Gift vouchers, trading credits: Brokers scramble to attract clients

They are spending Rs 2,000 per head to attract customers

With nearly a million accounts being opened every month, brokers are scrambling to attract investors towards their platform. Amazon gift vouchers, trading credits, and bundled offerings are some of the sops being doled out. Besides, many players have sweetened their referral programmes, incentivising their existing clients to bring new customers.

To cash in on the boom, many brokerages are spending up to Rs 2,000 to bring new clients on board. As most new entrants are in the 20-30-year bracket, industry players have upped the ante with online advertising and social media campaigns. To edge out rivals, brokerages are said to have bid aggressively to place ads when Google searches with related keywords, such as ‘open new trading account’.

This aggression is backed by numbers. Since April 1, over 4 million new dematerialised (demat) accounts have got opened, taking total user base over the 40-million mark. What’s more, investors are not just opening new accounts, but are actively trading, thanks to the bull run in equities. 

From 2020 lows on March 23, the benchmark Sensex and the Nifty have surged nearly 50 per cent each, while many stocks in the broader market have more than doubled. The trading data showed retail volumes in July soaring to multi-year highs.

The big winners from the boom in retail account opening seem to be low-cost brokerages. Zerodha says it has opened a million new accounts since April. Angel Broking has opened 500,000; Upstox said it has opened 250,000 accounts (between April and June) and 5paisa has opened another 250,000 accounts.

 

 

“As a token, for on-boarding with us, we offer our clients multiple digital offers to select from. Besides, we have a referral programme in place where we reward the referrer appropriately,” said Prabhakar Tiwari, CMO, Angel Broking.

“We do not give any sops, such as gift vouchers, to our customers though we give them to our existing customers for referrals,” said Rajeev Srivastava, chief business officer, Reliance Securities, adding the average acquisition cost per customer for the brokerage is Rs 1,500.

Bank-backed brokerages, such as ICICI Securities and HDFC Securities, too, are looking to expand their client reach outside of those that come from their banking parents.

ICICI Securities said it is offering benefits worth over Rs 11,000, which primarily includes subscription stock market portals and magazines. HDFC Securities said it slashed broking charges and is offering “free volumes against a down payment". The ICICI Bank arm said it has added 80,000 customers during the April-June period and has seen an increase of 50 per cent in the number of clients transacting in equities after the Covid-19 outbreak.

“A new generation of active retail traders is slowly growing roots and participation volumes. All brokers want is a share of this pie. Those who offer a delightful, hassle-free, and safe experience across the customer's life cycle will gain share. Additionally, the use of digital technology is rising rapidly,” said Dipen Sheth, head, retail equity, HDFC Securities.

Industry players said many brokerages drawing inspiration from US-based retail trading app Robinhood, which has grabbed headlines for revolutionising retail trading in the US. The California-based firm has added new customers in millions this year and also has seen its valuation soar to $11 billion after the latest round of funding.