Zerodha is one of the largest discount brokers in India so let us take a look into its revenue model and how does Zerodha make money.
How Did Zerodha Start?
Nithin Kamath founded Zerodha on the 15th of August, 2010 with the purpose of removing all barriers to trade and investment in India, including cost, support, and technology.
They titled the company Zerodha, which is a combination of Zero and the Sanskrit term “Rodha,” which means “barrier.”
In India, Zerodha is the most well-known bargain broker. In just a few years since its beginning, they have shaken the entire business.
How does Zerodha, on the other hand, make money? Long-term/delivery trades have no fee, and intraday trades have a fixed maximum brokerage of Rs.20. When compared to full-service brokers, the difference is insignificant.
Let’s take a closer look at Nithin Kamath’s successful company, Zerodha, today
If you’re interested to open your DEMAT Account with Zerodha, here is the Direct Account opening link
What is Zerodha’s Revenue Model?
Onboarding traders who engage in high-volume intraday trading provides income for Zerodha. In the financial year 2020, the trading platform Zerodha generated 950 crores using this technique.
Zerodha’s innovative business plan allows them to make the most money with the least amount of capital outlay.
Zerodha, it appears, makes pennies. However, most brokers profit handsomely from day trading. Here’s how much they charge their 4+ million customers.
1. Charges a Commission on All Intraday Trades, Whereas Zerodha Charges a Fixed Fee on Intraday and F&O Trades
Zerodha, on the other hand, minimises its brokerage in comparison to full-service brokers who charge a percentage of the trade value.
Regardless of the size of the transaction, they charge a maximum brokerage of Rs.20 per transaction.
2. A Large Number of Transactions
The volume of transactions on the platform is crucial to their business strategy. Rather than charging more for each transaction, they concentrate on creating a quality product that will attract more clients to trade on it.
As a result, they make Rs.20 on the millions of transactions that take place every day. When you multiply that by ten, you can understand how powerful Zerodha’s business model is.
3. Incubation of New Businesses
Rainmatter is Zerodha’s incubator, which has launched several successful finance firms.
Here is a list of all the successful startups that Rainmatter has incubated or invested in.
- Small case: First thematic investing platform of India.
- Streak: It is the world’s first end-to-end platform for creating, backtesting, and deploying trading algorithms without the need for coding.
- Tradelab: It is a company that develops cutting-edge technologies to help firms in the capital markets.
- CRED: members-only app that pays you for paying your credit card bills with exclusive benefits.
- LearnApp: First-hand lessons from industry leaders in investing, trading, technology, and management.
4. Mutual Funds and True Beacon:
AMC Zerodha’s first alternative investment fund was launched in 2019. The fund was created to help high-net-worth individuals (HNIs) with a minimum investment of $2 million deal with market volatility. True Beacon returned 13 percent or more in its first year.
As a result of True Beacon’s success, Zerodha has applied for a mutual fund AMC license and plans to establish its own diversified fund portfolio in the near future.
True Beacon’s fees become a significant part of Zerodha’s revenue sources.
No Marketing Strategy for Higher Profitability at Zerodha
The “No-marketing” strategy was one of Nithin Kamath’s most effective strategies.
He stated that he wanted to design a product that people would advertise themselves.
And, as planned, Zerodha launched the world’s cheapest brokerage on a broad scale. It rocked full-service brokers by offering even greater service for a fraction of the cost.
Hope you got an idea as to how does Zerodha make money and its revenue model. If you have any suggestions leave them in the comment section below.
