Online Trading Makes Sense for Financial Services

One out of three trades on the NSE and a fourth of the exchange’s average daily turnover today originates from retail Internet trading platforms, says The Hindu Business Line’s article on the increasing use of online trade platforms in India. The rising numbers have been attributed to growth in investment habits of tech savvy young professionals and better web infrastructure.

The retail investors with an online bent of mind also appear to be a more stable segment among the investor base. When the markets fell sharply between January 2008 and March 2009, the number of online trades fell by just 7 per cent, even as overall trades fell 14 per cent. The rebound since March 2009 has seen online trades expand by 30 per cent even as market-wide trades saw a 31 per cent increase.

While investors tending to prefer the convenience of online trading is one thing, even brokerages and financial institutions have been pushing the medium hard. We have already seen a lot of banks market the benefits on online usage through 360 advertising.

Brokerages too have been pushing for online trading accounts on similar lines. The benefit for them of course is better scale and the flexibility that the systems provide in management and execution. The advantages of cost and being location independent is primary in this regard.

In effect the financial services industry presents an excellent case study on how digital media is good for business and the impact it has on business value. The biggest lesson however from my perspective is the will shown by many of these organizations to educate and cultivate a culture of online trading among their customers.

My father for instance is amongst those crop of individuals who find anything beyond emails and Rediff’s news page a tedious effort online. He now trades online. His broker marketed it and almost nearly told him that he won’t give any services unless my dad begins to use the online facility. Compulsion bridged the digital divide in this case.

And this is pretty much on the same lines of the thought that I echoed many times on this blog, that of digital publishers needing to up the ante, and provide clear benefits and long term value. This will drive more usage and thereby provide more engagement online for digital advertising and digital commerce to work. The responsibility is not on brands and corporates waking up to new media, but on web publishers and developers to make the web indispensable for them for digital media to achieve its full glory, online trading being the case in point.