Others reducing brokerages has been a long time coming. We have been thinking this will happen for the last 3 years. Now with the bank+brokerage Axis Securities dropping the pricing, I am guessing this is beginning of the end of how traditional brokerages in India have been charging fees. I am guessing the rest will soon do something as well. This could spark off a price-war that would end up being good for the customers.
Btw, even though the pricing is reduced, the transparency isn’t. There are so many ifs and buts. It must be extremely tough to let go of existing revenue and risk cannibalisation. Since all clients won’t automatically move to the new plans, I am guessing the hope is that existing clients don’t move due to complications. When PayTM and the new age startups, whenever they launch, will most likely have the pricing right - simple, transparent, with no conditions, and for all clients.
Here is the thing though, I don’t think it has ever been only about pricing. If it was, there are 50 other brokerages who charge as much or lesser than we do, who should have caught up to us. I think it has got to do with the products we offer, our educational initiatives, and generally just the way we operate as a business. If you use any of our products or initiatives and compare them with what is available with the rest, the difference would be evident. All this isn’t easy to replicate. I think this race is going to be about who has the better product and does more for their clients, which is again in favour of consumers.
All of this is going to push us to do a lot more as a business. We already have a really long to-do list, and my gut says that this sudden competitive environment would mean a lot of those items getting ticked off faster.
Overall this is good for the industry, we all need to do whatever to increase the very shallow market participation on the Indian capital markets. I don’t think pricing alone can do it, but people competing on the product can. Here is where I think new age companies with good tech teams starting afresh with no legacy to worry about will do better. For those starting up the challenge would be that this isn’t just a tech play, online broking is probably one of the toughest businesses because of regulations and compliance, much tougher to update products due to downtime risk, extremely high beta, not a great underlying infra (leased lines etc), leverage products which is majority trading (F&O,margin funding, etc) which bring in huge risk to the business, etc. This is a business of unlimited risk at all times.
So yeah, will be interesting times…