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Rising like a Phoenix: Emerging from the
Pandemic and Reshaping Human Endeavors Practitioner-Oriented Research
with Digital Technologies ICIS 2023

Dec 11th, 12:00 AM

How ‘Zerodha’ Used Technology to Disrupt the Indian Stock

Trading Industry?
Joseph J. Nehme
HEC Paris, [email protected]

Shirish C. Srivastava
HEC Paris, [email protected]

Aman Aman
Volta Medical, [email protected]

Follow this and additional works at: https://aisel.aisnet.org/icis2023

Recommended Citation
Nehme, Joseph J.; Srivastava, Shirish C.; and Aman, Aman, "How ‘Zerodha’ Used Technology to Disrupt
the Indian Stock Trading Industry?" (2023). Rising like a Phoenix: Emerging from the Pandemic and
Reshaping Human Endeavors with Digital Technologies ICIS 2023. 8.
https://aisel.aisnet.org/icis2023/practitioner/practitioner/8

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 Digital Disruption in the Indian Stock Trading Industry

How ‘Zerodha’ Used Technology to Disrupt

the Indian Stock Trading Industry?
Completed Research Paper
Joseph J. Nehme Shirish C. Srivastava Aman Aman
IS&OM Department IS&OM Department HEC Paris
HEC Paris HEC Paris France
France France [email protected]
[email protected] [email protected]

Abstract
In this practitioner-oriented research, we describe how “Zerodha” entered and disrupted the
Indian stock trading industry through the use of technology by overcoming the challenges of (1)
developing a new business offering that is accessible to all, (2) gaining trust across the community,
and (3) fostering and growing their business ecosystem. Our case-based research illustrates how
an organization can enter a well-established business area and create value by (1) rethinking the
business model, (2) treating technology as a business enabler, (3) empowering the end user, and
(4) proactively investing in the business and community. Based on Zerodha’s experiences, we
provide guidelines and recommendations for other businesses contemplating to enter and disrupt
an established industry by leveraging technology.
Keywords: Business disruption, digital transformation, stock trading, India

“The chase has always been in creating quality and impact—building high quality, accessible
technology and services to offer to retail investors, free and open financial education, and with our
Rainmatter initiative, to build a modern ecosystem within the Indian broking industry.” Nithin
Kamath (Co-founder, Zerodha)

Introduction
In the last two decades several industries have witnessed profound business disruptions. Whether it be
Airbnb disrupting the hospitality industry or Uber disrupting the taxi industry, the guiding force behind
these disruptions has been the all-pervasive Internet enabled connectivity. Moreover, most such business
model disruptions have been enabled through technology namely digital platforms which aim to provide
customized services to individual customers either by connecting the service providers with the service
consumers or by making specialized services accessible to currently unaddressed customer segments (Hang
et al., 2011; Srivastava and Shainesh 2015). In recent times we have witnessed growing number of business
model disruptions that were driven or enabled by technology and Internet (Chandra et al., 2022; Srivastava
et al. 2013).
We describe one such disruption in the online stock brokerage industry by an Indian firm, Zerodha, which
aspired to make the online stock trading accessible to new customer segments through an innovative and
disruptive business model enabled by a platform-based technology (Chirstensen et al., 2015). Until the
advent of the Internet, stock trading was done by specialized brokerage firms who executed the deals on
behalf of the individual customers. The orders were generally collected through either the phone or in-
person, and the transaction executed manually in a stock exchange. The process was cumbersome and
required a large manpower to conduct trading transactions. This limited the potential trading volumes that
a broker could achieve in a single day. Brokerage firms generally adopted a commission-based model where
traders would charge a fee proportional to the size of the trade —implying a lesser percentage commission
for larger volumes. This was primarily driven by the fact that the brokers were limited in terms of the
number of transactions that they could execute in a given day. This constraint led the broking firms to chase

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high net worth clients who could offer larger trading volumes for an eventual higher commission for the
same number of transactions.
With the proliferation of the Internet, the stock brokerage firms moved to the online space. However, the
Internet was primarily used for automating the existing business processes for facilitating the interaction
with the customers and the stock exchanges. The traditional business model rooted in soliciting the
sophisticated high net-worth clients continued to remain the same. Although there were sporadic moves by
some US based players to bring the small retail customers into the trading market, the brokerage industry
in India continued to focus on high-net-worth clients. Moreover, because of the specialized nature of the
industry, the online stock brokerage industry in India continued to be dominated by few big, trusted banks
and financial institutions, which charged a huge transaction and service fee. In addition, the stock market
context in India was very different compared to the other developed markets where the potential customers
were generally more knowledgeable about stock markets.
Against this backdrop, Zerodha’s founders were motivated to make the online trading service accessible
to new potential customer segments comprising small-volume investors, who desired to invest in stock
markets but were unwilling to pay the huge transaction fee charged by the traditional online share trading
platforms. Although the move to make the stock markets accessible to retail customers was not exactly
ground-breaking, it was something revolutionary in the Indian context. Zerodha came up with a business
model that charged a flat rate brokerage fee, which was lower than the market rate and independent of the
volume traded. The underlying idea was to multiply the volumes through efficient technology use and offer
a basic service model to all, at a competitive price. The business model which Zerodha pioneered in 2010
was based on providing a fast and reliable portal that gives the customers the necessary confidence to trade
through an online platform and simultaneously take the advantage of lower costs premised on potentially
larger aggregate trading volumes.
However, Zerodha was constrained in its pursuit of this innovative business model by the requisite amount
of customer trust that the incumbent stock brokerage companies already had. The well-established
incumbent firms were backed by reputed financial institutions that had the expertise and experience to
function in the heavily regulated Indian stock brokerage industry. Such incumbent stock brokerage firms
had been operating in a rather closed ecosystem for a long time and had established necessary customer
trust in a rather risky business. Clearly, to enter the Indian stock trading industry, Zerodha needed to earn
the trust, not only of the seasoned traders, but also the small potential investors that it wanted to onboard
into the stock market through its platform.
In addition to the requisite customer trust, Zerodha’s high-volume low-margin business implied that the
company needed to grow its customer ecosystem and reach out to a larger population base model
(Srivastava et al. 2021). The challenge was to increase the size of the market itself rather than compete for
a share of the existing market along with the powerful incumbents.
To pursue its redefined business model, Zerodha focused on the three identified challenges, namely,
accessibility, growth, and trust, in a structured way in its journey from 2010 to the current times. To make
the investment in stock market accessible to all potential customers, Zerodha focused on bringing down the
transaction and service charges to almost ‘zero’ and making the trading interface intuitive and user friendly.
Simultaneously, Zerodha adopted a multipronged strategy to foster trust across a wider customer base by
devoting resources to educate and empower potential customers to make better informed stock investment
decisions. And finally, they proactively invested in innovative technological solutions as well as in the
community to increase the size of the market and grow their ecosystem to reach a wider customer base.
Though pursuing such a digital platform strategy appears to be simple, Zerodha’s journey to enter the online
stock brokerage platform space was fraught with multiple impediments. Many of the hurdles faced by
Zerodha were tackled through innovative and disruptive technological solutions. Our study, based on data
collected from multiple primary and secondary data sources and supplemented by interviews with Zerodha
executives, their customers as well as competitors, describes how Zerodha, a small start-up founded in
2010, has now become the major player in the Indian retail online brokerage market segment. This paper
traces Zerodha journey since its inception until the present time, specifically how Zerodha overcame the
three identified challenges in the path of its innovative business model strategy. Through the lessons
learned during Zerodha’s journey, we offer a set of actionable recommendations for aspiring practitioners
and entrepreneurs who want to enter an already well established yet insulated industry through an
innovative digital platform strategy. Although the study concerns online stockbrokerage sector, learnings

