Four reasons why digital brokers are booming amid Covid-19 crisis

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The aftershocks of the Covid-19 ravages are being felt in the financial market even though the second wave of the pandemic has subsided across the country. The most recent example of this is the remarkable shift of more than half of the active client base of the stock market to digital-only brokers. The top five digital-only brokers Upstox, Angel One, Zerodha, Groww and 5paisa were reported to have had an accumulated tally of 12.6 million active clients, making up to 53% of the total market share, as per the latest available data.

This stupendous growth in the digital-only brokerage firms has come at the cost of traditional brokerage firms. During the same period that investors jumped towards the digital brokerage firms, the market share of top five traditional brokerage firms plummeted from 33% to just 22%.

Industry experts attribute this huge jump in digital-only subscriber base to four main reasons.

Hassle-free, quick-response time digital broker applications

At a time when physical movement was largely restricted, the digital-only brokerage firms allowed the flexibility of trading in the stock market seamlessly. Opening accounts was much easier in the new-gen brokerage firms and the young self-starters in the age groups of 20-30 years found it much easier to navigate the stock market through their apps.

Small city boom

The next driving factor behind the jump in digital-brokerage firms was the entrepreneurial spirit of the youngsters particularly from tier II and tier III cities, many of whom were toying with the stock market for the first time. This movement of young people towards stock markets was intensified by the need to generate financial security, given how local businesses were hit by successive Covid-19 waves.

Low brokerage fees

What works again in the favour of digital-only brokerage firms is not just the seamless manner in which they allow their users to purchase and sell stocks, but also of the strikingly small brokerage fees they charge on intraday and F&O trades. This has really undercut the market of the traditional brokerage firms, which run on bigger manpower and resources, and aren’t able to provide such low, flat brokerage fees.

Access to overseas markets

Market experts say that another added attraction of investors towards these digital-only brokerage firms is the level of access they provide. Allowing their users’ options such as stock gifting, SIP, GTT (good till triggered) orders and basket orders, providing immediate stock-market alerts and giving their users access to the US stocks, digital gold, and mutual funds on their platforms.