How effectively companies are using technology to offer financial services
In the last 20 years, there have been several visible examples of the use of technology in financial services. ATM and internet banking changed the face of banking substantially and we need to thank private banks for taking that initiative. Stock broking and distribution underwent a big change with internet broking, online personal finance advisory and distribution of financial products. Institutional broking also saw big shifts due to the advent of technology and this included algorithmic trading, low latency trading and direct market access (DMA). But these are just the most visible trends in India. If you look at the rapid proliferation of low cost online stock brokers in India, it is clear how technology has changed the face of financial services.
Technology is actually transforming financial services
Technology is becoming a transformative agent in every sector of the financial services industry. In the case of banking, technology allowed smaller banks to compete with the big names. Customer acquisition costs also came down sharply. Above all, the advent technology in financial services helped to reduce the costs substantially and provided a shield against economic downturns. This has helped financial services become less cyclical over time. In fact, financial service companies are looking to the IT organisation to do more to help make sure they are well positioned to succeed in the future. There are macroeconomic trends sweeping the world, and technology-driven influences buffeting the industry. We have only seen the first generation of technology application in financial services like online, internet, ATMs etc. The next phase consisting of machine learning, artificial intelligence, robotics etc could be challenging but also more differentiating. Let us look at five such trends that allow us to understand how technology is transforming financial services.
Convergence of finance and technology via Fintech
Never before has the confluence of the financial services industry and the technology sector been so meaningful and deep. Goldman Sachs and Citi employ more machines and programmers in their broking businesses than sales traders and dealers. Those who can develop or leverage disruptive technologies and innovative practices will thrive. India has just about scratched the surface of Fintech but new business opportunities like low cost broking, P2P lending, remote banking are all becoming possible due to the power of Fintech.
Technology is forcing strategy shift in financial services
Technological advances have real world implications on the financial services industry, and institutions need to adjust their business models accordingly. More full-service brokerage first are beginning to think like discount brokers and working their models accordingly. Distributors are not avoiding discussing about MF Direct Plans but are voluntarily including it as part of their broad strategy. These could hardly be imagined. Banks are not only bracing for competition from other banks but also from NBFCs, P2P lenders and telecom companies.
Better use of data and analytics
Whether you are a bank, an insurer, a broker or a financial distributor; the key to growth is in improving revenue per customer. That is only possible through deeper data mining of your existing customer base to throw up new financial needs that are unmet that can be business opportunities. The need of the hour in financial services is to develop a deep understanding of the current trends in the market and the needs of the customer and fit them together into a nice jigsaw puzzle. Quite often the gap between planning, execution and success has been the ability to distil and harness data. That is where analytics can play a big role for financial services companies.
Changing the way payments are managed
Do you remember the old IPO days when you would file an application with a cheque and you will now the response in 3 months? Those days are long gone. The IPO process is crunched to less than 10 days and the outcome is available online. You can get the allotment status on the 8th day and the shares into your demat account by the 10th day. These are possible due to new payment methodologies like online banking, UPI payments, ASBA payments, digital transfers etc.
Robotics and automation
One scare in the financial services industry has been that robotics and automation would lead to thousands of job losses. In reality, jobs are likely to be transformed. You don’t need an army of relationship bankers talking to people at a branch. The entire experience can be converted into a smart and customised BOT. Similarly, online advisory services are now being redesigned to look like an actual branch visit. Your next visit to the bank may be met by a robot than a human. That is certainly what financial services are moving towards.
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Forex Trading - a profitable investment option in 2020
Of the various investment and trading options available to you, the one option we focus least on is currencies trading or forex trading. For a long time, currency trading was out of bounds for most retail investors. With the introduction of currency futures and later currency options, you can actually and effectively take positions in the future movement of currencies. As Indian markets enter 2020, the markets are more globalised than ever before in history. Hence, currency fluctuations are not only a risk but also a unique opportunity.
In the old scenario, there were dollar forwards but that was only available to a person with an underlying currency exposure; not otherwise. Only exporters and importers could hedge their dollar exposure or Euro exposure through these banks. Typically, in the olden days, an importer would buy forward dollar to protect against rupee depreciation while an exporter would sell forward dollars to protect against rupee appreciation. However, speculation, trading and arbitrage in currency were out of bounds for most investors and traders in India. But, all that changed with the advent of currency futures trading in 2008 on NSE.
