Espresso’s CEO on how data explosion has changed trading

In India, discount broking is a fairly recent phenomenon, having caught on just a little over a decade ago. But it has changed the rules of the game, making investing possible for anyone with a mobile.

What is less appreciated is how closely a discount-broking firm, which charges a lower commission than traditional counterparts, interacts with its clients. Its broking platform is constantly evolving, based on customer feedback.

R Kalyanaraman, CEO of Espresso, Sharekhan’s online trading and discount broking  platform, spoke to Moneycontrol about the changing profile of a trader. Edited excerpts:

How have customers changed over the past few years? 

More people are willing to see trading as a full-time profession, and this trend has accelerated since the pandemic. What we are also seeing are people realising that they need to keep emotions out of trading, and that they are using more predictive analysis (using current and historical data to predict future events) for trading. There are traders who say that if I make half a percent in a day or a month, going by whatever formula, then they get out (as the data analysis tells them) and they don’t rue the fact that they could have may be made another 2% (if they had stayed on the trade by ignoring their analysis). They don’t let emotion take over logic.

There are multiple tools available across various online platforms to help them, and these tools keep getting better.

How do you–as an online broker with a product as the main interface between you and the customer–know that the trader’s attitudes are changing in such a way? 

Here is where personal connection matters. As a matter of principle, I speak to two to three customers every day. I take numbers at random, introduce myself as a part of Espresso and speak to them.

As a team, we ask customers what kind of experience they have had in trading and that opens up conversations. During these discussions, the customers say that they were doing this transaction when they let emotion take over. That had they looked at the data, they would have got it right. This is not coming from us, but from the customers.

Secondly, we also have Trading Success Beans with Kalyan on our Espresso Youtube channel, and we have done a lot of interviews over the last few months. On the show, we ask the traders about the mistakes they have made, to help aspiring traders (avoid making those mistakes). And nine out of 10 times, the failures that they don't talk about are the ones they made by getting carried away by emotions. They say that had they looked at data, things would have been a little different.

But didn’t traders and investors always know this, that making decisions based on emotions won’t go well? 

The traders always knew that this could be disastrous. It’s like people know that they age, but people rarely act on that knowledge. Now there is so much data that is so easily available, it’s available at your fingertips, and it is in your face. (So you can’t escape acknowledging mistakes made by emotional trading) It’s like that quote, ‘In God we trust, for everything else we have data’. That is the guiding principle now.

Also listen to Market Minutes: What are volatility indices signalling? 

If I speak to some of the traders today, they probably won’t even know where the Nifty level is at. Five years ago, they used to follow levels much more closely. They still follow these levels obviously but not with the same intensity.

Now when I speak to a lot of traders, levels don’t matter to them as much because they already have their trading strategies in place. They say that this is a strategy that they’ve perfected after multiple failures and that they’re going to stick to it. There is a lot of discipline coming into trading.

How is running a discount broking firm different from the traditional kind of broking? 

In a discount brokerage, since you don’t have a typical branch model, it makes managing customer expectations that much more difficult.

In a full-service model, you have your relationship managers to assist you in every possible way. In discount broking, your product becomes your relationship manager. Therefore, the product design must be a lot more intuitive.

Gone are the days when brokers used to create a product and hand it over to the client. Now the customers are having a say in how the product is being created. In Espresso, a lot of things that we do, we do by seeking advice from customers. A lot of the popular features and products we added came from them. For example, innovations on our desktop-trading platform Binge or features such as Smart Basket and EZYOption Watchist that we created. Then there were a lot of UI (User Interface), UX (User Experience) changes that we effected.

What are the most frequently made demands  by customers? 

Bulk of the demands is around product stability, speed, UI (user interface), UX (user experience) and transparency of reports.

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What drives customer stickiness? 

Great product experience. For example, how the onboarding experience has been, how easy was the first transaction, have the charts appeared like he/she would like to see it, is there ease of use and so on.

Every time we try to also give a small surprise, which gives customers the feeling that there is constant work in progress.

What portion of the trade is transacted through mobiles and what portion through desktops? 

So for us, about 60% comes from mobile, contrary to popular belief. Usually, people think that a high-end trader would want to transact through the desktop or the website because of the larger screens for multiple charts.

Is there a lot of migration happening from Sharekhan to Espresso? 

No, not much. I’ll tell you why. The type of customers that Sharekhan typically attracts are those who need investment advisory services and research. Some of these are customers who also need hand holding, and they are reassured when they see a branch office. But Espresso typically attracts the do-it-yourself kind of customers, and they actually loathe the idea of human intervention. So they do everything on their own, from account opening and transacting to accessing reports. Some of them are highly involved, they do their own software, their own strategies.