A digital push

The advent of tech-driven discount brokers has disrupted the industry.Here is a promising stock to profit from this trend.

- 

Digital transformation or disruption, whatever you call it, is that lever and a grossly underpenetrated domestic market, practically in any segment, is that fulcrum. A case in point is the broking industry.

In the early part of the last decade, the sector looked ripe for disruption, given the abysmally low coverage of demat accounts. While traditional brokers who charge a percentage fee on the transaction value have existed for years, the advent of tech-driven discount brokers who charge a flat transaction-based fee, irrespective of the volume and the trade size, has disrupted the space. Their lever is the asset-light, scalable, technology-driven digital medium, which provides a seamless, superfast and hassle-free customer experience. The benefits of cost savings, in turn, are passed over in the form of zero transaction fee (delivery trades), as well as a flat fee (intra-day).

The results of these disruptions have started gaining prominence since FY2020 following a spate of sweeping developments in the financial-services space. These include demonetisation, tax reforms, a rise of fintech, falling internet tariff, the deeper penetration of financial products and services in tier II and tier III cities, and a rise in millennials. Digital brokers started outpacing the competition by a wide gap.

Steady growth in demat accounts in India

Rising penetration of demat accounts in India 5.1%