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may also be useful for other sectors. The method employed for conducting our practitioner-based research,
along with the different sources of data used for our analysis, is described in Appendix 1.

The Beginning of Zerodha Story

The Internet revolutionized many industries by transforming the way, business was conducted. One such
industry is the stock brokerage industry. Stock brokerage firms provide services to their clients to enable
them to trade shares of publicly listed companies in a stock market and generate returns. Since the 1970s,
brokerage firms used to run manually, receiving orders via phone from their customers, and making
transactions on their behalf in the stock market. The process used to be cumbersome and required a lot of
manpower and infrastructure to conduct trading transactions. This severely limited the number and volume
of transactions a brokerage firm could execute. Consequently, the firms turned to a commission-based
model where they would charge a commission proportional to the size of the trade —higher the size of the
transaction, higher the commission. This enabled the brokerage firms to execute larger volumes with the
same fixed cost and earn more commission. Such an approach led brokerage firms to chase high net worth
clients who could trade with large amounts of money resulting in higher total commission for the brokerage
firm’s volume for a similar trading effort. Because it was not possible for individual customers to trade in
the stock market, brokerage firms played an essential role in the capital market ecosystem. With the
advancement of technology and the connectivity offered by the Internet, traditional stock market brokerage
firms automated the trading business by superimposing a technological layer into their well-established
processes. This approach of automating the existing business processes served as an opportunity for
Zerodha. The founder of Zerodha succinctly summarized this opportunity:
“The opportunity is that though brokerages in India are all offering online platforms they are
(still) relying on an offline method to run it, hundreds of branches, sub-brokers, relationship
managers, regional heads, zonal heads, and many more to serve clients who were all going
online. The increased cost of running this offline business is passed onto the trader who is mainly
online and bridging this disconnect paved way to starting Zerodha in Aug 2010. The idea was
simple — stay completely online, provide excellent support, offer a fast & reliable trading
platform, and pass back the benefit of reduced costs to the client.”
Despite this apparent opportunity, Zerodha’s journey was fraught with several challenges. In the next
section, we summarize the salient challenges that Zerodha’s senior executives faced, followed by a detailed
description of their journey which describes the innovative solutions Zerodha brought forward. We then
present a set of actionable recommendations for senior executives who seek to embark on a similar
disruptive adventure.

The Challenges for Zerodha

The intention of Zerodha to disrupt the traditional stock brokerage model in India by focusing on high
volumes and low margins entailed several challenges for onboarding previously uninitiated customer
segments into the stock market. The bid to increase the potential customer base translated to the three
major challenges for (1) making the stock market accessible to all potential customers, (2) fostering trust in
customers, and (3) growing the network and customer market segment for economic viability.

Challenge 1: Making the stock market accessible to all potential customers.

Because the dominant business model for Indian stock brokerage firms hinged on high trading volumes per
transaction, their focus was on high-net-worth clients who could afford to trade large volumes of shares.
Such a strategy excluded a large potential segment of retail customers who would be willing to trade small
volumes of stocks. Rather than focusing on existing high net worth customers, Zerodha’s strategy was to
onboard the vast majority of small potential retail customers. The rationale was that because the
incumbents are not keenly interested in this segment of potential customers there would be lesser entry
barriers. However, for doing this they needed to make the stock markets accessible to this large potential
customer base. After a deep examination of the characteristics of the requirements of the potential customer
segment, Zerodha realized that it faced the challenge of making the solution accessible in three ways (1)
operational accessibility, (2) price accessibility, and (3) knowledge accessibility.

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Operational accessibility

For the customers, operational accessibility implies an easy to use and intuitive customer interface
(Srivastava et al., 2007; Teo et al., 2006; Teo et al., 2007). Technically, the new platform should also
exchange information with other complementor solutions. One of the first challenges Zerodha faced in their
journey was to build and implement an easy to use and accessible solution consistent with their redefined
business model. At that time, there were no easily customisable solutions available in the market and the
technological ecosystem in the brokerage industry was not well-developed. Personnel with sufficient
expertise in both technology and stock brokerage were very limited. Zerodha had to rely on external vendors
who assisted them in building their digital products to be launched on their trading platform. Highlighting
this difficulty, the Head of Education Initiatives at Zerodha remarked:
“We had to rely on technology vendors initially to build our solutions and it was extremely
difficult because we were the first people to do so and did not have complete clarity on how to go
about it and on top of this the turnaround time on our projects was very slow”
The incumbent solutions in the market were extremely complex for an in-experienced trader and this was
a major challenge Zerodha wanted to address through their solution. A typical screen interface provided by
the incumbent providers contained around 24 columns of data that needed to be understood by the
customer for trading efficiently. Though the customers were not using all the options for every transaction,
the incumbent firms had replicated the manual process on their platforms. These options might be fine for
a seasoned trader but may prove to be far too complex for a novice debutant retail investor. Speaking about
this issue, the CTO of Zerodha remarked:
“The founders had intuitively realised that the technology available at the time was not good and
new technology had to be built but they had never worked in technology and also, they did not
have a technical background. They had no connections to the “technical resource” neither did they
have any friends who had worked in technical fields.’
The second aspect of operational accessibility was related to the technological ecosystem. The designed
solution should interface with other systems and solutions. Such modular solutions (Nehme et al. 2015)
were hard to be superimposed on already developed legacy technological solutions. The trading industry is
continuously evolving because of the frequent changes in government regulations. The designed platform
should be agile enough to integrate these changes swiftly and seamlessly. Such changes if not performed in
a quick fashion would risk deteriorating the response time. Zerodha had the challenge of addressing this
concern to maintain efficient, seamless, and agile solutions that could be quickly added on to their existing
systems. Moreover, Zerodha also needed solutions that would be quick enough to address the continuously
evolving technological landscape for the customers such as the growing use of smartphones.

