Brokers may prune branches as pandemic bolsters digital play
Trades through mobiles accounted for a fourth of transactions onn se in july
The Covid-19 pandemic might compel full-service domestic brokers to rationalise the number of branches catering to their retail customers. This is because digital has become the new buzz word for brokers, with the bulk of customer acquisitions during the pandemic completed through the digital route.
“The pandemic will lead to further consolidation of branches, wherein brokers will shift from a pure brick-and-mortar model to a hybrid model, consisting of digital and physical engagements. This will bring in greater operating efficiencies. The number of touch points, however, will increase as more and more customers sign up for new accounts,” said Lav Chaturvedi, executive director and chief executive officer, Reliance Securities (RSL).
Nearly 80 per cent of RSL’S customers are trading through the mobile app and end-to-end retail account acquisitions are now completely digital.
Share of mobile and internet for brokers has been rising at a fast clip over the past 2-3 years given the ease of trading, falling commission and privacy preferred by investors and traders. Trades executed through mobile phones accounted for one-fourth of cash market transactions on the National Stock Exchange (NSE) in July.
With artificial intelligence coming into play, brokers are better able to track the needs of individual clients. Smartphones have also made it easier to chat with clients and give updated notifications. “Brokers served a large number of retail clients offline until a few years ago. With better connectivity and offtake of mobile apps, that clientele has largely moved online,” said B Gopkumar, MD and CEO, Axis Securities.
Retail broker Angel Broking shuttered its branches a year back in keeping with its digital-only strategy. “The advent of smartphones and the easing of data prices has led to an exponential growth in online and mobile trading over the past couple of years. So, we decided to gravitate towards a digital-only model, acquiring and serving customers digitally, which has served us well during the pandemic,” said Vinay Agrawal, CEO, Angel Broking.
The broker, which caters only to retail clients, has a network of over 10,000 authorised persons. Agrawal said these are not customer-facing, full-fledged branches but small set-ups that cater to clients across India.
Experts say most brokers drastically reduced physical branches after the financial crisis in 2008. So, the number of branches that might shut shop now could be far lower.
What’s more, a large number of wealthy clients need advisory support and might still prefer executing trades through relationship managers. Physical branches are required to cater to this set of customers, and to cross-sell products.
“Physical branches may never go out of fashion totally as there are a lot of traders and investors who look for guidance to make up their mind on their trade or investment decisions. Some are more comfortable dealing with an actual person and would like to meet them occasionally. And some regular brokerages may want to offer relationship managers to their clients as a distinguishing service vis-à-vis the discount brokers,” said Dhiraj Relli, MD and CEO, HDFC Securities.