking after all the aspects of the business, with a focus on product and customer experience. Having worked as a Senior Product Manager at Flipkart previously, his attention-to-detail was key in helping Groww nail the customer experience. 

Harsh became the head of growth and business at Groww, leveraging his experience in both engineering and marketing. Neeraj became the head of product development and customer research. His experience as an engineering manager at Flipkart helped him create a unique product with Groww. The head of finance role was filled by Ishan who had previously worked with Flipkart in the corporate development domain.

Understanding that since users were putting their hard-earned money at stake when deciding to invest, the founding team spent a lot of time in market research. Intending to go to market only with a safe and secure product, they finally went live in 2017 when Groww was unveiled as a direct mutual fund distribution platform. Their hard work paid off as Groww became one of the most popular mutual fund investment platforms in the country in the first year of operations.

Following the success of its mutual fund investment services, Groww has since added investing options for stocks, digital gold, ETFs, intraday trading, and IPOs. Their entry into the stock market coincided with COVID-19 with fueled retailer investor participation in the Indian stock market. As more and more people sought alternative income streams during the lockdown, Groww’s user base grew exponentially. Today, over 9.5 million investors use Groww for their investment needs. It holds a 23.4% market share in India, making it the country’s biggest stockbroker, a title it first achieved in October 2023 when its user base surpassed that of Zerodha.

Decoding the Factors Behind the Growwth 

In a crowded fintech marketplace, Groww has carved a niche for itself through two key differentiators: exceptional user experience and affordability.

Groww boasts a clean and intuitive interface that simplifies even complex investment processes. The platform is designed to be accessible to both novice and experienced investors, offering educational resources and investment guidance on the way.

Groww also prides itself on offering investment options with minimal fees and charges. This focus on cost-effectiveness makes it an attractive proposition for budget-conscious investors, particularly millennials, who are a significant demographic in the Indian market.

Its success should also be credited to its impressive technological infrastructure. Groww leverages advanced algorithms, data analytics, and machine learning to provide personalized investment recommendations and insights. This has helped it build trust among its user base as the platform is always able to offer relevant and timely information. To further re-inforce trust and build long-term brand loyalty, Groww employs state-of-the-art encryption, two-factor authentication, and regular security audits to safeguard the data of its users.

Through all of this, the founders have not let go of one of the primary reasons behind setting up the company – promoting financial inclusion in India. The platform provides a wealth of educational resources that cover a wide range of topics, from basic investment principles to advanced trading strategies. The Groww Academy, an initiative aimed at educating investors, has helped de-mystify personal finance and investing and helped Groww position itself as a trusted advisor in the financial journey of its users.

Financial Growth for All

This user-first approach has translated into an impressive year-on-year performance for Groww.

In FY23, Groww posted a total revenue of Rs 1,294 crore which was up 252% from Rs 367.4 crore the previous year. The company’s net profit jumped over 10x from Rs 6.8 crore to Rs 73 crore in the same time period. While 90% of Groww’s revenue today comes from retail broking, it has recently diversified into credit and payments. It has started offering personal loans to its customers through the Groww app in the hopes of boosting its margins further. 

The latest round of funding for Groww was in October 2021 when it raised Series E funding of $251 million at a valuation of $3 billion. Groww is backed by Sequoia Capital, Ribbit Capital, YC Continuity, Tiger Global, Propel Venture Partners, and most famously Microsoft CEO Satya Nadella. 

Over the next years, Groww plans to leverage these funds to reach under-penetrated geographies in India by strengthening its team and scaling up its infrastructure. There are also plans to continually help improve the accessibility of financial services and education around personal finance to the people of India.

Next Chapter in Investing’s Growth Story

Despite the best intentions of investment platforms like Groww, it would be prudent for investors to stay vigilant about their investments. Investors should recognize that their role doesn’t end when the amount is debited from their account and the investment is made. They shouldn’t rely on Exeuction-only Platforms (EOPs) such as Groww, but should periodically verify their holdings through RTAs. They can provide Consolidated Account Statements (CAS) which investors can use to tally their investment portfolio.

While digital stockbrokers such as Groww offer unparalleled convenience, the ultimate responsibility of managing and growing their portfolio lies with the investors themselves. Digital calendars, notes apps, and investing platforms certainly make life easier. But the peace of mind that comes with personally verifying your portfolio? There’s no app for that.

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Written By: NIMESH BANSAL

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