Zero(dha) to the top!

Zerodha, an Indian discount broker was able to rapidly scale and satisfy a surge in demand during the recent market downturn. As its original proposition of low-cost transactions has worn off, it relied on its technical prowess to compete. What else can it do to sustainably grow, particularly in a post-Covid India that has a seemingly insatiable appetite for digital financial products?

On March 23rd, 2020, the flagship index of the Bombay Stock Exchange (BSE), the Sensex, fell below 26,000, a level that was last seen almost 6 years ago. As the stock markets collapsed (before recovering almost 30% by the end of April), and the entire nation of 1.3bln went into lockdown to contain the spread of Covid-19, a 10-year-old business, Zerodha, India’s first discount stockbroker, was signing up new users at an unprecedented rate. The number of new monthly users increased by 100% and Zerodha further solidified its position as India’s largest brokerage with over 2mln users. In addition to new users attracted by low asset prices, the volatility of the markets led to twice the number of daily orders, which increased from 3.5mln to 7mln. The firm’s capacity to handle this surge without outages is nothing short of impressive and can be almost entirely attributed to the digital native operating model at its core that enabled both its emergence as a discount broker and its subsequent rise.

Zerodha entered the market in 2010 with a flat fee per trade rather than a commission. After initial success, it began to feel the heat of the competition, more established brokerages, which also switched to the same pricing model. To stay ahead and afloat, it chased a more sophisticated digital model with a far more intuitive UI and a centralized technology stack to handle its users from various platforms (mobile, web) and offered the products to a wider range of users than its initial target of day traders. The new design also catered to “investors” who accounted for the bulk of users. In addition, it also enabled users to digitally signup and register for an account in minutes. When faced with a surge of users and orders, its modular technology stack allowed it to scale rapidly and the firm is building a second data center to build redundancy and ensure that performance doesn’t degrade.

There is no doubt that key choices surrounding its operating model and technology stack have allowed Zerodha to capitalize on the sudden interest in the platform. However, what can it do to sustain the demand and continue its growth?


A key component of retail-oriented digital businesses continues to remain the element of customer service, and more so when they involve financial relationships. While digital operating models can deliver value at scale, that is not necessarily true for their customer service. In fact, forums (both Zerodha’s own and others such as Reddit) have seen an increase in the number of complaints about unresolved issues. Zerodha can use some its own expertise in segmenting customers to render superior service; for example, it would have sufficient data to automate the handling of common issues and reserve expert intervention only in cases where absolutely necessary. Another benefit of segmentation will be the targeted warnings against risky trades. The volatility has also led to an increase in the number of risky trades and is forcing Zerodha to intervene on its user’s behalf with warnings about their trades. While this is seemingly in good faith, it nevertheless requires some targeting to ensure that the overall usability of the platform is not hampered.


The low asset prices and the mindshare of people towards investing and trading because of the pandemic will (hopefully!) not last into the future and Zerodha will have to build a longer-term customer acquisition and engagement strategy. It can leverage its Varsity product to educate potential customers about investing. It also has a forum, tradingqna, that has created a community of users. One alternative strategy it can pursue is to transform into a platform of investing knowledge by bringing onboard market experts who can provide a blog or Twitter-like environment with updates and insights, akin to their interviews, etc. in traditional financial sector media.


As millions of Indians demand financial services and adapt digital products, Zerodha does face some key concerns ahead of it. Despite being the largest brokerage in the country, its 2mln users are a mere fraction of the 1.3bln Indians, many of whom are yet to be formally introduced to financial services. Investing is also not the first step on an individual’s financial aspirations journey (that belongs to a traditional/digital wallet and payment method), and by not being a digital wallet or banking solutions (which are earlier along the financial services curve) it’s unclear how the firm can compete with those who offer complementary services. For example, India’s largest digital wallet PayTM launched a mutual fund service and announced its intent to launch a brokerage.

New Products

Having challenged traditional brokerages, Zerodha is now targeting the traditional lending business as well, particularly loans secured by equities. While some of the traditional brokerages are owned by banks, their technology stack is still primitive and most offer a flat 50% of the equity value as a loan without considering more nuanced risks. Zerodha has a clear technological advantage here given the digital model that allows it access to financial and investing data of an individual enabling a data-driven risk model. Coupled that with its digital capabilities, it is almost inevitable that it is more likely to build a superior data-driven risk model! Zerodha has also made several investments in and built partnerships with niche investing products and algorithmic trading platforms. While these are still in the nascent stage, they can deliver the next wave of growth as it can begin competing with brokerages catering to institutional clients.

Zerodha has also actively stayed away from venture financing and is completely bootstrapped – a possible disadvantage when user acquisition might need to be subsidized. On the other hand, the post-Covid world is also likely going to be more fiscally conservative which would be an advantage for Zerodha. The only certainty appears to be the continued evolution and growth of the Indian fintech ecosystem.



“Zerodha’S Boundaries – The Ken”. 2020. The Ken.

“India’S Digital Mutual Funds Bet: Will Paytm Money Win This? – The Ken”. 2020. The Ken.

“For Zerodha, Covid Is A Ladder – The Ken”. 2020. The Ken.

Kashyaap, Sindhu. 2020. “[Product Roadmap] The Evolution Of Zerodha, One Of India’s Largest Retail Online Brokerage”. Yourstory.Com.



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