INTERVIEW: Sharekhan’s new discount broking platform will take no fees for a loss-making trade

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  • Sharekhan today announced its foray into digital-led discount broking with a new platform – Espresso.
  • In an interview with Business Insider, R Kalyanaraman, Espresso’s Chief Customer Officer, explains why for the 20-year old firm, discount broking was seen as the ‘need of the hour’ to serve India’s new age stock broking investor – the millennial Indian.
  • In a bid to win the confidence of the consumer, Espresso works on a model where it will take brokerage fees for intra-day trading only if the user makes a profit.
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Leading stock broking firm Sharekhan today announced its foray into digital-led discount broking with a new platform – Espresso. For the 20-year old firm, discount broking was seen as the ‘need of the hour’ to serve India’s new age stock broking investor – the millennial Indian.

And interestingly, in a bid to win the confidence of the consumer, Espresso works on a model where it will take brokerage fees for intra-day trading only if the user makes a profit. In an interview with Business Insider, R. Kalyanaraman, Espresso’s Chief Customer Officer, talks about Espresso and the company’s plan to take no charge for brokerages services if you register a loss in an intra-day trade.

Discount broking foray

Kalyan believes that multiple things have happened in the last three-five years that led to Sharekhan’s entry into discount broking. “There is clearly a segmentation of customers. One which seeks services from a full services broker like Sharekhan, they need a relationship manager, reports, and a lot more hand-holding. And in the last few years, we have observed the trend that there are a lot of new to market investors who want to do things by themselves,” he said.
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So Espresso was built for this emerging clan of customers who just needed digital support but would trade the DIY way. “An Espresso customer would be very different from a Sharekhan consumer,” he said.

Espresso will be competing with the likes of Zerodha who have already garnered a good reputation in the market.

Espresso Competition
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CompanyUsers
Angel Broking2.15 million
Zerodha3 million
Paytm Money (Mutual funds. Stock broking launched recently)6.6 million
Groww80 lakh
Source: Company data

Building for the millennial customer

Right from the name ‘Espresso’ to the look and feel of the website, it doesn’t look like a traditional stock broking firm. Kalyan says it was an intentional step to build a product for the new-age customer. “The whole idea of branding the new company Espresso was to communicate in clear terms that investing is not a taboo – it’s not something to dread about,” he said.

Kalyan shared that in the past few months, discount brokers account for nearly 60-70% of the total new accounts opened, which shows that the average investor age group is getting younger.
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Sharekhan CEO Jaideep Arora shared during a conference call with reporters that while they have already invested ₹50 crore in Espresso, they would invest more ₹25-30 crore along the way.

Free brokerage if you register a loss in intra-day transactions

Espresso has also made a bold move with a ‘Pay When You Profit’ pricing model for intra-day trading. With this, the company will charge brokerage fees only when you make a profit on the same day trading. “The idea was to give the customer an additional chance to learn from their mistakes. I’m trying to say that for an intra-day trade, even if you make a mistake, don’t worry, don’t pay me brokerage. There are multiple ways to connect with the customer and this is our way of saying we are in this for the long haul,” said Kalyan.
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And he dismisses that this model might not be sustainable. Instead, he says if they can build credibility with this model, they will show the consumer that they “are partnering with the user for the road to success”.

“We have a huge support from the balance sheet of BNP Paribas (Sharekhan’s parent company) and we can go ahead and paint the town red. We chose not to do so because we don’t want to just spend money and acquire customers. We hope to make a serious name in the stock broking industry and be in the top 3 in the next five years,” said Kalyan.

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