Thriving to Surviving - Reshaping the Broking Industry

By Prakarsh Gagdani

At an event organised by ANMI, I was invited as a panelist to present my views on a very relevant topic – ‘Thriving to surviving – Reshaping the broking industry’. Here are some key takeaways from the discussion.

In my opinion, Mobile has been the game changer. The broking industry, notably, has transformed from the dependence on a dealer to lock-in trades, into a more independent and mobile-driven trading. Considering the evolution of the broking industry over the past five years alone, it should come as no surprise that Mobile is set to bring even more disruptions to the industry.

Now consider these facts: one, India is a young country, with majority of population under the age of 35; two, about 4% of the country participates in the capital market against around 40% in the developed countries; and three, the market cap of Indian equities is roughly USD 2.1 tn against USD 30 tn in the US.

 Given this reality, there is undoubtedly a huge opportunity for further penetration of the broking industry in India. And to capitalise on the sector’s prospect, the best way forward to reach out to the masses can only be driven by ‘Mobile’.  

At 5paisa.com, Mobile has been the cornerstone from our humble beginnings two and half years ago. Till date, every product that we have launched, went up on the mobile app first and was then introduced on our other platforms. We were the first broker to open our mobile app to general users and not just our customers. In another first, we introduced m-pin, which only featured in internet banking apps back then. We were also the pioneers to enable end to end online account opening through mobile. Consequently, today, ~ 75% of our transaction volumes come from mobile.

One of my co-panelist also indicated that in the US ~ 30% of the trades happen through mobile devices and this ratio is over 50% in Singapore already.  He acknowledged that Mobile is the way to go forward and more so for countries dominated by the youth.

Interestingly, in India, over the past few years, retail participation has been on a rise and a large part of the growth is coming in the discount broking segment. Looking ahead, I believe that discount brokers possibly will have a dominant share, similar to countries like South Korea, where capital market activities are prominently driven by discount brokers or wealth managers.

To conclude, I strong feel that the broking industry has still not unleashed its potential in our country. With burgeoning young population, strong digital penetration and growing focus on financialization, the segment will remain promising and witness huge participation from the retail segment - both in direct equity as well as mutual funds, in the coming years. Consequently, there will immense growth opportunity for all the players in the market and the best is yet to come for the industry.