With over 13 million users, Flip has become part of Indonesia’s maturing fintech culture. But while the company started out in 2016 with a product centered around free money transfers, their product-market fit has had to evolve over the years. Flip’s VP of Product & Design, Sourabh Gupta, walks us through the latest developments in Flip’s product-market fit journey, with lessons for the startup PM and entrepreneur. 

More on Flip’s journey

TLDR: 7 Ways to Let Go of Your First PMF and Move On To Unlock More Sustainable Value for Your Customers, a Product Management Executive’s POV

When it comes to early-stage venture-backed startups, there is the popular heuristic around finding product-market fit, often tied to the company’s ability to fundraise. While there is truth to that, it is not the whole picture.

And as the company grows beyond its first round, the company will often have to let go of (focusing on) this hard-earned initial product-market fit, in favor of expanding the business model’s revenue streams and capturing more customer segments for longer periods of time.

In this latest episode of On Call with Insignia, we had the privilege of hosting Sourabh Gupta, the VP of Product Management at Flip. 

In this TLDR, we recap 7 ways Flip has evolved its product-market fit beyond free P2P money transfers over the years and more recently in today’s economic environment, through the lens of the product leader.

4 Ways From the first half of Part 1: 

1️⃣ Products to achieve scale quickly are often not the same products to create healthier margins. The former can lay the foundations for expansion into the latter.

As Sourabh shares, “Globally, there are many examples of companies which started off with this but diversified their product portfolios into building products, which give you more revenue…Payments generally are not the end use case…”

2️⃣ The more complex a product ecosystem becomes, the more important it is for cost management to be bottom-up.

“If you’re top-down, you can only do so much. There could only be so many ideas that you will have, which are low-hanging fruit, which are very obvious…but when you put the entire team on board, they have a very good idea of what they can do in terms of cost-saving.”

3️⃣ There’s no formula for introducing new pricing; finding the right balance between margins and churn is key.

“So our idea was clear: if we are able to lock in these pools of users who unlock enough value from our platform, then they should be willing to pay for that. We did multiple AB tests to calibrate what is the value at which churn is not too much, but growth is still there.”

4️⃣ It’s not just about expanding the product mix; there may be product segments waiting to be unlocked.

“How do we unlock this additional user segment who has a similar problem but needs to be addressed differently? How do we get this additional segment because if you want to grow, you either get people from, let’s say, other competitors who are doing the same thing, or you’re bringing new users who haven’t come to your platform.”

7 Ways From the second half of Part 1: 

5️⃣ Marketing also needs to evolve with product-market fit. “We’re no longer going to be just about free transfers… We’ll offer one of the best transfer experiences at pretty cheap costs, real-time, and scalable.”

6️⃣ Build infrastructure that is reusable and scalable across different products and customer segments.

“We build what we can reuse and we reuse what we have built. So all of this infrastructure, which we built with partner integrations, et cetera, and orchestration on top of it for consumers, we extended that to the business side as well…” 

7️⃣ Fundamental to any product-market fit evolution strategy is finding out what your business is the “super-app” or “everything store” for. It may not be the be-all, end-all of your business, but it can be the foundational thesis for expansion.

“We also built subscription products, to see how we can unlock more value from users who are loyalists. We invested a lot in cross-selling as well because we have other products as well, right? We have digital products and other things, which are things that everyone needs, like paying your electricity bill…If they are coming to Flip to solve one problem, why not solve their other problems as well?”

The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any ⁠⁠⁠⁠⁠⁠Insignia Ventures⁠⁠⁠⁠⁠⁠ fund.

About our guest

Sourabh Gupta is VP of Product Management at Flip. With more than 14 years supporting the growth of very large organizations and bootstrapped startups across Product Management, Consulting, and Engineering roles, he brings to Flip his expertise in leading cross-functional teams consisting of product managers, analysts, and engineers across India and Southeast Asia as he leads Flip’s product and design functions. He was previously Head of Product International Expansion and then VP of Payments Platform at Gojek before joining Flip.

Transcript

Part 1: The Art of Evolving PMF and How Flip has grown beyond its free transfer proposition

Paulo: Yeah, I wanted to start with this concept of the “year of monetization,” which I quote from Gita, who is actually Flip’s COO and who we had on the show earlier this year. She was saying that, at least for the Indonesian ecosystem, this 2023 is the year of monetization for startups. And as you said, the theme has changed since we last talked. 

How has that theme, you know, the year of monetization played out for Flip with regards to its value proposition to different types of customers, from consumers (B2C) to B2B, even the enterprise over the past year?

