Should you invest in new-age digital investment platforms?

Indian fintech companies have witnessed monumental success in recent times. Startups like Paytm, Zerodha, Razorpay, Groww, and Cred among others have earned a place in the coveted unicorn club in the past two years. The Covid-19 pandemic brought a major shift in people’s approach towards money. Fintech companies have, in the meantime, made their service more accessible and diversified for the potential customer.

Gone are the days when people blindly followed the same financial path as their ancestors or friends. Today, everyone is looking for customized financial platforms that specifically caters to their financial goals and desires. This is where fintech companies and digital investment platforms come in. These platforms let you invest in mutual funds, stocks, manage and balance your wealth portfolio, offer goal-based investment approach and guide while switching between different funds, etc.

“Yes, this trend in India is increasing and will slowly become dominant over the next 5 to 10 years, especially with millennials, since they fine fintech familiar, easy to use and cost effective. However in India traditional broking business will continue to be a major driving force for most broking companies as older generation clients like value adds and relationships based services,” Avinash Gorakshakar, research director at Profitmart Securities, said.

In India, excluding some major cities, the majority of investing still happens in traditional assets like FDs, RDs, and Gold. Investments in stock markets, mutual funds, and other new generation investment avenues is still restricted to a small set of users, given the current mechanism to access these products still remains complex. This is the problem that digital investment platforms address.

“Digital investment platforms are tech driven and user first interfaces, which provide a simple and secure way for investors to access and invest in a variety of investment products. Leading digital investment platforms like Paytm Money offer 100% digital and hassle free account opening / user onboarding journey, intuitive user experience and navigation, low ticket size products with competitive rates, advanced performance tracking, and investor education, while ensuring bank-grade security,” Paytm Money spokesperson told Money9.

Ability to leverage cutting-edge technologies and improve upon outdated processes enables digital platforms to offer better services at competitive rates vs. traditional market participants. This makes digital investment platforms an ideal option for any young retail investor comfortable with basic technology.

“Digital investment platforms are filling the gap between Fixed Deposits and Debt Funds, stocks and equity mutual funds for the retail investor. New investors prefer this route as compared to the traditional physical agent route as this is faster and more convenient. FDs offer very low interest rates and thus ignored by participants as real returns adjusted for inflation are negative here,” Gorakshakar pointed.

Take an example of the leading fintech company in the business – Paytm Money. It offer simple, secure, and low cost (zero commissions on direct MF / zero brokerage on equity delivery trades) investment products has enabled users investing in traditional products like FDs to explore equity based offerings that have higher return potential.

“Paytm Money’s vision is to make investment options accessible to all Indians in a simplified manner. This is a one stop app for all savings, investment and trading needs of individuals having Rs 1 to crore, and offers Equity, IPO, ETF, F&O, Direct MF, Digital Gold & NPS to is users. The popularity of our offering with new age investors should be evident by the fact that over 60% of our users are first time investors, and around 80% of users on the platform are under 35 years of age,” company spokesperson explained.

Meanwhile, Gorakshakar also highlighted the impact of Covid-19 pandemic that caused almost all market players operating in debt equity and insurance space to encourage online business as this ensures continuity and ease of business.

But what should be kept in mind before opting for digital investment platforms?

Online broking is good as it’s quick and hassle-free but investors must choose quality franchisee providers that have strong brand credibility and reputation in the market. You should ideally avoid unknown small players operating in this domain.

“More importantly customers must be careful in using this medium as they need to be aware of cybercrimes and the risk of sharing their passwords across multiple platforms,” Gorakshakar asserted.

Having discussed the growing importance of digital investment platforms, market experts still feel the traditional broking business in India will continue to be a major driving force for most broking companies as older generation clients like value additions and relationships based services.