COVID-19 has affected the stock market in an unprecedented way, also led to digital transformation. During the lockdown, people turned to trade on online brokerage platforms. We talked to Upstox, an online trading platform, about the changes, growth trajectory, and the future of technology in the broking space.
Here, Shrini Viswanath, Co-founder, and CTO at Upstox tell us more. Excerpts:
DQ: How has technology changed the year 2020 for the broking industry?
Shrini: The Indian broking industry’s digital transformation accelerated in 2020 with an increasing number of people turning to trade on online brokerage platforms. To cater to this unprecedented trading volume and deliver enhanced trading experiences, brokers adopted new-age solutions such as cloud-based systems and IT-enabled applications that form the broking industry’s backbone.
Cloud-based systems have increasingly helped brokers to meet the spike in trading volumes and new account openings. Unlike legacy infrastructure, cloud computing offers easy scalability, cost-effective and time-saving services, and a level of flexibility never seen before in the sector.
The result- Today, one can enjoy high-value trading seamlessly, even on a smartphone. Technology has emerged as a critical differentiator in a highly-competitive market that helps brokers continuously create value for investors.
Earlier, stockbroking relied strongly on a physical presence. However, a smartphone and a robust internet connection have enabled equity participation from millions of investors across the country. Account opening is now also totally paperless, aided by the regulator’s initiatives of promoting online account opening using Aadhaar e-Sign.
We have seen technology contribute significantly to retail participation from Tier-II and Tier-III cities. Currently, 70% of Upstox’s total customer base comes from these regions. Overall, 65% of our diverse customer base comprises first-time Demat account holders, and 75% are millennials.
Learning from the business during the pandemic, we realized that our cloud infrastructure got us immense value. We aimed to ensure that our technology was up to the mark, and a constant monitoring procedure and continued innovations were put in place to meet expected demands.
DQ: What does the coming year look like for the broking industry?
Shrini: Entities with established information technology infrastructure as well as commensurate processes and controls are expected to fare better. Brokerage firms in India have seen the opportunity for hassle-free trading using design and technology to reduce costs for their customers.
Low-cost trading, deeper penetration of smartphones, faster internet, and simplification of trading applications will make it possible for an increasing percentage of people across age groups to trade with ease. Technology-based firms in the financial services space have empowered customers with tools and insights for savvier investment decisions.
Today, there are many tools built into the trading systems aimed at simplifying investing and mitigating risk.
DQ: The number one and number two stockbrokers in India are both digital brokerages. Do you think traditional ones are passe now?
Shrini: The new breed of investors entering the stock market is digital-savvy and seeks quality user interface (UI) and user experience (UX). Our digital-first approach helps us grow and build a rich user experience and advanced features, which our customers love. We have been growing at a rapid pace, mainly due to our products and a customer-first approach.
We have recently launched one more feature to our Upstox app to help our customers make a trading decision basis chart analysis. This chart-sharing feature is a first in the industry. Currently available on the Android platform with real-time data, it will make trading convenient for lots of traders and investors who share screenshots of their charts and their analysis with their friends or even post them on social media.
Usually, it gets too difficult to understand all the details from the screenshot. Our new chart-sharing feature will also enable our customers to refer or retrieve the chart analysis anytime, over time.
Today, customers are well aware, especially when identifying a high-quality service that meets their needs and gives them a seamless experience. Traditional brokers have been around for a long time and have a different way of functioning. They excel in holding a specific plan for people they can give their service. They call people personally, walk them through the entire procedure, and carry out a detailed orientation of their service.
DQ: There have been technical glitches with respect to digital brokerages in the past and they have received a lot of backlash on social media on the same. You have an edge as far as technical glitches are concerned, as compared to your competitors. How do you ensure minimum technical errors?
Shrini: We have continued to innovate and create based on changing needs and demands. There are no compromises on rigorous software testing, load testing, and deployment on a highly available mold. To ensure and curb any glitches, our protocols are set in place to improvise and act quickly. Since there has been a growth in transactions lately, we have made it a point to shift to our cloud infrastructure for higher bandwidth.
Our goal is to consistently maintain 99.99 percent platform stability with our cloud systems providing information at the highest speed, empowering traders and investors to make accurate decisions at the right time.
Our customers have benefited from applying Artificial Intelligence (AI) and analytics that have transformed traditional investment and wealth management from cookie-cutter services to bespoke, near-real-time PFM. Learnings over the years have highlighted the importance of these factors and the fact that they are key for any business to function smoothly.
DQ:How are you making your platform the safest to be used by customers?
Shrini: We have always been focused on offering best-in-class services, from the time a customer opens an account to the time of executing a trade, and beyond. Rapid technological developments have created the possibility of security threats in financial markets. Therefore, the security of the customer’s fund becomes a prime objective at Upstox.
We are the industry’s first to implement an electronic delivery instruction slip (e-DIS) facility to help customers sell shares in real-time after seeking authentication from investors through OTP. This makes e-DIS a secure way of transferring shares without giving power of attorney to a third party. The customer doesn’t have to give a physical POA; there is no authority given to the broker to transfer shares from a customer’s Demat account without the customer’s consent. This makes e-DIS a natural choice v/s POA and curbs the possible misuse.
Our entire technology suite is built in-house and continuously upgraded to make it more secure and threat-proof. It helps us implement the best practices adopted in those markets to mitigate security threats into our systems and processes.
DQ: Mobile trading has been a huge winner for you. Do you see a saturation point?
Shrini: Modern technology has made apps extraordinarily intuitive and user-friendly, driving the surge in mobile trading. From analyzing the market to viewing charts and placing trades, everything can be done with a few taps on a smartphone—making it easier to trade on the go. Currently, over 85% of Upstox customers carry out daily trades on smartphones.
Despite advanced technology, the number of retail participants in the Indian stock market over the past few years remains insignificant compared to developed markets such as in the US or Europe. It is estimated that only around 3-5% of India’s population invests in markets as compared to other countries.
We are still a long way to go from reaching the saturation point!