Sourabh: Thanks for the question. I mean, let me talk about it. And I think I’ll try to give a broader view first because I think that’s important to understand for those listening in as well. And then deep dive into a specific product that we have. 

So I think what happened, and again, a little earlier than 2023, is when we started to realize that we don’t want to be just known as a transfer app or a transfer product, right? And there were a few factors to that. 

One, again, our vision—if you look at Flip’s vision, it is to be the fairest financial services company, right? And transfers, etc., were a means to get to that final vision. So that vision was always there in our minds. And we were clear that it’s time for us to act on that in a more direct way. 

And the other thing was what we also realized, and if you see the market, not only in Southeast Asia, you’ll see that transfers payments are very commoditized in nature, especially on the consumer side. Very hard to monetize very deeply to build a kind of sustainable business. And that’s what we also were cognizant of, right? Like you can’t just be focusing on that. 

And globally, there are many examples of companies which started off with this but diversified their product portfolios into building products, which give you more revenue. So those were the thoughts as well in our minds.

And along with that, there was a kind of internal realization that you know, everyone knows Flip as a Flip app for consumers, but we had a B2B vertical or a business vertical as well where we offered transfers and payment acceptance service as well. 

So this year, if you ask me, there were two key strategic decisions that we took, right? Number one: diversify your product portfolio. And that’s where we are venturing into financial services still very early, but yeah, that’s definitely a bet that we want to take. And secondly, double down on our business vertical.

Bottom up cost management

Another thing — I think what changed for us this year was similar to what a lot of other companies would have done. In terms of cost-cutting, I know everyone did it; we also did it, but one of the things which I want to highlight and what I think we did differently at Flip was that it wasn’t purely a top-down activity. I mean, of course, there were some top-down initiatives. 

But I think what we did very well was we got the whole team together. We got the whole company together to understand why this is a key priority for it and what we need to do, which I think is very important because if you’re top-down, you can only do so much.

There could only be so many ideas that you will have, which are, let’s say, low-hanging fruit, which are very obvious. But when you put the entire team on board, then this team is doing, taking decisions on a day-to-day basis, taking product decisions, day-to-day basis. And they have a very good idea of what they can do in terms of cost-saving. 

And I’ll share a couple of examples. This one is very recent, where I think three weeks back, one of our PMs who manages the integrations team came to us and said, “Hey guys, I was just analyzing a particular scenario. And I think if we change this routing, we will end up saving like 50 million per month.” It’s not a lot, but it’s still a decent amount. But what I like is how this was very bottom-up.

Similarly, some engineer will come one day and say, “Okay, I think I can optimize this query or change a particular scenario, and it will help us save like a few hundred dollars.” The amount may be less, but what we really liked was that the entire company was rallying to it. 

It wasn’t like [just] a management goal. It was a company’s goal to cut down on costs and so on and so forth. And I think full credit to Ari for this because he was able to rally the team for this and a collective, it was a collective cost for it where everyone was thinking, “Okay, revenue. How do we get revenue, right? We’ve talked about growth enough. How do we look at revenue?”

And as part of revenues also, you need to look down at the cost that you have. So all in all, just painting this broad picture.

But one point I think I want to deep down as part of this whole narrative is what everyone knows so far, which is domestic transfers or interbank transfers, that has been the hero product. And the reason I talked about all of this was to talk about how we’re thinking at a high level, but now let’s go deep. 

Deep Diving into Flip’s PMF

So the thing is that was the first product market for Flip, right? Everyone knows us for interbank transfers, right? That’s how people started coming in. 

But the key thing is, along with being synonymous for interbank transfers, there was an additional point: free interbank transfer. That’s how we pitched as well. 

Back in the day, we used to talk about free interbank transfers…but I think what everyone has to realize is it might be free for some, but it’s not free in the end. There is no free lunch. So we were incurring a cost. 

So the key question for us became, for domestic transfers, which is our key volume, you have millions of transactions happening every month. How do we make it profitable? Because you can do whatever else you want, but if you keep on burning money here, it’s not going to make us a sustainable company over the long run. 

So this is the key problem. I think this year we tackled that, and the idea was simple, right? To be positive, increase revenue, cut down on costs, and of course, now cutting costs was easier because I think that was more internal to us. 

And that’s where we did multiple newer integrations, be it BIFRs, integrations with newer banks, renegotiated our costs with a lot of our partners, which brought down our blended cost per transaction. 

