What Is Upstox? Business Model Explained

What is Upstox

Direct trade in stock markets is not possible for common folks like us. We need a “Broker” for this purpose. You need to pay commissions to the broker in order to execute the trade in stock markets. There are innumerable stock brokers in our country. But there is a broker that has been in the limelight recently. It is none other than Upstox! What is Upstox and why is it popular? You may wonder. 

What is Upstox

It is a stock broker that does not charge any commissions from the investors. All you need to pay is a flat fee. By flat fee, we mean a specific amount of fee in all kinds of stock trade. It immensely benefits the customers. Then, how does it earn revenue? Is it a profitable company or not? You will get detailed information on the “Business Model of Upstox” in this article. 

(Note: All the information given in the article is based on the latest data given by Upstox in 2021) 

Stay tuned!

What is Upstox?

Upstox is an Indian technology-based online stock-broking firm. You will get various trading services in it such as stocks, commodities, currencies, and other financial instruments. Earlier, it was known as RKSV i.e. acronym of the founders’ names. Raghu Kumar, Ravi Kumar, and Srinivas Viswanath founded this company in 2009. This India-based brokerage is currently located in Mumbai. As you have read above, you won’t have to pay any commission for the trades. Because it believes in charging zero-brokerage. Also, you will get advanced charting tools as well as free trading in equity shares. Upstox provides its services through a web-based trading platform, mobile application, and desktop software. 

Apart from that, it also offers educational resources and research reports to help traders and investors make informed investment decisions.

CEO of Upstox

Currently, Ravi Kumar, one of the co-founders is the CEO of Upstox. He is the head of the business strategy and product development of Upstox. Also, his vision is to make the trading and investing process affordable for the Indian population. He gives full credit for the rise of the public’s participation in stock markets to the government’s Digital India Campaign. Because this campaign aided the rapid rise of internet penetration and financial participation in the country. Eventually, this helped in providing profits to his own business.

Products of Upstox

Products of Upstox

Upstox offers HTML-based trading solutions for investors. You can trade through various software systems like the web, desktop, Android, and iOS. 

  1. Basic Services

Upstox provides you the opportunity to trade on the following investment tools-

  • Stocks
  • Bonds
  • Mutual funds
  • ETFs (Exchange-Traded Funds and Products)
  • IPOs (Initial Public Offerings)
  • F&O (Future and Option)

You need to pay the brokerage charges i.e. flat fee. Also, you can personalize the online trading experience through the following services of Upstox-

  • Investment tools 
  • Brokerage Calculator
  • Span Calculator
  • Strategy building option
  1. Premium Services

Apart from a regular trading system, it also offers paid services. It is known as “Upstox Pro.” Here, you will get equity trading options along with different commodities and currency derivatives. You can use the following premium Upstox products depending on your software system-

  • Upstox Pro Web– Through this, you can spot the market trends through charting. Also, you can customize your trade chats with over 100+ indicators.  Also, you can review the orders and keep an organized trading system.
  • Upstox Pro Mobile– This is the break-through feature of Upstox. It lets you trade through mobile platforms. It is compatible with iOS as well as Android mobile devices. But, you need to download the app for this purpose. Here too, you can chart, buy, and sell the stocks. The price alerts will help you to keep the latest update on your stocks.

Revenue Sources & Market Valuation

Some of the major revenue sources of Upstox are-

1. Brokerage Fees: Upstox generates revenue by charging brokerage fees on trades made by its customers. You need to pay a flat fee of ₹20 per trade, which is much lower and more affordable than the industry average.
2. Account Opening Charges: Upstox charges a one-time account opening fee of ₹150 for its customers. This fee is charged to cover the cost of account opening, KYC verification, and other administrative expenses.
3. Margin Trading: Upstox offers margin trading too. This allows you to trade with more money than you have in your account. You just have to pay the interest on the amount you borrowed for margin trading. This generates a considerable amount of revenue for Upstox.
4. Interest on Idle Funds: Upstox also earns interest on the idle funds that are kept in its customers’ accounts. This interest income contributes to the company’s revenue.
5. Premium Services: Upstox also offers premium services like Upstox pro, which generate additional revenue for the company.

