Online trading in India actually began way back in the late 1990s with the likes of ICICI Direct and Sharekhan among the early pioneers in the online trading business. The online trading business has traversed a long way and it gradually becoming the default mode of trading in the Indian markets. More and more retail and HNI investors are now shifting to the online trading mode due to the benefits and convenience that it offers. Here are some of the key benefits that online trading offer!
- It is much quicker than offline trading. You don’t worry about the presence of a dealer, getting the dealer on the phone or getting the dealer’s time slot etc. Travelling to the dealer office can be too cumbersome if you have a busy schedule.
- It is more efficient. Online trading makes the entire process seamless. You place the order and the confirmation is also available online. IN addition, all the back office tasks, ledger checking and contract note verification can all be done online.
- Online trading is more democratic. You are not at the mercy of the time available with the dealer. You can execute the order from the convenience of your home or office and you get the best price on the screen.
- Online trading is also more cost efficient. Online trading does not require too much of broker intervention except the risk management. These lower costs are passed on to the end customer in the form of lower brokerage.
How did online broking evolve in India over the years?
If you look at online trading in India, there are 4 distinct phases that it has gone through.
- The first phase was the rise of the bankers / brokers where the client deposit worked as float to the bank and hence the entire online broking model made a lot of sense for the bank. That is how the likes of ICICI, Kotak, HDFC and SBI among other embarked on this online trading. This phase lasted from 1999 till about 2004.
- The second phase involved brokers investing in infrastructure as they realized that online broking was the way ahead. The introduction of STT added a new layer of cost to the customers and brokers had to make efforts to reduce the costs. This was the second big phase when most of the full service brokers came into online broking in a big way.
- The third phase started post the financial crisis of 2008. That was the time smart phones came into the market with the likes of Apple and Samsung dominating our communication ecosystem. Now, online trading did not require a PC but could be conducted on the move from your mobile smart phone itself.
- The fourth phase was, perhaps, the biggest shift in online broking when low cost brokers (discount brokers) offered only the online platform but offered extremely low rates of brokerage. This was a no-frills model and it gave the real big boost to online trading. Combined with the cheaper and more efficient smart phones, low cost broking was a force multiplier for online trading.
Does online trading really benefit the franchisee?
In fact, online trading benefits the franchisee in more ways than one! Let us look at some of the major benefits for a franchisee from online trading.
- It offers a much simpler and efficient method for franchisees to leverage their contacts and networks to add value to their business.
- The online model ensures that the translation into a full-fledged client becomes a lot easier for the franchisee. Since all the operations and the back office are taken off by the automated software, the pressure on the franchisee to handle routine tasks is much lower. This leaves them more room and time for business development.
- Low cost and high value for money is a great value proposition for the franchisee to sell to the customers. That really makes the job of a franchisee much easier.
- Lastly, the franchisee is assured of much greater transparency because of online trading. Everything is available online and the franchisee can monitor their performance on a real time basis.