Initially limited to only digital payments space, Indian fintech sector is now slowly transforming the personal wealth management space with products ranging across mutual funds, fixed deposits, gold to stock trading and even algorithm trading.
While, the consumer base for traditional stock brokers had always been limited to high networth individuals (HNIs), the new-age digital and direct-to-consumer platforms have enabled both the mass affluent and mass market segments access financial investment advisory and transaction services.
Digital platforms accounted for an appreciable 16% of all individual user accounts in FY18. Deloitte has predicted this share will increase to 21% in FY19. While digital investing may increase at varying rates for different asset classes, features such as immediate service, improved product discovery and innovations in customer experience are likely to cause customers to increasingly gravitate towards these new-age platforms.
There is an unmistakable shift in consumer preference towards digital investment options and the main reasons for this are the superior customer service experience and cost-effective nature of digital solutions.
These two aspects are major focus areas for online stock brokerage platform TradingBells. The Indore-based company claims to combine the benefits of both full-service broker and discount broker to help customers get affordable and transparent stock investing experience.
A full-service broker is a premium broker-dealer firm that offers a variety of services such as research and advice, retirement planning, tax tips, and more. While, a discount broker is an independent stockbroker that supports customers in buying and selling orders at a much reduced commission rate that full-service broker. However, discount brokers do not typically provide research-based investment advice or in-depth analysis for investments.
Cofounder Parth Nyati told Inc42, “Discount brokers are like low cost airline carriers, affordable and a good solution for short distances but not very comfortable for long distance travel. We are providing all the comforts which a trader wishes for in terms of relationship managers, better customer support and research services.”
Pay For What You Use
TradingBells was founded by Amit Gupta and Parth in 2016 and soon raised INR 2 Cr from Mumbai-based stock broker Swastika Investmart. The company offers stock, commodity and currency broking services to customers and a flexible service model tailored according to the customer needs.
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For those already familiar with stock market or commodity market investing and are comfortable about making these trades on their own, the company offers mobile trading applications built for self-trading.
But TradingBells’s brokers and personalised research services are made for those opting for premium plans, along with a dedicated relationship manager “Such a flexible service model allows the customer to choose what they want and only pay for the services they use,” Parth added.
Since its launch in 2016, the company has acquired over 10K customers and is aiming to bring on board 100K active customers in the span of three to five years.
Even though the company aims to fill the service gap in discount broking sector, most of its revenue currently comes from their premium service product which includes access to the TradingBells research data and a dedicated relationship manager among other services. This could be indicative of the fact that the company’s client base has scaled beyond the experienced stock investors who would need less trade assistance.
Interestingly, customers do not have to pay any upfront fee to subscribe to the premium service of TradingBells, instead the company charges a slightly higher brokerage every time a premium subscriber performs a trade. It claims this is still lower than most other traditional full-service brokers.
Fighting The Resistance Towards Online Trading
Talking about their competitors, Parth said that the company does not face much competition in discount brokering because of the differentiated product and customer service standards. But he admitted that traditional brokers such as Angel Broking, Sharekhan and ICICI Direct are definitely bigger competition.
Parth also counted other wealth management products such as mutual funds, fixed deposits and gold investment platforms as rivals.
The competition from wealth management products is clearly growing for the stock brokering platforms. While popular names such as Paytm Money and ETMONEY claim to earn healthy returns from customers. Other major players such as Flipkart and Google Pay are also being speculated to enter the mutual funds and gold investments space.
Further, other players in the online trading space include Zerodha, Groww, Paytm Money, and algorithm trading tool Streak.tech, which is available as an integrated service on Zerodha and plans to soon be integrated with other trading platforms too.
“But we have a cost advantage over traditional(full-time) brokers so it is relatively easy to convince traditional brokers’ clients to switch to TradingBells.”
Even so, getting people to invest in stocks is not easy. According to Parth, convincing clients to invest their savings directly in the stock markets is a challenge, even though historically stocks have given the highest returns when compared to other asset classes mentioned above. He noted a resistance to change among such customers and prevalent myths around online trading as other challenges.
Booming Fintech Sector In India
Digital transactions in India saw a huge uptick during the previous term of the current government, with the announcement of demonetisation of INR 500 and INR 1000 currency notes in late 2016 playing a big role.
This coupled with the launch of Reliance Jio’s 4G services in 2016 also played a vital role in increasing the digital payments adoption in India. The number of internet subscribers in India surged by 54.28% from 2016 to 2018, from 391 Mn to 604 Mn.
Easier access to the internet means the total addressable market for the fintech startups operating in India is also growing at a healthy pace.
According to Datalabs by Inc42, the total funding in Indian fintech startups has surged by 8.67x from $164 Mn in 2014 to $1.42 Bn in 2018. In the same period, the number of funded startups increased 3.43x from 30 to 103. The top three fintech sub-sectors — payments tech, insurance tech and lending tech — combined made up 85.7% of the total $6.97 Bn funding in Indian fintech startups in the same period.
But how fintech platforms adopt new-age tech will determine the next generation of growth stage players and unicorns. Finding real solutions through the use of AI and ML is a challenge, and at the same time, fintech companies have to consider the implications of data localisation and processing, rules around which could change in the future. TradingBells is also exploring using the latest technology to grab the advantage, according to Parth. “We see the use of artificial intelligence as the next disruptive thing in fintech and TradingBells has already started working on implementing this technology to help improve customer engagement and experience.”