Firstly yeah, with direct mutual funds and no transaction fees ,no earning from manufacturers, no DP charges, there is no earning from Coin for the business. Tricky times for business, but good for the customers :). But eventually when the dust settles, even the most well funded companies will have to figure a way to start earning. Most are planning to sell multiple products and sell, and/or charge for advisory. Thankfully for us at Zerodha, we earn from our active traders, which helps us subsidize the investors (equity and mutual fund clients). But still as a business, the only way it makes sense to do something without earning is if the running costs are low.
By selling direct MF in demat, the entire process works exactly like how stocks settlement works. So incrementally there isn’t too much of a cost we incur. With just 4 people on the Coin team, there have been over Rs 5000 crores of investments on the platform. Most of our competitors who hare 1/10th of this size have 10 times more people on their teams. Apart from this Demat is also extremely beneficial for the end customers, no more having to track folio numbers and all, easy to take a loan against, and easy transmission in case of death to the dependents.
Unlike most eCommerce businesses who do everything for free or even do cashbacks to onboard, in a regulated business like ours, every customer brings in a compliance/regulatory cost. It doesn’t make sense to take this on, unless you are sure that the person is serious about doing business. We are not in the business of building out valuation, so showing a user number who aren’t serious doesn’t really make much sense. I am guessing there will be dropoffs, but no other way to ensure that only people who are serious onboard.
As a business we have tried to focus on execution and education. But yes, this may not be enough, people need help especially in a complex area like finance. We are brainstorming on the best possible ways to help out our customers take the right decisions. We will keep you all posted as and when we decide on something.