Everything you should know about currency futures
Currency futures trading on the stock exchanges started in 2008 and actually picked up steam after the European crisis in 2010. The currencies are tradable in currency pairs; either rupee pairs or cross currency pairs. One can trade hard currencies like the dollar, Yen, Pound and Euro vis-à-vis the rupee or other foreign currencies. Today, online broking accounts give you access to currency futures and currency options on the NSE, BSE and the Metropolitan Stock Exchange. Currency trading in India has become simpler with the advent of currency trading as it enables you to hedge your currency risk through the exchange mechanism itself. Also, being an exchange traded product, these currency futures and currency options are guaranteed by the clearing corporation and hence there is no counter-party risk. This is a big comfort zone for participants.
Why currency futures and currency options could be big in 2020
You can use your existing equity trading account for trading in currencies too. No additional KYC or documentation is required for the same. Also, the margins are the lowest in the currency derivatives markets giving you the best leverage on these products. Here is how you can make the best of currency trading or forex trading in the coming year.
Scenario 1: India could hike interest rates, which could lead to greater FII flows into debt. That means INR will get stronger and the Dollar gets weaker. You can play this view by selling the dollar pair at 71/$ and buy it back when INR appreciates to 68/$. The minimum lot size is $1000 and you make a profit of Rs.3 on each dollar.
Scenario 2: You have to pay the fees for your daughter who got admission into Brown University in the US in dollars at the end of 3 months. Your concern is that the dollar could become stronger and entail a higher burden. You can hedge your risk by buying the dollar pair and locking in the current price in the market.
Scenario 3: You have bought USD/INR at $/70 as you believe that the dollar could strengthen due to higher fiscal deficit. However, you also believe that at $/75, the RBI would intervene and defend the rupee. You can sell USD/INR pair in next month contract and create a substantially risk-free calendar spread.
Scenario 4: The dollar index has gone up sharply in the US but the INR is still strong due to strong FPI flows. You expect that the rupee must weaken due to the dollar strength. You can buy the USD/INR futures to play on the rupee weakness.
Scenario 5: You import from Europe and export to the US. Hence you are interested in a strong dollar and a weak Euro. However, that is not in your control. You can solve the problem by doing a currency pair. You buy a EUR/USD currency pair so you are protected both ways at lower cost.
Year 2020 could see some exciting currency trading opportunities due to uncertainty over the global trade war, outcome of the BREXIT, revival in China and monetary loosening. That will give you plenty of opportunities to play the currency game through currency futures.
Everything you need to know about Burger King IPO
Through the IPO the company aims at raising ?810 crore. Of the total amount the promoter entity QSR Asia Pte Ltd will sell up to 60 million shares, which would amount to ?360 crore while a fresh issue of shares will aggregate to ?450 crore. The company has also raised a pre-IPO funding of ?92 crore from public markets investor Amansa Investments Ltd at ?58.5 per share.
Burger King IPO details at a glance
Dec 2, 2020 - Dec 4, 2020
Finalisation of Basis of Allotment
Dec 9, 2020
Initiation of refunds
Dec 10, 2020
Transfer of shares to demat accounts
Dec 11, 2020
Dec 14, 2020
Offer for Sale
?10 per equity share
?59 to ?60 per equity share
Min Order Quantity (each lot)
250 Equity Shares
Min Amount Cut off
Maximum Lots allowed
3250 Shares (13 lots)
Want to know our suggestion? Read here - Burger King IPO Note.
Things you need to know:
Burger King India Limited is one of the fastest growing international QSR chains in India during the first five years of operations based on the number of restaurants. Talking about the global presence, when measured by the number of restaurants, with a network of 18,675 restaurants in over 100 countries, Burger King is the second-largest fast food burger brand globally. In India, the company owns 261 restaurants which include eight Sub-Franchised Burger King Restaurants, across 17 states and union territories and 57 cities across India.
Burger King India has exclusive franchise rights in India and a strong customer value preposition. Apart from the customer loyalty and brand value, strong management and a vertically scalable supply chain are the company’s key strengths. The company will use the funds raised through the IPO to finance the roll-out of new company-owned Burger King Restaurants, repayment or prepayment of outstanding borrowings and to meet the general corporate purposes.
If you are looking for the short-term gains through the IPO, you need to bear in mind that if there is a spike in the Covid cases and there is another round of lockdown, then the business might take a hit. The termination of the Master Franchise and Development Agreement could also pose a threat to the business. Lack of identification of the locations when expanding in new regions, and deteriorating relations with third party delivery aggregators apart from perceived and real health concerns along with shifting food preferences and habits are a few things to look for. Having said that, the investment would turn out to be promising in long term.
