Zerodha's Nithin Kamath explains why opening free demat accounts is bad for business, customers
Zerodha Co-founder and Chief Executive Officer (CEO) Nithin Kamath has advocated against opening demat accounts for free just to increase user accounts. While claiming that Zerodha is the only brokerage firm to charge account opening fees from clients, Kamath explains why not charging an account opening fee is a non-starter for the broking platform.
In its blog post 'Z-Connect', Zerodha said that it charged Rs 200 from customers for opening an account and was the only Indian brokerage to do this.
It said that there is an actual cost associated with opening a demat account which involves costs related to KYC, documentation, eSign, and human verification, among other things.
It said that if there was no account opening fee to recover the cost, the business could implicitly be pressured to get a customer to transact to recover that cost.
«This isn’t good for the customer or the business in the long run if a customer transacts due to a push from the broker, which causes the customer to lose money. Any attempt to explicitly recover this cost could also mean compromising on the many core principles at Zerodha, like the no-spam policy, no revenue targets for the team, and more.
This is also why we don’t spend on advertising,» the blog post said.
«Trading the markets is a serious business with serious risks involved. Collecting an account opening fee right at the start also, in a way, helps set this expectation with a potential customer, filtering out users who may not be serious about trading or investing with us,» the blog said.
The blog said that new account openings, which had dropped off a cliff along with the market drop, are now bouncing back in sync with markets at all-time highs.
Kamath shared the blog on his official X
