Finvasia, a technology-driven online broking start-up, announced that it has rolled out what it claimed was India’s first ‘truly’ free online demat account for investing in stocks and derivatives, including futures.
There have been many ‘free demat account’ providers in the past too, but such operators usually find some way or the other charge their clients.
The start-up, however, claims to be different and describes itself as the first player in India to offer “zero brokerage and zero clearing” charges.
“When you trade on the exchange, all it takes is an electronic message from the broker’s server to the exchange,” says Finvasia.
“That’s just how WhatsApp or email works. When you don’t have to worry about paying to deliver your WhatsApp messages or email, why should you worry about paying to have stocks delivered?”
Traditionally, stock brokers have had a system of dual charging — a basic monthly rental, plus a variable commission per trade.
The ‘free demat account’ providers generally got rid of the fixed fee, and opted to charge only the commission.
Within this segment, some moved from charging a fixed percentage — say 0.1% — of the value of the transaction to a flat fee per transaction.
The broker 5paisa.com, for example, charges a flat fee of Rs 10 per order.
It is this business model that Finvasia claims to be disrupting with its ‘Now’ service targeted at retail investors.
For now, free trading is possible only on the NSE, while BSE trading requires a premium plan under which each segment costs Rs 120 in terms of monthly rental.
Under the company’s retail-investor-focused Now product, trading can be done on the mobile app or using the PC and transactions can cover equity, derivatives, currency and mutual funds.
The Indian financial services industry is seeing massive disruption due to the emergence of digital technology.
While banks used to charge money for practically all kinds of transactions such as money transfers, new age payment banks such as Airtel Money and PayTM offer such services at zero cost due to the high-degree of automation achieved by them.
Traditional banks, on the other hand, have massive costs related to their legacy equipment and infrastructure such as branches, staff, ATMs and so on. This has led to competition and strife between legacy players and new-age players.
Besides the free offering, Finvasia also offers a ‘Nest’ product that is targeted at traders and costs more.
Finvasia claims that it is India’s first brokerage to offer “life-time commission-free trading in all segments on all exchanges”.
“Our mission is to democratize the financial markets and make the markets accessible to everyone by offering Zero Brokerage plans,” said Natty Virk, CEO & Co-founder of the VC-funded company.
“Investors are losing the amount they make from stock market appreciation in just commissions. And eliminating fees is one of the most effective ways to improve their trading profits and enhance their savings,” he added.
The company claims to offer several services such as asset management, investment banking, capital market advisory, currency hedging to brokerage services in commodities, equities, and derivatives.
To spur retail investors to sign on, the company also offers to complete all know-your-customer requirements using Aadhaar in five minutes.