The Discount Brokerage Company

Digital Business and

Innovation
From B13: Kalyani Gaikwad, Niharica Pingala, Parshva Shah, Praneeth Singana, Snehil
 INTRODUCTION
Products and Partners

• Zero + Rodha
(barrier) 
Zerodha Commodities Kite, Coin, Console Kite Connect API
• For commodity trading Platforms for trading, mutual fund Platform for businesses to create
Established: investments and  viewing  all trades their own trading applications 
August 15, 2010 and investments in one place
respectively

• 8+ million clients

• About 20% of
Indian retail Smallcase, Streak,
Zerodha Varsity Rainmatter Foundation
trading volume Sensibull, GoldenPi
Mobile application teaching Foundations instituted for investing
captured Stock portfolios, designing trading
trading and investment in upcoming companies and
strategies, options trading, investing
in bonds and debentures charity respectively
 Traditional Brokerage Industry

Financial Steep Operating

Trading Advisory Instruments Rate
Traditional A traditional broker
Brokerage firms give you brokers claim to provides a large
A brokerage will take your provide extra
buy and sell order and investment guides,   variety of services
tax- services such as to its clients 
facilitate  your transactions commodities,
saving recommendation including trading and
when dealing with securities -
s, retirement planning currency advisory and hence
like stocks, mutual funds,
advice, and deliver asset trading, come with a steep
ETFs, and others.
management services. advisory, operating rate, due
research, asset to these extra
management and facilities.
more.
HOW DISCOUNT BROKERAGE FIRMS WENT
MAINSTREAM
Price deregulation and technological advances
Market Share dramatically changed the brokerage paradigm. A new
breed of specialized firms and discount brokers
appeared on the scene, offering services at vastly lower
costs.

A tectonic shift in investor’s pattern with respect to

participation in market, has given a boost to discount
brokerage services in India. It is a result of the mobile
and Internet revolution that has swept across the
country.

As discount brokers provide all their services online and

don’t offer investment advice, they provide all their
services online and don’t offer investment advice that
requires maintaining a team of qualified analysts, they save
on overheads. This benefit is passed to consumers in the
form of reduced costs
 CUSTOMER ACQUISITION
GROWTH Traditional vs. Discount
Brokerage
• The Central Depository Services (India) Limited, (CDSL),
registered nearly a 20% increase in new accounts (reaching 25
million over one month) during the first six months of the
lockdown in 2020.

• Companies like Zerodha & Upstox, that offer discount brokerage,

have registered an 84% increase in active clients from March
2020 to November 2020.

• The primary reason for this surge post the 1st wave of Covid, was
that the economy bounced back and there was optimism that
vaccines will help return the world to normal in the new year, and
businesses will do well as a result. Hence a lot of millennials in
the 24–39 age group accounted for a significant share of the new
accounts opened in the country due to their low cost, no frills
trading options.
 Pre-Zerodha Customer Trends
Reliance on
Intermediaries
Pre-Zerodha, customers
would typically rely on
brokers and sub-brokers for
investing in stocks, bonds
and mutual funds. They
were unwilling to enter the
field themselves and make
investing decisions
independently or based on
educational websites or
blogs.
Stock broking +
Investment advice
The traditional stock
broking industry relied on
giving advice about stocks
to their clients. The
customers too preferred
getting both services
coupled together and
considered lack of
personalized investment
advice as a drawback of the
discount stock brokers.
Trust factor
Customers put their trust in a
stock broker that could see in
person and meet and were
hesitant to give their money
in the hands of a website/
digital platform. As discount
stock broking was not
common, there was not
enough 'word-of-mouth'
publicity about the
trustworthiness of Zerodha
and similar platforms. 
 ZERODHA: PRESENT INDUSTRY LEADER

● Zerodha is the leading Stock Broker in

terms of customers because of it’s pricing
and digital strategies.

● Zerodha’s annual profit of FY21 jumps 2.6x

times to INR 1122 Cr way ahead of its
competitors

● Zerodha is 3rd largest stock broker in terms

of revenues

Source: Zerodha Financial News || Zerodha Revenue Position Source: Number of active clients
 COMPETITIVE ANALYSIS
Threat of new Bargaining power of Rivalry among existing
entrants suppliers competitors
High Moderate
Low 

Zerodha faces significant threat from new
entrants especially PhonePe as new
companies enter the retail stockbroking/
discount stockbroking market in India  
Zerodha differentiates itself from competitors
Zerodha is  working on bringing down the few 
with technology/product offerings are objectively
external dependencies on tech suppliers which
exhaustive and ahead of other players in the market
will make them 100 per cent self-sufficient with
however Groww is giving it tough competition
their end-to-end broking technology stack

