How does Zerodha make money?

how does zerodha make money

If you are someone who invests in the stock market, then you would have heard about Zerodha, or maybe even used Zerodha to trade. 

Zerodha is one of the most popular discount brokers in India. The reason they got so famous was that they offer zero brokerage long-term/delivery trades and a fixed maximum brokerage of Rs. 20 for intraday trades. 

We all know that Zerodha helps its users make money, but today we will talk about how Zerodha makes money for itself. But, before that let us know a little about its history.  

Zerodha was formed on 15th of August, 2010, by Nithin Kamath. He wanted to break all barriers to trade and investment in India, such as cost, support, and technology. Zerodha did exactly that. 

He chose the name Zerodha because it is a combination of Zero and ‘Rodha’ in Sanskrit means barrier. Hence, zero barriers. 

Only in a few years, Zerodha became the go-to trading platform in the country. So, let’s take a look at how does Zerodha make money.

Zerodha make money in four ways:

  1. Charges a flat fee on intraday and futures and options trading 
  2. High volume of transactions 
  3. Incubation 
  4. True Beacon and Mutual Fund AMC 

Charges a flat fee on intraday and F&O trading 

Zerodha charges a flat commission of Rs. 20 on all intraday and futures and options trading. However, Rs. 20 may look like a very small amount but if you multiply it by the millions of transactions happening every day, that would make for a mountain of money.  

High volume of transactions 

Just like any business, Zerodha also aims to have a high volume of transactions happening on its platform. As mentioned above, they have a flat commission of Rs. 20, and to multiply that small amount into millions, that would require a high volume of transactions. So, instead of charging more money per transaction, Zerodha focuses more on building a product that attracts as many customers as possible to trade on it. 

Startup incubation 

Rainmatter, Zerodha’s incubator has launched several successful startups over the years in the fintech industry. 

Here is a list of some of the startups that Rainmatter invested in or incubated that have been successful:

  1. CRED – A members-only app that offers you exclusive rewards for paying your credit card bills.
  2. LearnApp – Courses in Investing, Trading, Technology & Management taught by industry experts first-hand!
  3. Tradelab – Builds cutting edge technology to drive for capital market businesses
  4. Smallcase – India’s first thematic investment platform
  5. Streak – The first end-to-end platform in the world to create, backtest, and deploy trading algos without coding

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True Beacon and Mutual Fund AMC 

In the year 2019, Zerodha launched its first alternative investment fund, True Beacon. With a minimum investment of $2 million, it was built to tackle the volatility of the marketers for high net worth individuals (HNIs). 

True Beacon turned out to be a huge success, and that made Zerodha apply for a mutual fund AMC license.

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