Nearly two decades ago, trading was next to impossible and time-consuming, as it was done manually from the terminal of brokers and sub-broker offices. Also, opening a Demat account was a whole different ball game altogether. However, cut to the 2020s, investing has become as easy as trading from mobile or desktop, thanks to the rise of new-age investing and discount brokerage platforms like Zerodha, Groww, and others.
Today, the Indian markets are driven by FOMO, or fear of missing out, along with easy access to investing – and the bulk of that money is getting routed via new-generation tech platforms and discount brokerage firms. According to SEBI, close to 14.2 million Demat accounts have been opened in FY21. Moreover, because of depleting interest rates (banks) and markets soaring, many retail investors have entered the industry in the last one year.
Leading the market is Zerodha. Nearly 20 per cent of all retail trading volume in India is done via its platform. With close to 1.5 million daily active users (DAU) and 4 million monthly active users (MAU), its platform processes close to 10-12 million retail trades per day, generating about 8,000 crores of equity and 15,000 crores of futures and options (F&O) turnover.
Next in line is Groww. The company witnessed a 226.12 per cent rise in 2020 – fueled by first-time investors from the age group 18-20 years – compared to a 101.6 per cent increase in 2021. As per the company, Pune, Mumbai, Bengaluru, and New Delhi were the top cities that saw consistent growth over the last two years.
Besides Zerodha and Groww, other emerging players include Upstox, ETMoney, Paytm Money, etc. Here is a comparison graph showcasing various investing platforms in India based on monthly visits from users on its website as of September 2021.
Zerodha vs others
Today, Zerodha competes with a slew of investing platforms, including Groww, ETMoney, Upstox, Paytm Money, ProStocks, 5paisa, etc. But the question is, how is Zerodha managing to stay ahead of the game, despite the growing competition in the space?
“We have specific product and business philosophies that we follow, and we have been on a certain trajectory guided by those for over a decade, irrespective of who the other player in the market is — old institutions or new startups — we continue to follow our own trajectory,” said Kailash Nadh, CTO at Zerodha.
The company believes in innovating consistently irrespective of competition and focuses on products and services that keep getting better, while never chasing ‘engagement’ metrics or user ‘growth.’ For instance, Zerodha has never advertised or marketed its products and services to date, despite the newer players doing massive ad campaigns, where they are burning investors money, chasing growth metrics, and whatnot.
“Our focus has always been on service offerings. We do not have any growth targets or revenue goals,” said Nadh. This can be explained with its latest feature called the ‘Nudge,’ which warns and blocks users of potentially risky trades. In other words, this reduces the number of trades their clients make, thus reducing their revenue. “I am not sure how many other businesses can take the decision to actively discourage their own clients from trading because that would be the right thing to do,” said Nadh.
Zerodha = Zero Barriers
Compared to other players in the space, Zerodha has the first-mover advantage as it was one of the first discount brokers in the country. Nithin Kamath founded the company in 2010 to overcome the hurdles he faced during his decade-long stint as a trader and create a barrier-free trading experience for investors.
Currently, the company offers a gamut of products, including Kite (trading platform), Console (central dashboard), Coin (mutual fund), Kite Connect API, Varsity (knowledge platform), and Sentinel (cloud-based market alert platform), among others.
Zerodha offers all kinds of investment options for its customers, including stocks, direct mutual funds, F&Os, IPO, gift stocks, and fixed income. The team told Analytics India Magazine that the bulk of the activity at Zerodha comes from equity and futures and options trading, followed by mutual fund investments. Its mutual fund platform Coin is one of the biggest online direct mutual fund platforms in India by AUM (asset under management). Soon, the company will be launching its fully revamped web app for Coin.
Groww, which was started six years ago by former Flipkart employees Lalit Keshre, Harsh Jain, Neeraj Singh, and Ishan Bansal, offers various investment products such as stocks, direct mutual funds, IPO, exchange trading fund (ETF), fixed deposit (FD), digital gold, and US stocks.
With time, Groww is becoming synonymous with mutual funds investing in the country, and in the future, it looks to capture the burgeoning trading ecosystem. Its mutual fund is quite popular among its users – particularly among the millennials, gen-z and younger audience – as it offers a seamless, commission-free direct mutual fund investing platform without any brokerage or subscription fee.
Compared to Zerodha, Groww offers ETF, digital gold and US stocks options. However, the only missing services include gift stocks and fixed income. Plus, Groww Calculators are quite different. It provides several tools to assist customers in different ways, including SIP calculator, Lumpsum calculator, SWP calculator, MF return calculator, income tax calculator, FD calculator, etc. Soon, the company is coming up with fixed deposit (FD) services on its mobile app.
In the coming years, Groww could emerge as a direct contender to Zerodha. To this, team Zerodha said that their technology/product offerings are objectively exhaustive and ahead of other players in the market.
For instance, no other brokers offer anything like Console, a reporting and analytics platform, said the team. “We built it before the fintech frenzy started because we have always wanted to build it for the benefit of our clients, irrespective of what others offer or don’t. Or the fact that Varsity, our open market education courseware, one of the largest in the world, is freely open and available to everyone without even the need to sign up. We will continue to improve and innovate and go wherever that takes us,” said Nadh, sharing the USP of the company.
Bundling vs Unbundling
While Groww looks to offer all its services under one roof, Zerodha’s product philosophy is unique. “We decide this on a case-by-case basis,” said Nadh.
For example, Zerodha’s Kite, as a trading platform, keeps getting features integrated seamlessly while Coin – the passive investment platform offering MF, bonds, etc. – is an entirely separate app. “Here, the fast-paced nature of a trading platform and the slow dynamic of passive funds, not open Coin every day, but traders open Kite every day multiple times. Console, on the other hand, is a centralised, consolidated reporting and analytics platform that ties everything together in one place. People generally use this after trading and investment activity to analyse and reflect,” explained Nadh.