Price accessibility

The second accessibility related challenge that Zerodha faced was to make solutions affordable for their
potential customers. To achieve this low-cost objective, Zerodha conceived the idea of building a pure
platform-based solution with zero brokerage on equity delivery investments and mutual funds, fixed rate
brokerage on intraday and future and options trading, without any advisory services. The idea of not
providing any advisory services was revolutionary because at that time no other Indian trading company
had such a stripped-down no-frills offering. In fact, prior to 2010 the Indian market was not even prepared
for a product of this nature. The low-cost model imagined by Zerodha was another challenge that they
needed to overcome to reach the targeted potential price-sensitive customers.

Knowledge accessibility

The third accessibility related challenge was related to enhancing the level of knowledge of the targeted
customer segment about stock markets. Without advisory services on their platform, Zerodha needed to
educate the customers about the basics of stock market before the customers would have the necessary
confidence to trade on the platform without any handholding. The relevant literature for understanding
stock trading is complex and spread across different channels. But for understanding it, customers would
require some basic background knowledge to start gaining familiarity with the intricacies of the industry.
Zerodha realized that this specialized knowledge needs to be made available to the potential customers to

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empower them to trade autonomously on the platform. This was also one of the prime challenges that
Zerodha needed to address to make their new business model work.

Challenge 2: Fostering customer trust

Every new startup that ventures into an established industry or market, whether private or government,
must fight hard to earn the ecosystem's trust (Teo et al., 2009; Teo et al. 2007). Zerodha, a newcomer in
the trading industry, neither had the end users nor the regulator's trust. Moreover, the new business
strategy aimed at high-volume low-margin did not score highly on the trust index. The new technological
solution had to appear convincing and trustworthy to a skeptical regulator. The unique low pricing
approach, which was relatively new, encountered a lot of skepticism in the market. One Investment Fund
Manager from the Merisis Advisors – one of the top investment banks in India - describes this challenge:
“Initially, trying to get people to trust them was a huge challenge for them, this is one thing that
is never easy in the financial services industry because people take their money very seriously
and they have to be able to trust someone to let them handle their money, so naturally you have
to gain trust of initial set of users and then bank on them and give them good services so that they
recommend you to the people that they know and then slowly customer confidence in the platform
slowly increases. Zerodha recognised this and worked very hard on this front, and this allowed
them to make their space in a market dominated by larger players.”
Trust was a critical issue for the firm and management at Zerodha was aware of this. The new low-cost
business model did not help —as people generally think there is a catch whenever something is offered for
free. One Zerodha manager from the Legal and Regulatory Compliance Business Unit recalls:
“It is hard to get credibility generally in the Indian financial services market, and building it took
a long time. We gained traction after the continuous effort we put in over a period of 6 years. Our
value proposition was zero brokerage and when you offer something for free in the Indian
market, clients naturally think that how can they have such low prices, there must be scam going
on. It eventually took 7 years for people to start trusting us and be seen as reliable.”
Zerodha’s leadership has from the very beginning understood the importance of trust in the brokerage
business. Gaining and maintaining customer trust has been one of their key priorities throughout their
journey. In all their business decisions, Zerodha had to ensure that everything they did and all their
interactions with their customers should contribute to building relationships based on trust, which they
realized is extremely important for their long-term profitability.
In addition to earning the end user's trust, Zerodha had to forge its way in a heavily regulated industry. Any
new technological solution or new business offering will need to be approved by the regulator before it is
made available to the market. Traditionally, the regulator brought changes that the industry applied to the
incumbent solution. Zerodha was challenged to push new solutions and ideas to the market and had to
convince the regulators to approve their innovative business model.

Challenge 3: Growing the network and customer market segment for economic viability.
When a new company ventures into a well-established industry, it must carefully strategize to grow its
customer base. In 2010 the trading population in India was limited to around 700 thousand regular traders.
This volume is relatively small compared to the total Indian population which recently became the most
populous country in the world after crossing the 1.4 billion milestone.
Consequently, it was envisaged that Zerodha should plan to not only entice this select group of elite traders
but also reach out to the untapped market segment by attracting new customers. To reach a wider
population base with different trading needs, Zerodha needs to provide contextualized complementary
solutions on its core trading platform. This can be done either by using inhouse developers, or sourcing
solutions from external developers. Because with a new business model, the market needs could evolve
quickly, developing these technological capabilities internally could be an option. But with this growth the
organization could become big and lose its internal agility. On the other hand, Zerodha can decide to partner
with an external organization to develop and expand its offerings and network. In both cases they need to
have a clean and reliable API or interface to facilitate the growth process.

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Three Phases of Zerodha to Achieve Accessibility, Trust, and Growth

The endeavor to achieve the three challenges of achieving - Accessibility, Trust and Growth was gradually
surmounted over the three phrases in which Zerodha metamorphosed from a small start-up to the leading
stock trading platform in India.
1) In the first phase Zerodha challenged the market with a disruptive business model and
decided to move into a High-Volume Low-Margin strategy.
2) In the second phase Zerodha realised that technology must be a partner in business
disruption. It consequently adopted a disruptive breakthrough technological solution.
3) In the third phase Zerodha consolidated their position by growing and nurturing their
network and market.
In the following section, we trace the three major phases which shaped Zerodha’s story since its inception
in 2010. We also describe how Zerodha overcame the three aforementioned challenges in each of the phases
to achieve wider accessibility, gain trust among the ecosystem members, and grow their network.

