Tajinder Virk reveals Finvasia Group’s ambitious plans for Cyprus

Established in 2009, the India-based Finvasia Group has assembled an impressive portfolio of trading platforms and healthcare businesses. Here, Tajinder Virk, the Group’s co-founder and CEO, delves into the parallels between wealth and health and reveals the Group’s ambitious plans for Cyprus.

Tajinder Virk, co-founder and Chief Executive Officer of the Finvasia Group, first visited Cyprus in 2018 to finalise the acquisition of the Limassol-based online broker, Fxview. Unlike his business travels to other island nations, characterised by meetings with lawyers in Bermuda shorts, this experience was decidedly different and Virk was pleasantly surprised by the smooth competence of the local services sector. Five years on, the Finvasia Group is planning to expand its footprint on the island by moving the main operations of ZuluTrade, a social trading platform in the Group’s robust roster, from Greece to Limassol. It will also increase its local workforce, currently close to 50 employees, by 100% by the end of 2024 – aiming to hire Cypriots – and intends to launch an Electronic Money Institution (EMI) in Nicosia.

In 2007, the then 26-year-old Tajinder Virk served as Vice-President at Fortis Bank in the US, managing a substantial US$1.6 billion in emerging markets, mainly South America and Asia. Meanwhile, his brother, Sarvjeet Singh Virk, had charted a successful path as a management consultant in the US. “When you’re young, your biggest motivation is to make money. So being a trader on Wall Street, you felt like a rock star,” Virk recalls in a pensive tone.

Working in the emerging markets segment, he could see the widespread need for access to capital and so, bolstered by youthful exuberance and a touch of naivety, he presented the bank’s top brass with a plan to open Fortis India. Alas, it thought otherwise. A Royal Bank of Scotland consortium led by Fortis Bank and Spain’s Santander acquired ABN AMRO, the third-largest Dutch Bank, for US$ 100 billion, winning a bidding war with Barclays – the largest acquisition in the banking industry at the time. “I thought that I’d run the show. But I was too young to understand the complexities,” he says. “That’s when my brother and I decided to stop asking people to do what we wanted to do and go about it ourselves. That’s how Finvasia was born.” As for Fortis Bank, its acquisition, coupled with the 2008 sub-prime crisis, caused serious issues, eventually leading to its demise; unbeknownst to him, Virk had dodged a bullet.

Founded in Canada, Finvasia entered India (the brothers’ homeland) as a foreign institutional investor in 2009, engaging in transactions across 14 countries, primarily managing wealth for hedge funds and family offices. Both brothers being engineers by trade, they based their trading and investment strategies on quantitative models and computerized automated trading. Algorithmic trading witnessed rapid growth in the late 2000s, with algorithmic traders capturing 20% of the US securities markets by 2009. While institutional investors predominantly used such trading at the time, it hinted at where the future would lie for the struggling retail investor space. According to Bloomberg Intelligence, in 2010, retail trading accounted for less than 10% of the total US stock market trading volume. Not long after, Finvasia started to feel the pinch of brokerage, so it bought its own licences, keeping its whole business activities in-house. “Then some of the employees suggested, ‘Since you have these licences, why don’t you get into the brokerage business?” But it did not really feel right,” Virk expounds, adding that the sticking point was that the old brokerage model had been proved obsolete. They had to do it the right way, building a trading platform for the digital generation: a mobile-friendly, community-oriented, cost-effective platform.

The first to bring the zero-commission model to the masses was the California-based Robinhood in 2015. “But traders still had to pay for the clearing fees and technology; you couldn’t really make it zero cost with that model,” he notes. Also, several zero-commission trading platforms, including Robinhood, made money through the payment-for-order-flow practice (PFOF), comprising routing their users’ traders through market makers, which paid hefty sums in exchange; it allowed them, to an extent, to offer commission-free trading. This model has come under heavy scrutiny in recent times, with a consensus reached in the top EU echelons to ban the practice in the upcoming MiFID updates. Against this backdrop, Finvasia became a professional clearing member on bourses, developed in-house technology, and in 2015, introduced Shoonya, offering zero charges relating to administration, clearing, and technology. No PFOF either. The launch of the trading platform signalled two things for Finvasia: its transition into a fintech company and the shrinking of its institutional investor role. Today, it oversees only family funds, with most of them invested in long-term holdings, and has relinquished its proprietary trading licence in India, too. “By 2017, we started feeling very successful, making plans internally to expand more – there is nothing like an Indian, a UK, or a European brokerage. It has to be global,” Virk says. “And Fxview was our first acquisition in Europe.”

Adjusting my headphones – this is a conversation over Zoom – I ask, “How did you get into the health business, then?”

According to Virk, the connective tissue is technology. “Engineering has a lot of scope to create and rebuild these industries, as we have not experienced before,” he says.