But the revenue part was still harder to crack because this was a change in our brand positioning altogether. And that’s where our marketing team also played a key role where we changed how we position our products. It was no longer free interbank transfers, right? But it was about interbank transfers and financial services overall. 

Our idea was simple; the idea was that you know that If we are able to provide a superior experience to our users and we have a lot of loyalists by the way, right? Our repeat users month on month are a very high number. 

So our idea was clear: if we are able to lock in these pools of users who unlock enough value from our platform then they should be willing to pay for that. 

And for that we did a lot of experimentation because there was no formula for it, right? How many free transfers? What should be the fee for it, right? So we did multiple AB tests to calibrate what is that value at which your churn is not too much, but your growth is still there and your margins are justifying whatever churn that is there.

So we did multiple experimentation, long-term experimentation to see retention. We ran experiments for three, three months to see if it is impacting retention month on month or not. And that helped us make this decision. 

So these were not like just top-down decisions or top down objectives that were given but the product team was completely on their own to figure out how they will execute this on similar lines. 

We also built subscription products, to see you know how we can unlock more value from users who are loyalists. We invested a lot in cross-selling as well because we have other products as well, right? We have digital products and other things, which are things that everyone needs, like paying your electricity bill. 

So we have those products, but what we realized was out of let’s say a hundred users coming to do transfers, only a fraction of them were doing these other transactions, which were all revenue-making, by the way. 

So the whole idea was if they are coming to Flip to solve one of their problems, why not solve the other problems as well, because so far they might be going to a different platform for the same. 

Part 2: Orchestrating Product Repositioning and Why Competitive Moats Don’t Last with Sourabh Gupta

Evolving PMF for a Consumer Fintech

Paulo J: I did want to go back to this whole B2C element and talk about — you mentioned that transfers, payments, and a lot of the basic financial services will tend to be very commoditized, and it can get very competitive — how have you thought about the competitive landscape in terms of how it impacts the way you approach trying to build an even better product-market fit than what you started out with, which was already great to begin with?

Sourabh: I think what we are realizing is that you hit a plateau with different kinds of user segments. So what we are realizing is for a particular kind of user segment, we might be plateauing out on how many more we can onboard without burning too much. Because you need to be wary about what you burn on growth. 

So that is where I think what we are trying to see is what is this additional user segment. Who has a similar problem but their needs need to be addressed differently. How do we unlock them? How do we get this additional segment because if you want to grow, you either get people from, let’s say, other competitors who are doing the same thing, or you’re bringing new users who haven’t come to your platform. 

So now getting people from other competitors might be a harder sell. And that’s why we are thinking, okay, how do we get this newer set of users and how to attract them as well. So the strategies we are using based on the product is also varying somewhere for some of the products we’re thinking about using an affiliate kind of a growth model. So again, different strategies, but that is definitely one of our focuses for 2024, how to scale more.

Paulo J: Are there any particular segments that you’ve already expanded into over the past year that you guys are maybe looking at?

Sourabh: Yeah. So I think one of the segments is the underbanked segment, right? Because if you look at Flip today, it’s mostly people who have bank accounts who can use Flip, right? But what about the vast majority of people in Indonesia who don’t use banks that much? Or who are underbanked? 

I have data from a lot of past research that I’ve done as well, where a lot of people who have, let’s say, moved money through cash, but they also have needs to transfer, etc. And the setup that is available to them is very expensive. For example, someone in a tier two city, right? They might be using an agent or someone and that person charges five to 10 percent of the transfer amount, which is super high. 

So that is definitely a segment which we are excited about. It’s harder to crack. That’s why not everyone is there. It’s harder to crack, but we think that if you want to scale beyond a certain level you need to do the hard things.

Paulo J: I also wanted to talk about the whole shift in branding strategy, which you mentioned in terms of focusing on the bigger picture for what Flip can do for consumers. So maybe you can share a little bit about the sort of the marketing side.

Sourabh: If you look for all of our ads or Play Store listings wherever we market, right? We always were like “free transfers”, right? But I think we changed that. That’s where it started off. 

We’re no longer going to be about just free transfers, right? We’ll give you one of the best transfer experiences at pretty cheap costs, real-time, and scalable. And we’ll offer other services as well, but this whole free component is not going to be there. Obviously there are certain free transactions, but after that we’ll charge for it. 

So that was the shift in marketing in terms of how our messaging was or how we were doing performance marketing, etc. We talked about it but that wasn’t the leading point. And it translated into the product as well. 