Phase 1: Challenging the market with a disruptive business model

Zerodha’s founders came from a trading background. Prior to launching Zerodha, they traded for 10 years
and lost all of their money twice. As they became proficient in trading and started generating healthy
returns, they started managing wealth for other people. In 2008, during the financial crisis they had a
successful run in the market and made a lot of money. After this, they decided to apply for a brokerage
license, using the money that was generated in the crisis to obtain the license. In the year 2010, Zerodha
started its operations in the middle of a market slump. During this period there was a huge negative opinion
about financial markets, so many stockbrokers had to turn to alternative industries. The experience of the
Zerodha founders made them soon realize that in the stock brokerage industry, the biggest gap in the Indian
market was that no broker was leveraging technology effectively to conduct market trade. Further, no
broker was offering a fair price to its customers for trading stocks. There was no relation between the size
of a trade and the charged brokerage commission. The belief that trading customers should get benefit
enabled by the use of technology led Zerodha to introduce discount brokering model in India, where only a
small fee was charged conducting stock trade on its platform. As explained by one of the company’s CEO,
the name of the company – Zerodha summarizes this mission of lowering the entry barriers for potential
customers:
“We wanted our name to suggest our objective rather than make a claim that we will make money
or wealth. Our name is created by the fusion of the English word “Zero” and the Sanskrit word
“Rodha” meaning barrier. Together “Zero Barriers” suggesting our objective on which the
business was started.”
Consistent with their disruptive idea of high-volume low-margin, in 2017 Zerodha decided to go for Zero
Equity Delivery. One manager recalls that this idea blossomed during a trip while waiting in the queue at
an airport. Senior managers were discussing how they can garner additional customer attention towards
their platform – to get the necessary high-volumes for their low-margin business model:
“… We got the idea to go zero on equity delivery. Majority of the revenues were coming from the
day traders anyway.”
Once granted a brokerage license in 2010, Zerodha set out to adopt a technological platform. No one in the
team at that time had any idea or experience with technology and they made their first online platform with
the help of an external vendor. At that time, Zerodha was a member of the NSE (National Stock Exchange)
and decided to rely on their NOW (Neat On Web) trading platform. This first version was not exactly a
great product or setting the market on fire, and people just started trading with Zerodha for the low prices.
The CTO commented on NOW:
“There are certain restrictions on NOW like it can’t be customized and can be used only for trading
on the NSE and not all exchanges. Nikhil and I, with our trading background wanted a lot more
on the trading platform than what was available. Also, with BSE launching F&O, Commodity
trading getting popular, it became imperative that we had to be able to offer multiple exchanges
on one platform without increasing the trading cost to our client.”

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Towards the end of 2011, Zerodha was trusted by 7000 clients trading on its platform. It was at this time
that Zerodha decided it was time to beef up their technological capabilities and develop their own platform.
They opted for Omnesys Technologies (the same company that developed NOW) to develop a new platform
that would at least match or improve upon the best trading platforms in terms of reliability, speed, and user
experience. This gave birth to Zerodha Trader, Zerodha Mobile and the web platform using HTML5.
Henceforth, Zerodha got their own proprietary platform to fulfill their needs and positioning. Whilst new
technologies were used and new modules were developed, they were limited in their capabilities for two
reasons:
1) Tunnel vision due to the platform being developed by the same team who were behind NOW.
2) Dependency on an external vendor to maintain and evolve their new platform.
Zerodha’s management understood that to achieve a real breakthrough with a competitive edge, adopting
a different business model (Low-Margin – High-Volume strategy) alone is not sufficient and it was time to
intertwine their disruptive technology with their strategic decision process.

Phase 2: Realizing that technology is a partner in business disruption.

It was not until 2013 finally that Zerodha managed to convince and onboard a new CTO to join forces and
implement a new technological platform for the stock brokerage industry. That is when the Zerodha's real
technological journey took off. The new CTO spent his first days at Zerodha meeting all the employees in
the firm and trying to understand the stock trading business. He spent time reviewing the different
functions inside the firm and how he could help solve their problems using technology.
Zerodha developed a small and young IS department for its core business and embarked on developing
their own online trading platform in-house. The first version of Kite (their custom online trading platform)
was introduced in 2015. The Kite platform was built on three characteristics features: Minimalistic,
Intuitive, and Responsive. Firstly, Kite aimed to be minimalistic. Traditional trading screens or user
interfaces were crowded with up to 24 columns of data and a plethora of less often used information. This
created a major obstacle for a new user to embark on a trading journey. The Kite user interface was very
light and comprised only a few fields. It was possible to drill-down and access further information, should
the trader want to dive into more details. Secondly the Kite platform was intuitive and very easy to use for
a fresh user. It comprised only the most common fields that a user needs to review his/her portfolio and
make trading decisions. Finally, because it was built from scratch, Kite was characterised by a swift response
time. Towards the end of 2017, Zerodha was able to launch Kite 3.0 version. It was a new revamp of Kite
with the aim to significantly improve performance, design, and user experience. Similar to the first version,
Zerodha decided to build everything from scratch so as not to run the risk of superimposing several IS
platforms layers (Ross et al, 2018). Subsequently, Zerodha’s senior management realised that for greater
inclusivity, it was necessary to make the API available for the external ecosystem to connect, communicate,
and exchange information with Zerodha systems, applications, and newly developed modules. This was
made possible because the Zerodha codes developed by an able technical team was clean and well
documented.

Changing Government Regulations as an Opportunity

The Zerodha story was bolstered by several regulatory changes that the Indian government initiated in the
past decade. As India started shifting towards a more digital government, it started incorporating new
technologies into its processes which could be used for innovative solutions (Srivastava 2015). It was not
an easy task for incumbents to cope with all these ongoing changes as they were locked into aging platforms
and technologies. Zerodha, on the other hand, was very agile allowing it to swiftly integrate and profit from
the new government regulations. This was facilitated by the newly developed Kite Platform that embraces
the latest web technologies. Of specific relevance are three regulatory changes that contributed to Zerodha’s
growth:
1. In 2015 the Indian Government allowed online identification through its UIDAI regulation for stock
trading account opening in late 2015. This could be easily incorporated into the developing Zerodha
platform.
2. In late 2016, the Government of India announced the demonetisation of all ₹500 and ₹1,000
banknotes of the Mahatma Gandhi Series (Chodorow Reich et al. 2020). It also announced the
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issuance of new ₹500 and ₹2,000 banknotes in exchange for the demonetised banknotes. This was
seen by Zerodha as an opportunity to onboard fresh users.
3. In 2017, the Indian government allowed e-KYC (Electronic Know Your customer) to onboard
Indian customers digitally, which was leveraged by Zerodha.