Bargaining power of customers

Threat of substitute products
Low Moderate

The traditional stockbroking industry is a substitute to Customers have  a choice between Groww, UpStox, 5paisa among
Zerodha but is facing high pressure to reduce costs and provide the online discount broking services and HDFC securities, Kotak
simpler and faster processes. Although the traditional banks are securities and traditional banks . Each of these has a different user
trying to catch up with discount brokers, due to logistical experience and offers distinct changes in services. For example
issues, it will take them at least 5 years to be at par with Groww offers AI based prediction tools for accuracy which
Zerodha does not. Hence, customers have incentive to choose
Zerodha . between different broking services however, with Zerodha's 20%
market share, it is a trusted name deterring customers from shifting
to other brands.  
 Zerodha's Growth - due to its Platform Business

• A platform business like this acts like a hub with spokes connecting
products to the center. The hub acts like a binder to join the products
with each other. It connects data, businesses, people, tools and
technology with customers to create a single place for all transactions
and buying-selling processes to happen.

• Platform businesses see exponential growth when compared to

traditional businesses which see linear growth. This is because platforms
act as connectors not only between product and customer but also
between customers. The connection between customers allows for fast
growth and better scale. They build a self-sufficient community and
increase efficiency and connectivity. Please refer to the next slide for
more statistical graphs of Zerodha's growth.

Source: Total Number of Customer of Zerodha

 DIGITAL DISRUPTION IN THE INDUSTRY
(1/4)

4. Educational Expansion 1. Revolutionized Digital

A holistic initiative to educate masses while
Experience in the Industry
building skills applicable to their growing
Compared to prevailing fully offline and
product portfolio
semi-offline methods (by some Banks)

2. Disruptive Discount-
3. Fintech incubating Fintech Pricing Model
Another mechanism Zerodha pioneered in India An industry pioneer in this price-setting, new
players followed
 DIGITAL DISRUPTION IN THE INDUSTRY (2/4)
1. Revolutionized Digital Experience 2. Disruptive Discount-Pricing model

End-to-End Digitization
- From the digitized from offline/semi-offline user
onboarding to trading and advanced reporting for all user
categories
0
Brokerage
₹20
Flat equity trading
0
Fee direct
commission Mutual Funds
Integrated systems
- Highly modular technologies, interconnected systems
based on data flow and user consistency No Digital Marketing
- Allowed smoother scaling up even during surge in Only Word-Of-Mouth marketing based on superior digital
userbase due to COVID-19 experience was enough

Technological stance
- In-house R&D rather than out-sourcing and partnering
with existing old-broker systems
- Attempted innovation in features and process
transformation that no competitor did back then
 DIGITAL DISRUPTION IN THE INDUSTRY (3/4)
3. Fintech incubating Fintech

Promoting FinTech Smart stock Strategy charts and

- Empowered fellow Fintech startups to launch a Fundamental,
portfolios Technical filters expert advisors
diverse portfolio for Indian broking and
investment ecosystem

RAINMATTER
ECYSOSTEM
- Backed and provided technical expertise to them

Simplified Finance and Guided journey on

Opened up their Platform Business news publication trading/investing
- Earlier Fintech startups in broking had to partner
with brokers for lease licenses and exchange
connectivity
- Zerodha’s open API eliminated this need
Dynamic Contracts Smart Insurance Improved Bonds
- Developers across geographies contributed to this
trading, technical Policy platform Flow platform
industry using this platform
indicators
- Together forming a highly comprehensive digital
ecosystem
 DIGITAL DISRUPTION IN THE INDUSTRY (4/4)
Fundamental Technical Quantitative Outside
4. Educational Expansion Analysis Analysis Analysis View

Trading Terminal aspects

Digital Education programmes

SAAMPLE DIGITAL COURSE MODULES

- Courses on financial concepts beyond Derivatives Market
Spot Market
stock market Transactions Transactions
- News and deep capital market analysis
publications
- Technical analysis tools etc. for Futures
algorithmic trading for guiding customer
decisions
Options

CALL Options PUT Options

In-depth Company blog Q&A Community
investment/ for easy reach & platform for user
trading courses education of and expert 400+ trading strategies using combinations
across platforms users discussions via basic and advanced algorithms and filters
(lessons with practical applicability)
 CRITICAL SUCCESS FACTORS
FIRST MOVER
ADVANTAGE
This enabled Zerodha to establish
strong brand recognition and
ONLINE customer loyalty before competitors
entered the arena. 