Market Valuation

As per the latest reports given by the company, Upstox raised a humongous amount to attain the market valuation of $3.4 billion. Thus, Upstox became the 40th startup to enter India’s unicorn club. The major contribution was done by Tiger Global ($25 million).

Is Upstox a profit-making company? 

Yes! In spite of charging zero commission, Upstox is a profit-making company. It is possible through its revolutionary business model i.e. “Online-only Business Model.” The following points describe how Upstox makes its profits-

  • No offline branches– As mentioned above, Upstox is based on an “Online-only business model” meaning it doesn’t have any offline branches. It opted for this model to execute its business through zero brokerage fees. As you know, it costs a huge sum of money to maintain the offline branches. Other brokerages manage this cost through commissions and higher fees.
  • No advisory services– Many times the tips, recommendations, and advisory services provided by relationship managers create a conflict of interest with the clients. Also, it is difficult to customize the recommendations according to the choices of the clients. This creates a wrong impression on the firm. Therefore, to prevent any kind of conflict of interest, Upstox prefers to not provide advisory services. If so, then how do the clients without any expertise or a clear idea of stock markets invest in it? Worry not! Upstox has a solution for that too. It encourages the clients to seek tips from independent advisory service (tips) providers. 
  • Using advanced technology– Being the first advanced tech-based stock broking firm, it uses technology to reduce unnecessary costs. Some exclusive examples of this are-
  1. Online Ticketing System: With this feature, you can ask your queries and get solutions right away. It aids in the reduction of futile costs while ensuring outstanding customer care services.
  2. Transparent Brokerage Calculator: It provides a proper breakdown of all costs involved in a trade. It assures you that whatever you are paying for the deal is worthy enough for a profitable trade. Thus, transparency in calculation played a crucial role in winning the trust of customers.

Customer Base

Customer base

Upstox, the digital stock broking firm is getting famous day by day due to its flat fee structure, simple interface, as well as a hassle-free account operating process. This immensely attracted first-time demat account holders. Its customer base has surpassed the 6 million mark. And out of them-

  • 70% of customers are first-time investors.
  • 80% of the customers are youth i.e., in the age group of 18-35 years.
  • 80% of customers belong to tier 2 and tier 3 cities.

Marketing Strategies

Upstox and IPL

Marketing strategy is an essential part of any business model. The same is the case with Upstox. But here the distinction lies in the type of marketing methods used. Upstox strongly believes in mouth referrals and collaborations.

  1. Marketing through mouth referrals– Upstox prefers “word of mouth” referrals. Not only does it avoid unnecessary marketing costs but also attracts potent customers. Let me put it in simple words. According to Upstox, providing exclusive service through advanced technology would satisfy the customer. Eventually, that customer would automatically refer the service to their known ones like friends or relatives. This marketing strategy has been quite successful to increase its customer base.
  2. Partnerships and Collaborations– Collaborations with famous entities play a crucial role to increase the awareness of a brand among customers. Therefore, Upstox joined IPL as an official partner in 2021. It signed a three-year deal with IPL GC (Indian Premier League Governing Council). This deal is worth over INR 145 crores. It gained huge attention from the public as India’s fastest-growing digital brokerage firm. 
  3. Advertisement and Promotion– Upstox deployed numerous influencer marketing strategies to promote its brand on social media platforms. The famous tagline of its advertisement is “Upstox Start Karke Dekho- The partnership that promotes investment culture.

Final words

Upstox is an online discount brokerage company that provides trading services for stocks, commodities, and currencies in India. Its business model is based on providing low-cost brokerage services to retail investors, allowing them to trade in equities, commodities, currencies, and other financial products on its online trading platform. It charges comparatively lower fees, yet it is profitable!

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Published By: Supti Nandi
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