Archive for December 2nd, 2006

Finance 2.0 India

I was reading a good post by Alok Mittal on Venturewood inviting people to suggest 1X100$ plan such as Online DVD rental etc which could work . My mind straight went to the ICICIdirect and Indiabull sites i had open. If some one could take out the juice of per transaction charge these brokers charge and charge just an yearly fees. how much more people  will be willing to subscribe to the service and increase active trading.

This let me to do further research on the idea. Boom it took me to a story on techcrunch  about Zecco a pure Finance 2.0 project which let collabrative stock market research with zero% commission on trading.  How do they make it possible this what they had to say

The answer is pretty simple. Zecco makes money through 2 major revenue streams: online advertisements and interest from margin accounts.

Zecco has built up a community area on their site with forums covering all topics of trading, investing, finance, and business, and an area for bloggers and blog readers including commentary on trading, investing, and analysis.

Zecco also realizes interest from margin loans to stock traders is much more valuable income than trading commissions fees. While commissions fees are great income, they are substituting commissions fee income with advertising income. And they’re still holding on the very valuable interest fees attached to trading stocks on margin.

Now i do use indiabulls and but i have never heard these terms ring a bell margin interest or margin account probably i m not a High Net Worth Investor with 50 L of capital market assets. but googling the term further brought out some facts. This link on answers lot of questions which i had about trading.

In India margin account investment was only introduced by SEBI in Feb 2004. It specifics that if an individual has margin interest account. He can borrow the money from broker for trading above upto 3 times his actually paying capacity. So for instance if in your cash account you had 5,00,000 INR if that same amount was in margin interest account the broker can lend you more money to buy stock from market. This practise is very much useful if you believe a particular stock will be giving you a high yield return of lets say around 25%. This is a very common acceptable practise in west and forms the core of day trading.

I contacted local a share trader to understand how it works in india. This is what he had to explain

“In India margin interest is very high as compared to west. Companies want you to to put around 40% of money and they finance around 60%. Now this money is on 2% a month or comes out to 24% per annum basis. Secondly they only finance lets say 60% of amount but they charge interest on full 100%”

Probably need to do further research on number of users actully taking up this facility with brokerage houses.  Then only potential of similar business model to work in india can be explained.

Please do post some comments if you can help people understand the active trading platform game from brokerage house to retail investor perspective.

Offline Travel Agents Vs Travel Portal Customer Service

Almost 24 hours ago i decided to do a myster shopper thing with travel portals. I was trying to research a destination trip to Varanasi. I decided to treat Online travel portal on par with Offline Travel Agents and see how did they stack up.

As i am a person who doesnt like talking on phone explaning what is needed. I prefer to put down my requirements in words. I wrote down a clear simple email with my travel constraints and destination of travel. The same which i wrote to my travel agent (which he prefers while interacting ). Here it goes

“I am looking to travel from delhi – varanasi .Reaching varanasi 23rd Dec and returning delhi on 26th Dec. Please advice me with travel plans and possibly budget hotels for a group of 10 adults 2 children”.

Within 4 hours i checked my inbox again to see a confirmation of travel request recieved from my travel agent. Advising they will get back to me by tommorow with details.

On the other hand i also sent email to 3 travel portals, and To my surprise even didnt get any automated confirmation email advising they will get back to me. dont even know if they even recieved the email or not.

My agent got back to me with couple of options which i am considering. Flying on Indian Airlines flight to Varanasi to couple of decent budget hotel options.  None of the portals are yet to come back to me on my requirement.

Before i got reply back from my agent i was thinking probably as their is no flight connectivity between  Delhi – Varanasi probably this is the reason portals never got back to me. But with very much indian airlines flying to destination and varanasi having no dearth of budget accomodation. There lies no reason for them not to get back to me.

For me customer support is very important hence OTA will never die as he is ready to get that extra mile to find that budget hotel or airlines even though he might not have direct tie up with them. This industry in india works on collabration  with so much diversity in the industry and target customer profile. Portals need to start identifying niche customers and fulfill their requirements 100%. Will also try the telephone service too and do a witeup.

Will surely share pics from Varanasi tour if it materializes!

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December 2006
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