Interestingly, even different products of Zerodha are seamlessly integrated. Kite, for example, opens many contextual Console views from its UI in a single tap. In other words, Zerodha believes in meaningful separation with seamless integration.
Tech Evolution – The Beginning
Today, investing apps like Zerodha and Groww process hundreds of thousands of requests per second during peak market hours. So, how are they leveraging technology to ensure a smooth and hassle-free experience for millions of users and scaling their platforms?
To this, Nadh said that scaling is a collection of practices unique and is the product of an infinite number of variables – the numerous domain-specific problems, the nature of the people involved and their biases, the structure of the organisation, countless engineering decisions and trade-offs, technical debt and history, ad infinitum.
He said that several, mostly trivial, common sense techniques and rules of thumb help pluck the low-hanging fruits of typical scaling problems, particularly in the context of running software systems that serve concurrent user traffic and demand.
Recalling the early days – between 2013 and 2014 – Nadh said that in the early days of their team, they were busy digitising things inside the organisation, mostly writing Python scripts to automate redundant manual processes/tasks. “Building a trading platform was not even a thought,” he added. “Sometime in 2014, our order management system (OMS) vendor came out with a white-label web-based trading platform that we could provide to our users. Web-based trading platforms were a tiny niche, and Windows-only desktop trading platforms dominated the industry. When we saw it first hand, we were shocked by what passed for a web application,” said Nadh.
Further, he said, “if I remember correctly, its standout feature was that IE6 was no longer a requirement. It was at that moment the team decided to build a usable web-based trading platform. A pivotal, unplanned move that would eventually transform Zerodha into a full-fledged technology firm.”
Currently, Nadh likes ‘Go’, the programming language, Redis, and Postgres databases. He believes that these three things are enough to build powerful systems that can attain a huge scale. Here’s a complete picture of all the technology stacks used at Zerodha:
When it comes to leveraging machine learning or artificial intelligence tools, Zerodha uses a very minimal AI/ML. “We use little to no AI or ML apart from some basic image/document recognition ML models for document processing,” said Nadh.
On the other hand, Groww uses AI/ML in image processing, automating manual workflows, reducing errors and increasing user ease throughout the journey. Besides this, its tech stack includes React Native, Spingboot, and SpringCloud, and a microservices-based architecture that allows it to scale.
Here are the details of the tech stacks used at Groww (as shown below):
The Struggle Is Real – Transitioning to New Framework
At Zerodha, the team believes that product and services improvements happen incrementally every day. For example, around 2017, Zerodha struggled to maintain two codebases for their app on two different platforms – iOS and Android. “We wrote the iOS app in React Native hoping we would have a cross-platform codebase, but it turned out to have severe performance issues and version changes that constantly broke,” shared Nadh, saying that they stumbled upon Flutter, an open-source UI software development kit created by Google.
It was a highly experimental alpha technology at the time. “We wrote a quick prototype of Kite in Flutter by learning the Dart language over a few weeks to get a feel for it and, in the end, decided that it was worth ditching the Native and React Native apps and re-writing Kite,” he added. Interestingly, its trading platform Kite is perhaps the first serious app written in Flutter in the world.
Last year, Zerodha started experimenting with K8s, or Kubernetes – an open-source system for automating deployment, scaling, and managing containerised applications and tools. Sharing the experience, Nadh said, “We picked K8s to make deployment uniform across our projects. However, K8s turned out to be quite complex in many aspects, including mysterious edge cases (especially under high traffic) such as network packet loss and DNS/routing issues. Because there are so many abstractions to K8s, it turned out to be hard to deep dive and debug. Ironically, the uniform deployments themselves became complex with layers upon layers of YAML manifests per project.”
While the team did manage to move several services to K8s clusters, in the end, it did not turn out to be a smooth experience. Eventually, they had to remove K8s from their stack and are now looking at Nomad (and a related set of tools from Hashicorp) to script and manage their infrastructure. “We’ve run pilots, and it is far easier to understand and handle and seems to be the right fit for our requirements compared to K8s,” said Nadh.
A Peek into the Future
“We have been working on bringing the few critical external dependencies we have in-house. We are very close to achieving this, and that will make us 100 per cent self-sufficient with our end-to-end broking technology stack with zero external dependencies,” said Nadh.
Besides this, team Zerodha said that it would continue to push incremental features and improvements to all their products – Kite, Console, Coin, Varsity, etc.
With all the buzz around cryptocurrency globally, the question is, will Zerodha and Groww think about entering into this space or acquiring crypto trading platforms in the near future? “As a heavily regulated entity, we can only consider it if it becomes a fully regulated entity. Personally, I think crypto is rife with dodgy financial schemes just like any unregulated financial scheme would be,” opined Nadh.
Overall, both Zerodha and Groww, without a doubt, are phenomenal investing platforms for all kinds of investments and are ahead of most of the trading and investing platforms. However, if we had to analyse based on technology, accessibility, performance, maintenance, best practices, quality, UI/UX, Zerodha is a clear winner, not only because of the larger user base but also because of its seamless integration, transparency, and risk control features.
Groww, on the other hand, is still in the early days of user acquisition as it added stocks on its platform in the early half of 2020, and the same year, launched digital gold, ETFs, intraday trading, and IPOs. Plus, its mutual fund is top-notch compared to other players in the market, and the recommendation system within the app solves the hassle for many users in choosing the right investment plans.
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Amit Raja Naik is a senior writer at Analytics India Magazine, where he dives deep into the latest technology innovations. He is also a professional bass player.