The Group’s healthcare arm, Finvasia Health, is developing Bodyloop in collaboration with the Indian Institute of Technology, a bioengineering startup that builds nano-devices designed to go inside the body and monitor its activities. Virk draws parallels between the imperative of monitoring bodily functions with the roguish elements of the black box models he built to trade the markets; when they went sideways, it was already too late to fix the problem. “Why is it that we are exploring space but we can’t monitor our body so well? It should be relatively easier to explore the body than to explore space,” he says. Beyond Bodyloop, it has invested in a research company developing raw food-based medicine.

The company has recently filed a patent for utilising an extract that targets skin-related ailments such as psoriasis. Another division is working on therapies for conditions like diabetes. Additionally, Finvasia Health operates a medical facility that works like a well-oiled conveyor belt. Virk explains, “While a patient is waiting, we do the blood tests, and by the time he sees the doctor, we have fresh results. We also realized that the cost of these tests in the market was five to ten times greater. Is it the scale? The volume? Is it greed or fear? What is driving this kind of margin? We’ve made it extremely cheap for people because, for us, it’s always about the volumes and masses. If you can ethically make 10-20%, that’s more than enough; you don’t have to make 500%.” With the ‘for the masses’ model working well in financial services, Finvasia bet it would yield similar results in the healthcare space. “Right now, we are focused only on India and a little bit of a footprint in Canada, not too much. We will hopefully expand as we have more technology built to serve the masses and the right approvals to go into specific markets,” he notes.

Back to trading. In 2020, five million retail brokerage accounts were opened (15% of U.S. equity investors) while more than six million Americans downloaded a trading app in January 2021. Europe, Asia, and Africa saw similar trends. The main culprit? The pandemic lockdowns left the millennial generation with too much time and dwindling savings. Terms like ‘finfluencer’ emerged, referring to influencers building an audience by dispensing investment advice – which prompted watchdogs across the world to warn retail investors that a YouTube video did not constitute sound advice. Nonetheless, the masses did become more educated overall. The growing numbers of retail traders have also led to a market consolidation. “I believe that consolidation is good for any industry as complicated and sensitive as finance; the better companies prevail,” Virk says.

Finvasia does appear to have come out on top: the five trading platforms it owns attract between six and seven million unique visitors every month, with one registration every 30 seconds, and has cumulatively served several million clients in over 190 countries, with operations in 11 countries, including India and is expanding further into North and Latin America. Almost all brands are EBITA positive – Finvasia has never raised money to build its portfolio. “We’ve been doing what we said we’d do, which makes a loyal customer base. And by having so many different financial services and products within the Group, the ecosystem feeds itself. That is one of the drivers. Plus, I think, maturity: brands are like wines. And I think one of the most beautiful things about Finvasia is that 80% of our employees are under 35 years of age,” Virk says as he explains the reasons behind the Group’s growth.

The uptick in regulatory supervision, particularly in Europe with Brussels taking a much more bullish stand to protect retail investors, does not concern Virk. The Group, after all, is registered with 35 regulators across the world, has an investment bank license (among several other licenses), and is in the process of acquiring an EMI licence from the Central Bank of Cyprus. “I believe regulation is very good, both for financial services and healthcare, but I do see a downside; whenever we increase regulation, we will affect innovation. So, there has to be a sweet spot to combine the two, although no-one knows what the real balance is. At the end of the day, necessity is the mother of invention and people will find ways to innovate. You just have to make sure it is done with the right intention and for the right problem,” he says.

One of the big innovations coming trading’s way (and healthcare’s for that matter) is Generative AI. While Virk deems it premature to delve into the specific opportunities that Generative AI may bring to the industry, he sees the potential to reduce dependency on intermediaries. More importantly, by crunching data at such speeds, robo-advisors can attain a level of sophistication that enables them to caution retail investors against impulsive actions. ZuluTrade, for example, is one of the oldest social trading platforms, having transacted over US$2.5 trillion in value. “There’s so much data about people’s trading habits from the last 15 years. So, where does the impulse come from? It comes from greed and fear. Can we somehow quantify that and assist our clients?” he wonders. A similar potential lies in healthcare, with Generative AI poised to alleviate the burdens on doctors and introduce much-needed efficiency to the system. Virk, though, emphasises caution, urging an awareness of the current limitations of these technologies. He warns against blind adherence, highlighting the backward-looking analysis ingrained in mathematical models and the potential for new robo-advisors to become echo chambers, merely reinforcing individuals’ existing beliefs.

Finvasia’s expansion in Cyprus constitutes a broader global push to expand its human capital footprint within the financial services sector, from 600 to 1,000 employees. On top of that, Virk says, the Group wants to invest in incubating companies, sponsoring research and leveraging what is available in Cyprus’ universities. More interestingly, it intends to build a talent pipeline on the island, using the tried-and-true management associate programme that Finvasia has operated in India for the last 15 years. It involves hiring 10 to 15 young kids out of college and grooming them over five years to become future leaders. “It takes patience to build such a workforce but it is very loyal, free of baggage, and committed towards a common vision,” he emphasises.

This interview first appeared in the November edition of GOLD magazine. Click here to view it.