CLIENT TECHNOLO
ONBOARDI GY
robust architecture, best of
They were able to disrupt breed software, sophistry
NGindustry by
the brokerage and speed made their smart
providing client platform easy to trade on
onboarding entirely and user-friendly. 
online.

MULTIPLE
OFFERINGS PRICING
one stop solution for people interested in
Low commission charges
attracted youngsters into trading.
investing in Equity trading, Derivatives
This set them apart from others in
trading, Currency trading, Commodity
the market  that had a steep
trading, Mutual funds, Bonds &
operating rate
Government bond
 Zerodha: A Holistic Evaluation as a Digital User
Reduced brokerage for intraday and Introduced integrated model of trading
cash & carry transactions products and services
Economic By-passed the model of relationship Products &
Built open-source API library for
Model mangers and sub-brokers Services
trading
Very less advertisement Created a community to engage
and educate customers

Simple User Interface

Easy of Use Multiple product integration on a single

platform
End to end online process with
customer support

Highly efficient algorithmic trading Continuous development of system

architecture
Performance Alternate options to mutual funds with Emphasis on
zero lock in period technology Innovative apps in the trading sector
Quick updates and resolutions of
issues Superior data drive risk model
 TECHNOLOGICAL GROWTH W/O FUNDING

Competitors
like Groww, Upstox have been through 1+ rounds of funding

Zerodha
like Groww, Upstox have been through 1+ rounds of funding

Discount
Pricing + Huge User
Surge
* COVID
+ Technological
Prowess

=
- With expansion and continuous exponential onboarding besides
acquisitions, expenses have been increasing.
- However, with the massive customer base across digital offerings, they
could increase their revenue 2 fold and profits more than 1.5 fold.
* they chose profitNo external
through mass scalingfunding
up rather than individual margins
 SMART DIGITAL STRATEGY (1/3)
Digital Culture Digital Services Intelligent Smart Processes Connected
& Products Platforms Ecosystems
5.00 4.67 3.67 3.33 4.00
• New age fintech • Multiple product • Integrated platforms • Continuous efforts to • Self-funded
company portfolios for products improve trading organization
• Heavy focus of • Easy to use with • Data is stored in experience • Highly customer
leadership on tech simple UI AWS • Flexible work centric approach
• Employees mostly • End to end online • Low analysis of schedules • Limited to Indian
from tech process customer data • Exploring gaps to stock market, but
background • High satisfaction of • Highly efficient strengthen service with a strong
• Encourage tech- customer support algorithmic trading • Transparent and integrated platform
based continuous updates
experimentations  based on feedback
 SMART DIGITAL STRATEGY – INDUSTRY
COMPARISON (2/3)
S.No DESCRIPTION ZERODHA UPSTOCK ICICI SECURITIES PAYTM MONEY SHAREKHAN

1 Digital Mindset Among Employees 5 5 3 5 3

2 Familiarity With Digital Tools And Engagement On Digital Projects 5 5 3 5 3
3 Leadership Style For Openness And Experimentation 5 5 3 5 3
4 Products And Services Are Digitized In An Optimal Manner 5 4 3 4 3
5 Real Time Connectivity Is Used To Enhance Customer Relationship 4 4 3 4 3
6 Mass Customization And Personalization Of Services Is The Norm 5 5 3 4 3
7 An Integrated Data Platform Is Created And Matured 5 4 4 5 3

8 IOT Is Leveraged To Collect Data From All Objects And People 4 4 1 4 1

9 AI Is Used To Create Smart Analytics To Support Decision Making 2 2 1 2 1

10 Data Based Experimentation Is Encouraged As Sourced Of Learning 4 4 3 4 3

11 Smart AI Based Automation Is Used To Complement And Augment Humans 2 2 2 2 2

12 Appropriate Incentives Are Put In Place To Encourage Collaborative Behaviors 4 4 2 4 3

13 Co-creating Capabilities With Partners Around The World 3 3 5 4 3

14 Learning And Data Collection From The Edges (Of The Network) 5 5 3 4 3
15 Leveraging A Global Digital Platform For Business Innovation 4 4 5 4 3

Average 4.133333333 4 2.933333333 4 2.6666667

 SMART DIGITAL STRATEGY – INDUSTRY
ANALYSIS (3/3)
1. It has a better digital culture than the traditional players in the industry, however it is at par with the new age
competitions but has more customer engagement through forums, feedbacks and customer support.

2. It offers multiple products like Varsity, Coin, Sensibull, SmallCase, etc. as a complete packaged solutions to various
trading and investment needs. No other competitors have such a comprehensive package.

