Growing a large customer base is only part of building a successful stockbroking business. Keeping those customers engaged over the long term is an even tougher task, according to Zerodha founder and CEO Nithin Kamath.
In a post on X, Kamath said many investors eventually stop participating in the markets after losing money or exhausting their capital. As a result, brokerages must constantly add new users just to maintain their existing customer base.
Retention remains the biggest hurdle
Kamath said retaining customers is one of the toughest challenges for stockbroking platforms. Although many people open trading accounts, a significant number eventually become inactive.
"One of the biggest challenges of the broking industry is that retaining users is really, really hard. The reason is that most users eventually end up blowing up their accounts. And this isn't limited to F&O; it happens in equities as well."
He noted that the problem extends beyond the high-risk futures and options (F&O) segment, with many equity investors also dropping out of the market over time.
According to Kamath, this forces brokerages to continuously acquire new customers just to keep their business stable.
"So, you have to keep running just to stand still, to maintain the number of users on the platform and ensure that the business remains steady."
Zerodha's retention numbers
Kamath shared internal data suggesting that around 55% to 60% of Zerodha's users remain active on the platform. He clarified that "active" refers to customers who continue to hold investments in their accounts.
"We were looking at some statistics, and one of the surprising things we found was that roughly 55-60% of our users are still active. By active, I mean people who have holdings in their accounts."
While he did not reveal comparable figures for rivals, Kamath said industry estimates indicate that the percentage of active users is considerably lower across the broader broking industry.
Why Zerodha may be different
Kamath attributed Zerodha's relatively higher retention, in part, to its customer acquisition strategy.
Unlike many fintech and brokerage firms, Zerodha has largely avoided conventional advertising and aggressive marketing. As a result, he believes the platform has attracted users who are more committed to investing rather than those who open accounts but remain inactive.
"The best proxy we have for the broader industry suggests that this number is much, much lower elsewhere."
"This may be partly due to the fact that we have never advertised and don't have a lot of new users who typically don't trade and invest much."
What it means for the industry
Kamath's comments highlight an often-overlooked reality of the online broking business. While attracting new customers is important, retaining investors over the long term is equally critical for sustaining growth.
His remarks also underscore a broader challenge for the investment ecosystem: opening a demat account is relatively easy, but remaining invested and managing money consistently over the long run is far more difficult for many retail investors.
