These Brothers are using AI to Kill the Brokerage Model in Capital Market "Our idea is to add more and more asset classes for people to invest."
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Capital market is a tricky place, where many have burnt their fingers and lost their hard earned money. The reasons are many and range from lack of knowledge, poor technology to brokers' vested interests.
But, thankfully the scenario is changing with the advancement of technology. Numerous fintechs are sprouting under the robo advisory segment.
One such company is Finvasia. In an exclusive conversation with Entrepreneur India, Co-founders Sarvjeet Singh Virk and Tajinder Singh Virk relive their journey from the Wall Street to the Dalal Street.
Inception
The company was set up in Canada in 2009 and the brothers came to India as institutional investors in 2011. After waiting for a long time, the Virks managed to get their regulatory clearances and launched their first product SMART, an Artificial Intelligence-based social mutual fund analyzer, followed by SCALPERT, a charting-based advanced trading platform, using algorithm.
Its vision is to put an end to the dying brokerage model in India. "By and large we realized that everybody is using technology – be it through mobile or web or a trading application. So, if sending a message via WhatsApp doesn't cost you anything additional, why should there be a charge to put your trade on the exchange server?" reasoned Sarvjeet.
Middle-men are accused of acting out of their vested interests, guiding their clients through options that they will benefit from.
However, with fintech companies it doesn't really matter if you buy or sell more, it's the investors' stay in the market that matters, said Sarvjeet. "Our idea is to add more and more asset classes for people to invest," he added.
Zero Factor
Finavsia's clients find it hard to accept that the company follows a zero-brokerage model. Tajinder clarified, "We don't need to have offices all over India or hire 500 men to provide services. We first indentified areas where we can stop spending and then identified the areas where you can create more revenue."
The company always follows four pillars of growth — invest, lend, save and spend. The company is working towards setting up its NBFC and will then work towards designing fintech products in the spending segment.
Market Overview
The retail investment figures do not portray a happy picture. According to industry sources, only about 10% of Indians invest in the capital market as most as us believe in investing in fixed deposits, gold and real estate. And with events like demonetization, all our money comes back banks and nobody has any clue about what should be done, added Tajinder.
"Inflation has killed assets classes like FDs and gold. People, especially millennials who are financially stable and have sorted out their basic needs, will start looking for opportunities to invest," he added.
The Finvasia brothers doesn't just plan to educate people about multiple investment options, but are also looking forward to create multiple assets class for their clients that they can choose to invest in.
Having worked with both retail and institutional investors, the duo realized that both the segments were inclined towards technology, where the former is more on the learning curve while the latter looks for algorithms.
Meanwhile, Chandigarh-based Finvasia has raised an unspecified amount from Intrinsic Investments Ltd against the valuation of INR 150 crore in its pre-launch phase. The company presently employees 120 people and are looking forward to setting up their office in Mumbai.
