Brokerages bet on technology to woo customers
Brokerages are stepping up investments in advanced technology as more investors turn to mobile trading
Mumbai: Mahiyar Adajania, 48, who works in the financial division of a manufacturing company, uses ICICI Direct.com’s trading platform to handle all his investments, from mutual funds and equities to futures and fixed maturity plans.
“Now everything is taken care of from one trading account with a click of a button," he says. “It is easy to track my financial investments; I can access my account from anywhere, including my mobile with an Android application."
Brokerages have been roiled by tepid retail and institutional interest because of the uncertainty in the market and the bleak economy, which has weighed on their profit margins because of declining brokerage.
And with more people like Adajania wanting greater control on their investments, brokerages are investing in improving technology to provide a wide bouquet of products and information.
“In last two years, there has been 50-60% decrease in broking margins; therefore we are making good effort to automate systems and processes to compensate for the same," said Pradeep Gupta, co-founder and vice-chairman, Anand Rathi Financial Services Ltd.
Anand Rathi is a financial services firm and it provides equities, commodities, currencies, mutual funds IPOs, insurance and research through their online platform.
Many brokerages are stepping up their investments in advanced technology such as big data and mobility.
Online trading platforms now have portfolio trackers, detailed analysis, research reports, stock screeners and news updates, all offered through Web applications and across operating systems such as Google Inc.’s Android that dominates the Indian handsets market.
ICICI Direct.com, for instance, began with just a stock trading platform and now offers a single trading platform for customers to invest in a range of products—mutual funds, equity, fixed deposits, initial public offerings, bonds, gold exchange-traded funds (ETFs) and insurance.
Internet broking began in India in 1999 with only trading in shares and is now evolving into mobile trading, with an estimated 164.81 million people in the country accessing the Internet on their mobile phones or tablet computers, according to Telecom Regulatory Authority of India.
“We believe the cost of hardware and connectivity are the two biggest drivers for online broking to pick up," said B. Gopkumar, executive vice-president, head of broking, Kotak Securities Ltd. “The existing mobile displays and lower 3G spectrum cost will bring down transaction costs, (and) that will, in turn, drive the brokerage business."
“Many clients of Kotak Securities use either a tablet or a hand-held device to access their trading accounts. If Kotak Securities has to be a leader in retail broking it will be possible only through technology as more customers are going online," Gopkumar said.
According to Motilal Oswal Research, in this fiscal year so far, the retail segment’s daily turnover in the cash market fell to an all-time low of ₹ 6,401 crore. Retail and distribution client growth slowed to 4% year-on-year in the past two years, from an average of 17% in the three years FY09-11.
To attract more individual investors, Religare Securities Ltd in November launched an integrated distribution and financial planning platform through which investors can access mutual funds, bonds, non-convertible debentures, fixed income, initial public offerings and other asset classes.
Motilal Oswal Financial Services Ltd is also investing in technology, adding more products on its platform to attract retail investors.
“We have invested in the new integrated platform in the past one year that will give access to clients to a variety of asset classes...in the coming months we will be offering fixed income deposits, more variety of bonds and life insurance products to our clients," said Vijay Kumar Goel, chief executive officer (CEO), broking and distribution, Motilal Oswal Financial Services.
There’s a cost-reduction factor as well to the increasing interest in technology among brokerages. Goel hopes technology will help him get more clients and reduce servicing costs. “It is like an ATM (automated teller machine); margins of the banks will increase because they have to spend less on employee costs since machines are servicing people," he said. “Our margins (too) will improve because we don’t need to hire tellers; all the tasks of the retail investor will be done online."
Brokerage for futures would be as low 0.01-0.05% depending on the volume and for shares delivery would be 0.1%-0.25% for online trading, according to an industry expert who does not want to be named.
Says Gopkumar, “The broking charges are based on the volume of transaction. Typically the industry charges brokerage fee for online platform in the cash market in the range of 25-59 paise."
Basab Mitra, CEO, capital markets and wealth management, at Religare Securities, says analytics will be the key to identify and track investor behaviour and customize user experiences. “We have built capabilities to ensure that smart analytics consistently support our decision-making and strategies in this business," said Basab.
Dinesh Thakkar, chairman and managing director of Angel Broking Pvt. Ltd, has a similar view.
“Online trading has matured over the last decade and so has our approach to solving complicated trading problems with sophisticated and elegant solutions. What started as a straightforward trading platform has now turned into trading and instant information machine. Now the focus isn’t just on speed, it’s on adding value," said Thakkar.
About 30% of Angel Broking’s trades happen online and nearly 80% of its new clients demand online access, he said.
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