A flood of platforms has brought about a huge amount of competition in the discount brokerage market. With easy sign-up forms, simple applications, and venture capital the platforms have succeeded in gaining customer acquisition to a great extent. But keeping customers isn’t easy.
No one has ever reported the number of clients (traders) they’ve kept, says Parth Nyati, Founder of online discount brokerage platform Tradingo. The average lifespan of a trader using the platform is under three months. A person who invests could stay for longer however, not trading.
The Indore-based startup has developed the system of retention for traders (in-house proprietary tools and research-driven suggestions) in contrast to aggressive strategies for acquisitions used by its rivals.
Tradingo was the first to enter the market of discount brokerages that is already filled with established players like Zerodha, Upstox, Groww, ETMoney, ProStocks, and 5paisa, during its peak at India by 2020. The pandemic gave an incentive for the new player, with a significant growth in customer base and also increased numbers as more people turned on trading after the closures.
After a change last year, the two year-old company has added nearly 85 percent of its customers (of the total of 30000) in the last few months, registering the quarter’s revenue of Rs 453 crore during Q1 FY23.
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A spin-out
After working in Mumbai-based financial services firm Swastika Investmart for around 8 years Parth who is an IIT-Delhi graduate has decided to spin off Tradingo from the former, leveraging its broker licence and back office operations.
It did not make sense to invest the amount of money needed to acquire new licenses unless there was something entirely new we wanted to accomplish. Therefore, we decided to use Swastika’s license. Strategies differ however the back-office processes remain exactly the same. He adds.
The platform was funded with the seed capital of Swastika and began operations in July 2020.
This has helped to save significant expenses like licensing infrastructure, operations, and licences in addition to gaining recommendations from Swastika’s networks.
Enter Jarvis
The initial priority was the creation of a technology solution, i.e., the basic trading platform. The second was research and recommendations that are provided by other platforms. Tradingo is a partner of analysts along with Swastika to conduct these studies.
The third, and most crucial, is the destruction of the research that, according to Parth it is a huge issue for all of these platforms. This is a concern for traders to be informed of the best time to make a move or leave the market and in what manner.
This led to the development of Tradingo’s proprietary CRM tool Jarvis.
We needed some type of technology to provide the necessary support to our customers as well as be able to expand the company, explains Parth. Jarvis offers greater than 25 triggers, based on the trading patterns that traders follow, the behavior using the app, market’s conditions, as well as the results of research.
Coming from the traditional broking industry We know the exact needs of a trader and, therefore, we built technology that is built on top of the existing technology. It took us over a year to create Jarvis, he adds.
Jarvis uses a variety of channels to communicate with traders. It can be as simple as sending a message via Telegram.
The initial launch of the platform began with just a few clients who traded in huge volume (owing to the market’s bullish conditions at the time). However, the revenue figure was not a lot. Then, in July of 2021 after its overhaul and the introduction of Jarvis the business began seeing an increase in onboarding and retention.
From January 20, 2022 onwards, the website has seen a 10% month-on-month growth and a monthly revenue in the range of between 120 and 150 crore.
“Discourage” customers from engaging in trading
Many clients quit trading after losses, only to return later, after a while trading again, only to repeat the process. This is the nature of the typical trader, and the reason why platforms lose clients. In such a situation, the best approach is to teach traders to conduct their business in a manner that is appropriate and then exit or join when they have to.
A large majority of brokers are driven by revenue. If you are aiming for revenue, teams are encouraged (more broker) to allow the client to trade more. They exceed their capabilities and then lose money. It is essential to educate traders to keep their skills instead of focusing on immediate advantages, says Parth.
Parth states that 60 percent of traders are open to Tradingo’s suggestions.
The platform will keep the communications open even after the trader leaves the platform.
A brokerage should offer some kind of educational program for its customers. Otherwise, you’ll see the usual number of customers however, they’ll eventually begin to lose money. However, not all will be willing to deter traders from trading, as it’s the best option, says a financial expert.
Alongside Jarvis, Tradingo has a dedicated team of relationship-building experts for its most prestigious customers. This according to the founder, assists in establishing the bond. Tradingo also organizes interactive offline and online training sessions with traders.
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Revenue model
Tradingo provides two different pricing models. One is the traditional discounted brokerage plan (where there is no charge for delivery-based orders, and a an amount of Rs 20 per trade in intraday as well as different F&O trading). Another is premium services that come with several subscription plans.
For customers who are premium prices for intraday trading depend on the volume of business or turnover for the traders.
Around 70% of Tradingo’s revenue is from premium businesses that are built on the discount broking industry when customers move from the latter after a period of time.
A basic discount brokerage that is spending massive amounts of money on acquiring customers through advertising, influencer marketing etc. It isn’t viable. The price is outrageous unless they are investing funds. It is also absurd when a customer is gone within three months. It is imperative to convince them to remain and only a few are paying attention to this, the founder says.
The future is in the planning
Tradingo is currently looking ways to expand insurance as its next offering and will leverage Swastika’s licensing to offer the similar product. Although it offers margin-based funding to its customers however, it’s not planning to expand this due to SEBI directives, making it difficult for online brokerages to provide loans.
Presently, Tradingo does US Stocks in conjunction with Stockal in addition to ETF and mutual fund, all on this same platform.
Our APIs are open to the public, We’ve also integrated Algo Trading and stock basket platforms such as TradeTron along with Wealth Desk. Anyone can download APIs from us for free of cost and build their own platform using these APIs. We’re developing a wealth management product that is quant-based for our HNI/Premium customers. Parth says. Parth.
According to ICRA, due to the increased competition and the cost of acquiring clients brokerage firms are focusing more on increasing their portion of the wallet. For instance, in the few companies that are focused on retail the average income per active client grew by 25% to Rs 12,788 in FY21 , up from Rs 10,238 during FY20.