Phase 3: Growing, nurturing, and consolidating the market and network.

In 2016, the team launched Rainmatter, Zerodha’s investment arm. Senior executives quickly understood
that in order to expand the company’s network and leadership, they had to proactively invest and nurture
the ecosystem. This was now possible thanks to their newly developed platform and public API. It is now
feasible to communicate and connect external applications and modules to Zerodha’s core application.
Rainmatter started as an incubator of new startups with complementary solutions. Then they financed
various initiatives with a minimal stake. Finally, Zerodha launched the Rainmatter Foundation:
“a non-profit fund to support individuals and organisations working on climate change, with a
focus on afforestation, ecological regeneration, and livelihoods.”
Simultaneously, to democratise the trading business, Zerodha invited an old trading friend, onboard to
develop Varsity. Varsity was launched in 2014 to centralise all information related to Stock brokerage and
trading. Varsity consists of an online library to educate the end-user and increase the ultimate customer
base. Today Varsity is a compilation of 12 modules drafted over a period of 6 to 7 years and a collection of
5 books, The Rupee Tales, aimed at introducing younger generations to the financial world.
The three main phases comprising Zerodha’s story and evolution are summarized in the Table 1 below.
Period Event Implications
Stage 1: Challenging the market with a disruptive business model
2010 Launch of Zerodha with NSE A new stockbrokerage player in a very closed market dominated
NOW by big incumbent competitors. Zerodha adopted the NOW
platform (a platform provided by NSE).
2011 Zerodha Trader Zerodha embarked on developing a new trading platform with
Zerodha Mobile external experts.
Web Platform (HTML5)
Z-Connect
Stage 2: Realising that technology is a partner in business disruption
2013 New CTO joins the team Radical shift where IS becomes a strategic partner rather than
an enabler.
2014 Launch of Varsity In an effort to centralise all information related to stock
brokerage and contribute to the community, Zerodha launched
Varsity to educate, empower and increase customer base ‘good
karma’
2015 Launch of Kite 1 – Web First version of the new Stockbrokerage platform characterised
trading application as: “A minimalistic, intuitive, responsive trading
platform”(Zerodha 2015).
‐ Clean Code
‐ Open API to external ecosystem
2015 The Indian Government Zerodha was the first to adopt this technology and made the
allowed online identification account opening process completely online. It has always had
through its UIDAI regulation the smoothest account opening process since 2016 and today it
for stock trading account takes 15 minutes and a couple of documents to open an account
opening in late 2015. on Zerodha. It is the industry leader in terms of ease and speed
of account opening.

Stage 3: Growing, nurturing, and consolidating the market and network

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2016 Launch of Rainmatter Fund Zerodha started actively nurturing its ecosystem with three
(Raimatter 2016) initiatives under Rainmatter:
1. Incubator of new startups
2. Investor
3. Foundation
Late Demonetisation(Chodorow- Large scale adoption of digital financial services to deal with the
2016 Reich, Gita et al. 2020) currency crunch. Zerodha successfully leveraged this regulatory
change because of its technological agility.
On 8 Nov. 2016, the Gov. of
India announced the
demonetisation of all ₹500
and ₹1,000 banknotes of the
Mahatma Gandhi Series and
the issuance of new ₹500 and
₹2,000 banknotes in
exchange.
2017 Allowance of e-KYC(UIDAI Thanks to its technological edge, Zerodha managed to embrace
2017) (Electronic Know Your the e-KYC in a very seamless manner to onboard new
Customer) by Government to customers.
onboard Indian customers
digitally using adhaar (a type
of id in india)
2017 Zero Equity Delivery In an effort to garner additional attention to their platform,
senior managers, standing in a queue to board a plane, came up
with the idea to go Zero Equity.
Late Launch of Kite 3 The Kite ecosystem was rebuilt from the ground up, all the way
2017 from the back-end systems, APIs, to the web front-end. Zerodha
adopted new technologies and have replaced the underlying
ones completely, with the aim to significantly improve on
performance, design and User Experience while adding new
features. Kite 3 was driven by four main objectives: 1. Enhance
Accessibility, 2. Improve Simplicity, 3. Empower customers, 4.
Increase Ecosystem players.
Table 1: Timeline and Key Dates in the Zerodha Journey

Recommendations for entering and disrupting an established business

In the following section we summarize how Zerodha addressed the three main challenges to attract, retain,
and increase their customer base. We group our recommendations into four main themes that
simultaneously helped make the platform accessible to a wider customer base, gain trust across the
ecosystem, and grow the organization and their network. Based on the collected data and the Zerodha
story, we distill four main themes overarching 10 recommendations. These recommendations provide
insights for new start-ups that seek to embark on an innovative journey to transform and disrupt an
industry business model by leveraging technology. In Table 2, we describe how each of the
recommendations addressed the three identified challenges of accessibility, trust, and growth to enter a
new business by disrupting it through mindful application of technology. Subsequently, we discuss each of
these recommendations in greater detail which can be used as a point of departure by aspiring practitioners.

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Challenges for Attracting, Retaining, and Increasing Customer Base

Accessibility Trust Growth (organisation
& ecosystem)
Rethink the New Business Model New Business Model New Business Model
Business R1.1: Venture into a a R1.2: Know your Business R1.3: Go visible and
Model with a disruptive customer (domain knowledge) and extend your reach
customer centric business model. Stay close to your beyond established
mindset customers through SNSs. business boundaries.
Themes/Recommendations

Treat Kite 1 to 3 Kite1 to 3 Kite1 to 3

Technology as R2.1.a: Develop a new R2.2: Put quality first. Build R2.3: Aim for a
a business solution that is simple a reliable and efficient Modular architecture
enabler and intuitive. solution. and stay Agile.
R2.1.b: Be patient with
regulators
Empower the Varsity Varsity Varsity
end user and R3.1: Centralise the R3.2: Educate and R3.3: Make knowledge
the business-related disseminate knowledge available for free and
community information without expectations in for the younger
theoretically and return generation.
practically
Proactively Rainmatter Rainmatter Rainmatter
Invest in R4.1: Make accessible to R4.2: Keep up to your R4.3: Go beyond your
business and end customer many values and quality customer and devote to
community other applications and standards with all new the community.
solutions. partners.
Table 2: Summary of Solutions and Recommendations to Overcome the Challenges of
Disrupting an Established Business

Theme 1: Rethink the Business Model with a customer mindset.

