Stock broker Zerodha in its recent business update on September 26 said that it continues to be the only broker in India to charge ₹200 to open a demat account. In its update, Zerodha explains why it has kept the account opening charge at a nominal rate.
‘’There is an actual cost (KYC, documentation, eSign, human verification, etc.) that is incurred while opening an account. If there was no account opening fee to recover the cost, the business could implicitly be pressured to get a customer to transact to recover that cost,'' said Zerodha in its update.
The broker adds that this is not good for the customer or the business in the long run if a customer transacts due to a push from the broker, which causes the customer to lose money.
‘’Any attempt to explicitly recover this cost could also mean compromising on the many core principles at Zerodha, like the no-spam policy, no revenue targets for the team, and more. This is also why we don’t spend on advertising,'' said Zerodha.
Trading the markets is a serious business with serious risks involved, said the broker. Collecting an account opening fee right at the start also, in a way, helps set this expectation with a potential customer, filtering out users who may not be serious about trading or investing with the broker, according to Zerodha.
Zerodha Founder and Chief Executive Officer Nithin Kamath took to X, formerly Twitter, sharing how it took him six years to get the first 60,000 customers and the number increased to one crore in the next six years owing to the digital infrastructure.
"It took us 6 years to get to our first 60k customers, each of whom had to sign and courier 40+ pages of forms and wait for days. We got to 1 crore customers in the next 6, entirely eliminating paper in the process. This was enabled by eKYC, digital signatures (eSign), & digital documents (Digilocker)," he said in a post.
He added that with digitisation there has been a steep increase in productivity, savings, and an "exponential" huge reduction in wastage for companies and customers. "Hundreds of millions of pages that didn’t have to be printed and transported and valuable customer time that didn’t have to be wasted. Most of our time in the first six years was spent figuring out how to send forms back and forth collecting documents," Nithin Kamath shared.
Kamath also said that they had around 900 on the team in late 2017 with around 5l,000 customers. Today, Zerodha has 1.3 crore customers with around 1,100 on the team. ‘’And this while our customer support quality has improved significantly. We have done many other things right, but doing away with the physical process has helped exponentially,'' said Kamath.
Meanwhile, an analysis by domestic brokerage firm Motilal Oswal Financial Services showed that the number of demat accounts rose to 12.7 crore in August 2023, a surge of 26 per cent on a yearly basis, primarily due to attractive returns from equity markets, and ease of account opening process.
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Also, the incremental additions of such accounts were higher in August in comparison to the preceding month. Further, this was way higher than the average 21 lakh monthly additions in fiscal year FY23, according to Motilal Oswal. The new account additions rose 4.1 per cent month-on-month to 31 lakh in August compared to 30 lakh additions in July.
Going by the data, a total of 12.7 crore demat accounts were registered with the two depositories -- NSDL and CDSL-- at the end of August 2023 as compared to 10.1 crore a year earlier. The number of demat accounts was 12.3 crore at July-end.
Out of the 12.7 crore total, 3.3 crore, and 9.35 crore demat accounts were registered with NSDL and CDSL, respectively at the end of August, data from the Securities and Exchange Board of India (SEBI) showed.
Market experts said additions in dematerialized (demat) accounts are driven by attractive returns from equity markets and the ease of account opening process offered by brokers to their clients.
Also, the increased financial literacy and the growing popularity of trading among youth have been some other major factors contributing to the rise, they added. The count of NSE active clients has been increasing for two consecutive months. The active user clients in the industry as a whole rose 2.5 per cent month-on-month to 3.27 crore in August.
The top five discount brokers --Zerodha, Angel One, Groww, ICICI Securities, and IIFL Securities -- accounted for 60.8 per cent of overall NSE active clients last month, down from 61.2 per cent in July.
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First Published:
26 Sep 2023, 03:55 PM IST
