Distribution combined with trust will disrupt fintech business


Companies with higher consumer trust and the right per capita customer base will be successful in the contemporary world, believes Kunal Shah, founder of Cred.

When Kunal Shah, founder of Freecharge, launched his fintech venture, Cred, last year, he based the business model on a simple attribute – trust. He saw the merits of building a “frictionless environment that creates financial progress for its citizens,” so that people can trust that system.

In fact, trust is concept that Shah believes very strongly in. During a conversation with Navneet Munot, CIO of SBI Funds Management and Chairman of CFA Society India at the 2nd India Fintech Conference, he reiterated how this factor can disrupt the fintech business.

According to Shah, whenever an established brand with widespread distribution or trust builds a product feature, it could end up wiping out an entire product. He illustrated his point with digital cameras. When mobile phone companies decided to add cameras as a feature, this product category almost vanished. In fact, if one looks at a smartphone, most icons on the home screen were products earlier!

During their conversation about the employability of trust in fintech, Munot pointed out that the biggest asset of large traditional players is trust coupled with their huge customer database. However, seeing that most trust-related innovations are heralded by contemporary players and embraced by millennials, does this mean that legacy companies cannot leverage it?

Calling trust a complicated and under-researched topic in fintech, Shah explained that many companies would have this asset, but have been unable to solve the issue of distribution. “The question we need to ask is that if a payroll company decides to create interoperable loans between employees, will banks be required? Our fundamental definition of trust needs to shift in the new context because the younger generation trust their phones than a brand. And their confidence on using technology is significantly higher,” he stated.

He added that distribution combined with trust will disrupt the fintech business. In his opinion, even if a company deploys the latest technologies like AI, if they do not have distribution and trust, they are unlikely to be successful.


Whatsapp currently has over 1.5 billion daily active users and over 400 million monthly users in India. According to Shah, its consumer trust is significantly high since people share lot of personal stuff on it. So when this communication platform launches a payment feature, it has the potential to disrupt the fintech business.

“If a telco manages to get 10 million customers, what prevents them from lending and thereby disrupting the banking landscape? Similarly, a hardware tech company manufacturing 300 million phones knows more about a customer’s data and their financial behaviour. There is nothing stopping them from getting into investments like mutual funds,” he opined.

Of course, naysayers will say that these companies do not have expertise. But Shah pointed out that distribution had 10 times more power than capabilities. After all, capabilities can be bought, while distribution is extremely hard to build. As is trust. This is why when a company like Paytm or Google launches a new fintech feature; it is adopter quicker by people.


Till a few years ago, getting transportation in Delhi or Bangalore was relatively difficult. Now, people rely on ride hailing companies like Uber or Ola, though these are not traditional taxi companies. Similarly, consumers are willing to book rooms through AirBnB though it is not a hotel company.

These companies have instead used technology and created a rating mechanism to let consumers and service providers rate each other, thereby building trust. And countries that showcase similar examples of leveraging technology to build trust amongst are capable to showcase better economic growth. According to Economist Alex Tabarrok of George Mason University, research has shown than countries with low levels of trust could find themselves in a reinforcing cycle of greater regulation and lower economic growth. This is called a ‘distrust trap’.

So while traditional players have profitability, scale, ability to invest and a large database of customers, like Munot pointed out, unless they are a technology-first company, they are likely to become obsolete. This also explains why a media company like China’s Tiktok is a lending entity, offering loans at a click. This underlines that competition is not coming only from the immediate financial sector but from other areas as well.


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