Executives should be ready to rethink their business model and make sure that their new product/solution
is easily accessible to the client in terms of cost and capability. New initiatives must thrive to capture
and develop trust across the ecosystem. Finally, the new business model should be designed to grow
organically to foster an increased customer base.

Recommendation 1.1: Venture into a disruptive business model.

To endeavor into a new industry, you must first carefully consider your end customers and understand
their needs. Then you should try to develop a solution that is accessible to a large client base.
The traditional trading industry was a very closed one and a limited number of customers were making a
living out of stock trading. The industry embraced a High-Margin Low-Volume business model that was
until then accessible only to wealthy customers aiming for large trading deals. One competitor stated:
“Brokerage used to be an asset under management game and firms would maximise profits by
squeezing maximum commission on these assets. Brokerages are purely distributors of the stocks
in the stock market, a product which they have no control over, they earn a percentage
commission on the trading amount. There aim is to make their users transact as much as possible
because their commission hinges on the transaction value rather than the actual amount they are
holding, so they try to maximise transactions from users, churn their money and generate as
much commission as possible.”
It was clear for Zerodha’s managers that to brave the trading industry, they had to make it accessible and
within reach of a wider customer base. In its effort to transform the trading industry, Zerodha made a
radical shift and adopted a High-Volume Low-Margin business model. Zerodha’s offering disrupted an

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incumbent Business Model and redefined the broking industry. They tore down the walls of this closed
business. Henceforth, the trading industry became accessible to a very large population.

Recommendation 1.2: Domain Knowledge (Know your Business) and stay close to your
customers through SNS.

Trust is a key element every new startup should foster and grow with its customer base. To achieve a high
level of Trust, executives should prove on the one hand expertise or domain knowledge and on the other
hand communicate and reach out to end customers. The best person to score high on the trust index is the
CEO.
Zerodha’s CEO learned on the job. After spending 10 years in trading, he gained solid expertise and domain
knowledge. After launching Zerodha, he became highly active on most social media platforms and SNSs.
He wrote, blogs, and tweeted his opinions about the markets and his platform publicly. This is very unusual
for the head of a brokerage firm to put his opinion out in the public. It is rare for brokerage firm CEOs to
voice in their opinion openly; sooner or later, irrespective of whatever they say, they could become liable
and face flak from the public. Zerodha’s CEO has been courageous in actively putting himself out there and
addressing all issues and concerns that were thrown at him on these platforms. A Senior Business Analyst
from Sharekhan, a competing firm, highlights this aspect:
“Zerodha’s CEO is the only one in the Indian stock brokerage market who dares to go on public
platforms to voice his opinion because it is a risky thing to do. He is not always marketing
Zerodha but rather trying to provide quality information on concerns that traders might have
about Zerodha or the markets in general. His social media endeavour has helped Zerodha’s cause
and increased the trust in the company and him massively.”
Zerodha’s focus on remaining transparent and attempting to interact with its users has helped them in
conquering the trust challenge massively. In today’s interconnected world senior managers should reach
out and be close to the end customer. Social media is a powerful platform for executives to build a solid and
lasting relationship with a large customer base. This bond should be based on domain expertise and
transparency with the aim of fostering trust.

Recommendation 1.3: Go visible and extend your reach beyond established business
boundaries.

Once you rethink your business model with a view to a large customer base, you must seek visibility to
grow and reach out to all potential customers. Many correlate business and company visibility with
marketing strategy and advertisement campaigns. While this can provide quick and fast visibility, it is
often not sufficient when not grounded in strong customer relationships.
One of the most surprising things about Zerodha’s approach to ‘visibility’ was their decision not to spend a
single penny on advertising in their early days. What makes it more surprising is that they have achieved
massive growth with no promotional activity. This approach is grounded in their philosophy towards
customer relationship building and their understanding of the Indian brokerage industry. A senior
executive explains their decision on not spending any money on promotional activity in the early days was
partly due to them being bootstrapped. They had to be careful with money and focus on the most important
things first.
Zerodha’s no-promotional expenditure strategy was not only motivated by their limited financial
capabilities, as a startup, but more so it was rooted in their philosophy. They believed that there should be
no advertisement within the stock brokerage industry, and it is not right to spend money to attract
consumers this way.
Finally, once you define your new accessible disruptive business model and you nurture trust with your
customer base through domain expertise and transparent communication, you can grow your organization
and ecosystem. For that you need to be true to what you are and avoid overselling your product or solution.

Theme 2.: Treat technology as a business enabler.

After you rethink and define your new business model, you ought to seek the best technological solution
to meet your new disruptive strategy. In today’s world technology is an intrinsic element of every

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successful business to attract, retain and increase customer base. Technology plays a major role in
enabling a new business to achieve the much-anticipated customer accessibility, to build customer
trust and to grow the ecosystem.

Recommendation 2.1.a: Develop a new solution that is simple and intuitive.

To achieve high accessibility rates, you need to enable your business with a new technological solution
that is simple and intuitive to use. Zerodha’s managers made a long-term bet on technology. While most
other competitors were powered by a complex and convoluted solution, Zerodha decided to favor
simplicity over complex functionality.
2015 saw the birth of the long-awaited Kite web trading platform. Kite was characterized by three distinctive
features: Minimalistic, Intuitive, and Responsive. Traditional trading screens or user interfaces were
crowded with up to 24 columns of data and a plethora of information. This created a major obstacle for a
common person to embark on a trading journey.
Another important factor which contributes heavily to the overall ease of use of Zerodha’s trading platform
is the simple on-boarding process. They have a full online and quick on-boarding process which can be
completed in 15 minutes if you have all the necessary documents at hand. One manager from Sharekhan, a
competitor firm stated:
“It is possible to ’Do it yourself’ registration on Zerodha’s website. The account can be opened in
10-15 minutes on their website and it takes our sales team around a week to do the same.”
In summary, technology, when treated as a business enabler can make your new business accessible to an
extended customer base.

