Having regulatory foresight while building products is super important: Zerodha's Nitin Kamath

Zerodha founder Nithin Kamath (Centre) and CTO Kailash Nadh (Right)

Zerodha, India's largest stock broking firm, doesn't believe in the “move fast, fail fast” ethos.

In a panel discussion at Moneycontrol's inaugural India Fintech Conclave, founder Nitin Kamath said that one has to work with the spirit of regulation while building products, especially when operating in heavily regulated environments.

"For all of us regulated businesses, having a regulatory foresight is super important," Kamath said.

He gave the example of the Securities and Exchange Board of India (SEBI) cracking down on stockbrokers selling digital gold a few years ago.

"It never felt right because of the way it was structured. And we knew that one day, we'll get up and maybe SEBI will say you can't offer digital gold. Hence, we never took the effort of doing it. SEBI did get up one day and said that," Kamath said.

He also mentioned that Zerodha CTO Kailash Nadh has built an internal utility wherein all the circulars get listed every day and they analyse their potential impact.

Nadh, the other panellist in the session, said their approach to building products has been conservative and rooted in the principles of potential regulation in spite of growing in scale as a business and a technology company over the years.

"Many times, when crazy regulations have just appeared overnight, where we've been forced to completely change our systems, and business processes, we've been able to (do it), because we always end up imbibing that potentiality in our business processes and in our technology," he said.

Nadh said that over the last decade, it has become cultural for them to apply a "huge regulatory/risk perspective" to whatever they build and envision.

"It's an integral part of a product development philosophy, we don't really see it as a business feature or a financial offering, or a technology solution. It's also in equal parts a regulatory solution," he said.

"If you do that enough, over time, you kind of get good at predicting what can be changed and what can go wrong," he added.

Keeping things really simple and having the conviction to "avoid FOMO (fear of missing out) or shiny technology trends" has also been one of the founding principles for the company, Nadh said.

"I think a lot of organisations end up building way too many things, chasing short-term growth, short-term metrics. We've always had a simple and singular conviction of building things that are meaningful to our customers. So we've never really rushed to release new features or build new features arbitrarily. In fact, we discuss and shoot down most things internally," he said.

Nadh also noted that owning the technology stack is also crucial since it leads to low external dependencies and gives them immense regulatory agility.