India’s leading brokerage firm, Zerodha, announced on Wednesday that it will now offer demat account opening free of cost for all resident investors in India. This decision aligns with the company’s vision to make investing more accessible.
When Zerodha was founded, account opening was vastly different. The process was entirely offline, which necessitated a fee to cover the costs associated with manual processing. Nithin Kamath, the co-founder of Zerodha, explained, “When we started Zerodha, we consciously decided to charge an account opening fee for two reasons. There was no Aadhaar or eSign until 2016-17. Account opening was completely offline, which meant there was a cost involved. So we had to charge an account opening fee to cover the cost.”
This fee structure served two primary purposes: it covered the operational costs of the offline account setup, and it ensured that only serious investors, who were willing to bear the cost, would sign up. This was crucial for maintaining a focused and committed customer base, especially in the initial years.
The advent of Aadhaar and the introduction of eSign in 2016-17 marked a turning point for the financial sector in India. These technological advancements enabled the complete digitalization of the account opening process, drastically reducing the costs and time involved. Recognizing this shift, Zerodha gradually transitioned to a digital onboarding system, which has now reached a stage where it can be offered at no cost to the customers.
Kamath highlighted the impact of this digital transformation, saying, “But the broker acknowledged that things have changed over the years with fully digital onboarding.”
A few months ago, Zerodha took a step towards fostering early investment habits by making account openings free for individuals under the age of 25. This initiative was aimed at encouraging the younger generation to start investing early and take control of their financial futures. The positive response to this move demonstrated the growing interest among young Indians in the stock market and other investment avenues.
Building on this success, Zerodha has now extended the no-fee account opening offer to all resident Indians, regardless of age. This inclusive approach aims to democratize access to investment opportunities and support the financial growth of a broader demographic.
Zerodha’s decision to waive the account opening fee is not just a customer-centric move; it also solidifies its position as a leader in the brokerage industry. With over 6 million active clients and a total customer base of 12 million, Zerodha is the largest retail-focused broker in India. The firm manages an asset base of Rs 3 lakh crore, with a substantial portion of its revenue coming from futures and options traders.
Out of its vast customer base, around 2.5 million are engaged in futures and options trading, with 1.5 million being active traders. This robust client engagement is a testament to Zerodha’s efficient platform and comprehensive service offerings.
In the financial year 2023 (FY23), Zerodha reported a performance with an overall revenue of approximately Rs 6,875 crore and a profit after tax of Rs 2,900 crore. These figures show the company’s strong financial health.
Looking ahead, Zerodha’s move to eliminate the account opening fee is expected to attract a surge of new investors, further expanding its customer base and reinforcing its market dominance. This decision also reflects the company’s commitment to leveraging technology to enhance customer experience and streamline operations.