Recommendation 2.1.b: Be patient with regulators.

Regulators are used to dictating new rules to the industry and not the other way around. When you lead
the way with a disruptive business solution, you generate new ideas and solution but must wait for the
regulator’s approval before pushing this to the market. It takes lots of patience and time to proactively
chase the regulator for approval.
In the case of the stock trading industry, there were no technical decision makers at other traditional
brokers who said, “Yes we need to build up our in-house technological capacity”. Technology was never the
focus. They only focused on delivering financial services (on the phone, at a branch or on the screen) as
dictated by the regulator. All changes emanated from the regulator and were integrated into the incumbent
solutions. In positioning technology as a business enabler, Zerodha managed to ease accessibility to its
platform for everyone. One manager stressed:
“At Zerodha we build up patience to work with regulators and slowly in incremental events. That
could be this technological feature that you built but we didn’t get approval for 6 months or even
8 months. For biometric login which everyone takes for granted now, we had to request for 2,5
years, write numerous letters to get the right approvals.”
Regulators are slow movers as opposed to new business owners who are eager to expand their business in
the fastest way possible. Whilst business owners should be patient with regulators they should actively and
persistently chase the evolution of regulator frameworks and use this precious time to build and ready their
solution.

Recommendation 2.2: Put quality first. Build a reliable and efficient solution.

Using a bespoke technological solution for the business and high-quality standard is a definite game
changer when it comes to building trust across the ecosystem.
From inception, Zerodha understood that technology is a key business enabler and if properly and carefully
used it will play an important role in fostering trust. In the first 3 years Zerodha tried to have its own
solutions and relied on external vendors. As they realised that technology is key to enabling the business,
they sought to convince and partner with a new CTO to develop a technological solution internally.
Technology is considered a core competency and it should abide by the most stringent quality standards.
The technological department adopted the latest cutting-edge standards and wrote a clean code with proper

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documentation. The idea to start development from scratch and not to superimpose new code on aging
solutions was paramount in achieving a highly reliable and efficient solution.
This was achieved through different initiatives related to attracting the right talent for building their
applications and use of some non-standard technologies in the industry that served their purpose of
‘empowering’ their customers. As customers were empowered to swiftly create a new trading profile, start
trading, and monitor their portfolio, they naturally trusted a technological solution that was extremely
reliable, efficient and had nothing to hide.

Recommendation 2.3: Aim for a modular architecture and stay agile.

Start from scratch with the best and latest technology to build a state-of-the-art solution with a view to
the future. Many start-ups that want to start doing business quick, acquire a ready-made solution or build
their business layer on an aging solution. They become locked down in an old technology that hinders
their performance, agility, and potential growth.
Zerodha’s management fell in this trap in the early stages. They acquired NOW, an existent technological
trading platform, so that they can focus more on the business.
“With “NOW” all our technology headache was taken over by NSE and it worked brilliantly as we
focussed only on the operational side of the business rather than the technology.”
Soon after they started operations, Zerodha’s founders realised that even the best platform that existed back
then did not meet their vision. To grow their ecosystem and customer base they needed a new platform that
is modular and agile.
Zerodha’s technical team thrived to develop a new platform with a clean and well documented code. It was
then easy to make the API available for the external ecosystem to connect, communicate and exchange
information with different systems, applications, or newly developed modules. Their reputation as a state-
of-the-art investment platform was growing day by day.
A technological solution should be built in view of growth of your organisation as well as your ecosystem
and customer base. To achieve that companies should adopt modular technological solutions and they
should stay agile. From Kite 1 to Kite 3, Zerodha built a state-of-the-art technological solution accessible,
trusted by the end user, and that can foster organisational and ecosystem growth.

Theme 3: Empower the end user and the community.

Most technological platforms focus on customer service and how to meet customer demands and needs.
With Varsity, Zerodha changes the way companies deal with and view customers. An educated customer
is much more valuable than a customer brainwashed with advertisement and gadgets to drive and ease
consumption.

Recommendation 3.1: Centralise the business-related information theoretically and

practically.

As soon as possible make your business knowledge easily accessible on one single platform.
At a very early stage Zerodha launched Varsity, a centralised knowledge hub or database, where they try to
educate people on trading, financial capital markets, investment strategies and different financial products.
Prior to Varsity, investment information was spread over a broad spectrum of sources. For example, if you
wanted to know more about a regulatory decision, you had to browse the websites of the Indian regulators
such as SEBI (Regulators of the Capital Markets) or RBI (Central bank and the regulators for Banking and
Non-Banking companies).
There are a total of 12 modules on Zerodha Varsity which were developed over a period of 6 to 7 years. Think
of these as 12 different books on various topics related to capital markets (Varsity 2015). On top of the 12
modules, mainly aimed at investors, Varsity produced a box of 5 books which targets the younger
generation: Finance made easy for kids or “The Rupee Tales”(Zerodha 2020). Varsity initiator and leader
insists:
“There is no paywall or even a login requirement, so in that sense, this is a true effort to
democratize financial literacy.”
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Varsity made trading accessible to a wider public.

Recommendation 3.2: Educate and disseminate knowledge without expectations in return.

Make knowledge available to all for greater good even without any returns.
The main objective of Varsity was to educate people so they can independently manage their trading activity.
Varsity was available to the wider public and to all traders and for free. Disseminating knowledge for free
and without calculated expectations was a deliberate strategy that played an important role in developing
and gaining the end user trust for developing the required mindset (Shirish et al., 2023). Zerodha Varsity
Leader sheds light on this:
“Educating the customer is one of the top priorities for Zerodha because we believe that an
educated and happy customer always eventually turns out to be more profitable always and stays
longer with us”
Zerodha has undertaken multiple initiatives to actively build trust among its user base. Their users’ forum
trading Q&A is the second largest financial forum in the world, behind Investopedia. They also have deep
customer focus within the organisation, so much so that every employee in the company, irrespective of
their job, spends time on the platform everyday. They interact with the users, answering questions about
not only the platform but also trading and capital markets in general. This allows them to stay in touch with
their customers and increases customer trust in the company.

Recommendation 3.3: Make knowledge available for free and for the younger generation -
Good Karma.

Knowledge dissemination should be practised to gain customer trust in your company.