3. The platforms have high performance and efficiency but have low utilization of AI and ML in terms of customer
data analytic.

4. The organization has digitalized customer onboarding, HRMS system and trading platforms. The technology
orientation is high, however applications of IoT is less in terms of data due to regulatory and privacy concerns

5. The company has invested in acquiring platforms and companies which focuses on algorithmic trading. It also uses
AWS could services to host its data. However, the company is bootstrapped, and it can be a challenge on
subsidizing prices or scaling up.
 CHALLENGES & OPPORTUNITIES
Percentage of people investing in foreign
markets are increasing and we don’t have a
Avoiding technical issues during service to catter them
peak periods

TECHNICA BOOT FOREIGN REPORTS/

COMPETIT
L STRAPPIN TRADE TRADE
ION
GLITCHES G OPTIONS SUPPORT

Upstox, Grow, It can become a problem when we go Many players in the market are
5-paisa...etc are offering towards price war with competation offering trade support and providing
additional services on top of reports
Zerodha’s services
 SCENARIO PLANNING USING - PESTEL

POLITICAL ECONOMICA
L SOCIAL
 Increase in TAX  Volatility in market  Change in investment patterns
 Regulations on  Change in Interest rates  Implementation of new indices
investments  Inflation
 Economical Shift

TECHNOLOG ENVIRONME LEGAL

ICAL NTAL
 Natural calamities  Anti-Trust 
  Automation
 Data Breach
 Direct access to Stock effecting data centers  Bankruptcy & Fraudulent
Exchange bidding
transactions 
 Compliance and resgulations
 UNDERSTANDING UNCERTAINTIES

VOLATILITY IN MARKET VOLATILITY IN MARKET

UP DOWN

TAXES
BLEEDING ADVERTISE
UP

TAXES
LUCKY DRAW GO GODSPEED
DOWN

 Volatility increases risk and reduces trust

 Market is inversely proportional to the market
 Increase in capital gains taxes makes it difficult for people to show interest in the market
 High volatility & taxes push people to invest in other asset classes & foreign markets
 KEY-TAKEAWAYS

It’s always better to bring guns DIFFERENCIATING

to a sword fight
POINT
Anyone can copy your business model –
Build your brand and its unique qualities
DISRUPTI
ON

PROFIT
EXPAND
A company should concentrate on growing its
network. Evaluate whether Inside-out or Profit is directly proportional to
Outside-in produces the best linear/exponential innovation. Re-Innovate and
growth improve in every possible way
 APPENDIX A – PRIMARY RESEARCH
METHODLOGY 

1. Telephonic interviews of 2 employees of Zerodha, 1 employee of Groww and 1 from 1 Upstock

2. Inputs from users of products of Zerodha

Qualitative focus – The research was undertaken to analyse key triggers, barriers and perception among the users and employees with respect
to digital strategy of Zerodha

Age Gender Categories Products

20-35 years Male Employees – 4 Kite

Female Users - 10 Smallcase

Tickertape
Varsity
 APPENDIX B – SECONDARY RESEARCH
References:

1. https://blog.hubspot.com/marketing/platform#:~:text=Platform%20business%20models%20grow%20faster,contingent%20u
pon%20resources%20or%20capital
.
2. https://economictimes.indiatimes.com/markets/stocks/news/rise-of-discount-broking-zerodha-is-now-biggest-broker-in-indi
a/articleshow/67470490.cms
3. https://www.prove.com/blog/traditional-brokerage-vs-discount-brokerage-what-new-investors-preferred-during-covid-19
4. https://www.edelweiss.in/investology/stock-brokers-fcbd36/the-future-of-discount-stockbroker-in-india-b53c81#:~:text=Red
uction%20in%20costs%20further%20fuelling%20growth&text=For%20heavy%20volume%20professional%20traders,anal
ysts%2C%20they%20save%20on%20overheads
.
5. https://www.mckinsey.com/industries/financial-services/our-insights/how-trading-as-a-service-unlocks-opportunities-for-ba
nks
6. https://zerodha.com/z-connect/featured/11-years-of-zerodha
7. https://www.thehindubusinessline.com/markets/stock-markets/bank-backed-brokerages-keep-losing-market-share-to-discou
nt-brokers/article64354191.ece
8. https://digital.hbs.edu/platform-digit/submission/zerodha-to-the-top/
9. https://cio.economictimes.indiatimes.com/news/strategy-and-management/technology-helps-us-unleash-innovation-in-capita
l-markets-zerodha-cto-kailash-nadh/63589744
THANK YOU.