Nithin Kamath, co-founder and CEO of leading stockbroking site Zerodha, on Wednesday sharply criticised the pervasive use of "dark patterns" in financial services apps, asserting that incentives in the industry often prioritise business gains over customer well-being. Kamath highlighted that Zerodha has consciously avoided these manipulative design practices since its inception, fostering customer trust.
On X, Kamath articulated one of the "biggest challenges in building a financial services business": the inherent conflict where "incentives are often skewed toward doing what’s good for the business and not for the customer. It’s very hard to consistently put customers first."
He elaborated on how this skewed incentive structure manifests, stating, "This is one of the main reasons why finance apps are full of dark patterns, more than almost any other category." The Zerodha CEO defined dark patterns as "design tricks used in apps and websites to make you do things that are not in your best interest." He pointed to various examples, including "pointless 'gamification' and casino-like features to manipulative notifications, lack of transparency, and pushing harmful financial products." According to him, "many platforms are, in some ways, incentivised to work against their own users."
To underscore his point, Kamath quoted the late investor Charlie Munger: "Show me the incentives, and I'll show you the outcome."
Kamath contrasted this industry trend with Zerodha's operational philosophy. He attributed the high level of trust among Zerodha users to the company's steadfast commitment to ethical design. "One reason Zerodha users trust us with their money is because we’ve avoided these practices from day one. Doing what’s right for our customers has always been at the heart of our philosophy," he said.
How common are dark patterns in India?
A 2024 report by the Advertising Standards Council of India (ASCI) revealed the extent to which dark patterns are embedded in Indian apps.
The report found that 52 of the top 53 most-downloaded apps in India used at least one form of deceptive design, including hidden charges, pre-selected consent boxes, countdown timers, or misleading prompts.
These tactics were not isolated or accidental but systematic features of many digital services, it said.
An even broader investigation by citizen engagement platform LocalCircles, conducted over 18 months, reached similar conclusions.
Based on inputs from over 230,000 consumers across 392 districts and reviews of 228 online platforms, the survey found that more than half of all platforms used the forced action pattern where users had to take unrelated steps such as downloading an app or providing unnecessary personal information to proceed.
Drip pricing was observed in 48 percent of the platforms, followed by bait and switch, subscription traps and interface interference.
The most affected sectors included edtech, travel, airlines, e-commerce, quick commerce, digital banking, ride hailing and streaming services.
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