So it wasn’t that we stopped free transfers completely, right? Firstly it was, let’s say, unlimited then we put a cap and started monetizing beyond that. We saw how many people churned or how many people continue transacting then we reduce that limit as well. Then we looked at how we can add fees also so we improved multiple things — our SLAs, everything, because the point was, if you’re asking people for money, you can’t have a subpar experience, right? 

So the amount we invested in SLAs, if you look back just this year, has tremendously improved, right? 95 percent of transactions happen within like 30 seconds or so, and depending on the bank as well, because different routes have different SLA, but we focused a lot on that. We did a lot of design changes, and improved the experience there as well. 

So the overall experience got improved, SLAs got improved, our support got improved. When people end up transferring wrong amounts, there’s a refund process — we automated all of that. So multiple small things, which aggregate to improve the overall experience on the product side. And at the same time, on the marketing side, we also changed the messaging, how we are talking about it. So I think that it was a bunch of multiple initiatives.

Industry and Competitive Trends

Paulo J: Anything that you’re seeing, just zooming out a little bit in terms of like the Indonesian consumers moving into 2024 that would impact how Flip is doing things at this point in time, in terms of how consumers are spending or where they’re putting their money, all of that.

Sourabh: Yes, so I think what we are seeing is a deeper collaboration [between banks and fintechs], I mean the lines are diminishing. If you see the whole fintech revolution right, earlier companies specialized in just doing one thing. And then there was this [trend] where people started expanding to doing other use cases as well.

And now is where banking is also getting integrated into it. So not just specific to Flip, but I think overall, I see that’s how the ecosystem is changing. And if you see in Indonesia as well, Most larger fintechs or super apps have a banking part to it as well.

Banking is getting embedded into the whole experience. So I think that’s how I see 2024 and beyond where I think neobanks alone find it very hard to scale. So that’s why everyone is getting associated with let’s say a larger ecosystem. 

So that is a kind of theme which I see playing as well because with FinTech and banking merging that way, users will get a better experience in terms of the money they are storing and store value as well.

That redefines how people look at FinTech. So once a baseline is set, others start to do the same thing. So your differentiation or competitive advantage, I don’t think lasts very long in the tech world.

Paulo: So it will really be about the competition. Is it right to say that then it will really be about the loyalty that you build over time with the users that you have ultimately because then the costs might all just plateau and it would just be very commoditized, as you pointed out?

Sourabh: Costs definitely already are. And if you look at other mature markets, let’s say India as well, right? The cost of moving money is non-existent.

Payments generally, in my view, are an enabler anyways. Payments generally are not the end use case. So the more invisible payments are, the better it is for users. Because doing a payment or something is actually a bit of friction to achieve your end goal. 

If you’re buying something on e-commerce, the goal is to buy it. Doing payments is just an inconvenience that you need to go through. So that’s how I see the marketplace. 

Paulo J: Before we get into the B2B side as well (stay tuned for next episode!), I also wanted to touch on. The whole remittance piece which I did bring up with Gita earlier last year as well. I wanted to know your own thoughts on that, maybe even a little bit of a backstory from the product point of view of how that product came about and where it is right now within the whole sort of consumer mix that you have?

Sourabh: So we launched Flip Globe early 2021, but in a very pilot-ish mode. And what we were clear with was that if this doesn’t scale, then we might just [scrap] the product. No point just keeping it live. 

And we were pleasantly surprised with the kind of growth we got with limited investments early 2022. And that’s where we decided that this is definitely an area we want to double down on. And since then we have been growing quite well on that.

What we also did in this time is we in general flipped how we have architected and built platform teams. We put a lot of emphasis on [reusability]. So we build what we can reuse and we reuse what we have built. 

So all of this infrastructure, which we built with partner integrations, et cetera, and orchestration on top of it for consumers, we extended that to the business side as well, because similar to consumers, businesses also have a need to, let’s say, do international transfers. They will have, let’s say, vendor payments and purchasing outside of Indonesia. So we did that as well. 

And it’s still an early phase. So we still are trying to find a product market fit there. But on the consumer side the product market fit exists. What is interesting is that within the Indonesian user segment we have a very good presence. 

But within the, let’s say an expat segment, which is also there with, we are people remitting back money to their home country. That is where I think we need to build more of an awareness.

So that’s our challenge for 2024. That way we can cover both the segments and grow.

Paulo: And you did start talking about the business side, how you ported Flip Globe into the business segment as well. 

Stay tuned for part 2 as we talk about B2B synergies, bottom-up engineering, and what PMF and experimentation means for a growth scale company by following us on Spotify, Apple Podcasts, YouTube, or LinkedIn!