Whilst it is very important to make you knowledge database accessible to your customers and to gain
customer trust in your ecosystem, it is equally important to seek a wider customer base that spans beyond
your boundaries. Growing your ecosystem and expanding it to non-Zerodha customers is a strategy Zerodha
executives opted for. Table 3 illustrates some navigational statistic related to Varsity.
Daily Pageviews > 85,000
Number of submitted queries > 70,000
Number of app downloads > 10 million
Average App Store review Between 4.5 and 5.0
Number of certificates issued > 45,000
Table 3: Zerodha’s Varsity Data Points

Varsity senior manager describes this a “Good Karma” and recalls:

“50% of Varsity users are not Zerodha customers. Many are coming from the competition. Some end up
joining Zerodha.”

Theme 4: Proactively invest in the business and the community.

Invest in the capability building of the situating community for long term sustenance and good will.
Zerodha’s strong technological infrastructure and their decision to make their API’s public started gaining
attention. Their reputation as a modern state of the art investment platform was growing day after day. To
capitalise on this growing interest, Zerodha managers decided to launch in 2016 “Rainmatter” a financing
arm to invest in complementary products that can be connected to Zerodha’s modular platform. With
Rainmatter Zerodha pushed three types of investments. The first was driven by a financial KPI and
translated into an incubator in new startups and proactively taking stakes in the companies. The Second
consisted of limited investments in small companies with minimal stakes. And the third was driven by a
social circular economy KPI and consisted of a foundation fostering green and climate initiatives. The above
three investment initiatives grew their network and consolidated their position in the market while
addressing the three main challenges of Accessibility, Trust and Growth.

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Recommendation 4.1: Make complementary applications and solutions available to end

customer.

Proactively invest in new privileged players who could develop complementary solutions which upgrade
your solutions’ attractiveness and accessibility.
After making their API available in 2015, Zerodha launched its investment arm Rainmatter in 2016 and
started financing start-ups that can develop complementary solutions and connect them to its Kite platform.
New service offerings inline with its strategy to make trading industry accessible to a large population,
became gradually available on their platform. They hence attracted a growing customer base by making
new trading solutions offering available through Kite. These investments are fully integrated with Zerodha’s
platform as illustrated by an investor from the Merisis Advisors group:
“These investments work really well because they also have access to Zerodha’s API’s. They have
seamless login via Zerodha’s credentials which solves the problem of multiple logins.”
Amongst the solutions Zerodha financed we note the following: 1) SmallCase which is qualified by the same
investor as:
“Small Case allows users to invest in particular themes without looking into the companies within
the buckets. A layman investor without investing much time can just place long term bets that
they believe in.”
He summarised Streak as:
“With Streak users can create an algorithmic trading strategy based on moving averages and
automate it without knowing how to write much code.”
Two other solutions which are made available to the end user are Sensibull (the Options trading platform)
and Goden PI (the Bonds trading platform). The above four platforms are tightly integrated with Kite and
can be accessed through the Zerodha website. They are considered as partners and Zerodha maintains a
relatively important stake in each one of them.

Recommendation 4.2: Keep up to your values and quality standards with all new partners.

Encourage and invest in independent start ups to develop new solutions with minimal integration but
make sure to set the rules and the quality standards.
In addition to the above-mentioned partners, Rainmatter invested in numerous start-ups with very minimal
and limited stakes. They were open to many other companies to connect to their API. To capitalise on this
growing interest, Zerodha's managers decided to launch ‘Rainmatter’ a financing arm to invest in
complementary products that can be connected to Zerodha’s modular platform. With Rainmatter, Zerodha
pushed two types of investments. The first was driven by a financial KPI and this led to incubating or
investing in new startups. The second investment was in a foundation fostering green climate initiatives.

Recommendation 4.3: Go beyond your customer and devote to the community.

Make proactive contribution to the broader community.

In 2019 Zerodha launched the Rainmatter Foundation that stretched its investment initiative to the social
and environment cause. Rainmatter foundation plays an important role in growing the ecosystem to
include NGOs, CSOs, Policy Makers etc.
The Rainmatter Foundation focuses on four main pillars: 1. Ecology, 2. Human Services, 3. Economy and
4. Pride and Identity. This is clearly summarized in the following:
“A non-profit organisation in India that supports organisations and projects for climate action,
a healthier environment, and livelihoods associated with them.”1

1 https://rainmatter.org/

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On the Rainmatter website, we can trace that between 2020 and 2022, 17 investment projects, 41 grants
and 2 fellowships were instituted. To grow the organization and its ecosystem, consider reaching out beyond
customers, to non-profit entities and giving back to the society.

Concluding Comments
Zerodha has been the fastest-growing online stock brokerage in India with a 200 percent annual growth for
the last 5 years. This was achieved with a zero-promotional budget. The thrust on developing a new IS
solution rather on building on the incumbents and on empowering their customers rather than providing
them with value-added services is a distinct shift in the current focus in the industry. Following this strategy
coupled with their new business model anchored in a high-volume low-margin approach and their proactive
investment in their ecosystem and community, Zerodha now has henceforth a customer base of over 6
million clients2 and a market share of more than 17%. We believe that lessons offered by our case, will be of
value to entrepreneurs managing or contemplating to enter network impacted digital platform-based
business.

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Appendix 1 -Research Method

This research is based on primary and secondary data collected on Zerodha over a period of 4 years. For
secondary data we used Zerodha’s website, Varsity Online Database, internal documentation, and other
online resources. For primary data we conducted a total of 12 semi-structured interviews with three groups
of Zerodha employees and stakeholders. The first group is composed of senior leaders and employees from
the company. The second group consists of resources from competitor firms, and the third one comprises
experienced and independent traders. The transcripts of 12 hour-long recordings were then analyzed and
enriched with secondary data to build the case. We have covered a broad spectrum of interviewees to
capture the trading disruption phenomena Zerodha brought forward using technology.

Data Collection Source Type of Data

Zerodha 8 semi-structured interviews (Zerodha’s executives as well as employees)
Competitors 2 interviews with employees from competitor firms
Investors 2 interviews with 2 experienced independent investors
Secondary Data From Zerodha’s websites and internal documentation

Table 4: Summary of Data Collection and Interviews

Forty-Fourth International Conference on Information Systems, Hyderabad, India 2023

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