This year has seen a lot of good IPOs, which has encouraged a lot of new investors to enter the markets. Apart from Burger King, the other companies that issued IPOs this year include SBI Card, Rossari Biotech, Mindspace Business Parks REIT, Route Mobile, Happiest Minds Technologies, Angel Broking, Chemcon Speciality Chemicals, Computer Age Management Services, Mazagon Dock Shipbuilders, UTI AMC, Likhitha Infrastructure, Equitas Small Finance Bank and Gland Pharma.
How to apply for Burger King IPO?
- In 5paisa Trading App, go to IPO Section reflected on the home screen
- Click on Apply IPO
- Enter Quantity and Price to bid for
- Enter UPI id to block funds on
- Later in the day you will receive funds block confirmation in your UPI app, which needs to be approved
If you are not a 5pasia customer, you can apply for the IPO using any supported UPI apps. Click here to find the list of UPI apps and banks supporting the IPO application.
Watch the video below to know more about the Burger King IPO
Union Budget 2020 – What’s It All About?
Budget 2020 was rich on expectations but the exemptions in the budget were much lower than what the market desired. The impact was visible in the performance of the stock market indices which cracked in response. While a detailed analysis is still due, the immediate reaction of the market appears to be that there was no big bang announcement in the Union Budget despite the tough macro conditions. Here are some of the major announcements in the Union Budget 2020.
Response to macro pressures
Nominal growth for fiscal year 2020-21 has been pegged at 10%. The real rate of GDP growth could be in the range of 5.5% to 6% depending on the nominal growth actually achieved as even 10% does look quite steep at this point in time.
The budget 2020 has fully utilised the 50 bps leeway on fiscal deficit offered by the N K Singh Committee. For 2019-20, the fiscal deficit has been pegged at 3.8% instead of 3.3% while for the fiscal year 2020-21 it is pegged at 3.5% instead of 3%.
There is some positive impact on post-harvest infrastructure. To improve post harvest infrastructure, including cold storage, the budget has announced viability funding based on public-private-partnership. Indian Railways will run dedicated trains to support the cold chain plan.
Some cheer for Corporates and MSMEs
Despite the lack of any cost advantage, the Budget 2020 has outlined big plans for manufacture of mobile phones and electronic equipment and semiconductor packaging. In addition, the 15% concessional tax will be extended to the power sector too.
Finally, MSMEs have something to be really pleased about. Invoice financing via the factoring method will be extended to MSME as will be the issue of subordinated debt to MSMEs and handholding in the early stages.
No cheer for markets and that was evident
LTCG on equity stocks and equity funds was not scrapped, despite the STT being introduced in 2004 in lieu of LTCG tax. This is resulting in the cascading effect of STT plus LTCG tax and that is adding to the costs of traders and investors.
While DDT has been scrapped on equity and on equity funds, it comes back in another form. At the same time, the dividend distribution tax on debt funds will continue as before. There will be a single point of taxing dividends as other income at the applicable peak rates of tax for individuals.
Efforts are being made to reduce tax burden on middle class. People earning in the range of Rs.5 lakh to Rs.15 lakhs will see reduction in taxes.
Direct tax; more complicated than effective
Direct tax regime has suddenly become a lot more complicated. There will be two regimes; first regime will focus on status quo with all exemptions and rebates. The new regime with lower rates applicable will be devoid of exemptions and rebates. Loss of exemptions could be a big cost as many exemptions are virtually mandatory or inevitable like life premiums, provident fund, tuition fees, home principal etc.
Under the new tax regime, direct taxes will be as under:
5l to 7.5l
7.5l to 10l
10l to 12.5l
12.5l to 15l
Tax Rate (%)
Above table represents the new regime. If you opt for the second option, then your IT form will be auto-filled. That simplicity appears to be the only visible advantage.
Hurled by the IPO Rush? Here’s All You Need to Know About ASBA
ASBA (applications supported by blocked amounts) was introduced by SEBI to protect the interests of the retail investors. ASBA can used to apply for IPOs, FPOs, rights issues etc. In ASBA, the designated bank account only gets blocked to the extent of the application money. On the date of allotment, the amount gets debited to the extent of allotted shares and the balance gets released. If zero shares are allotted to the applicant, then the entire blocked amount under ASBA is released.
Who can make an ASBA investment?
ASBA is mandatory for all IPOs after January 01st 2016. However, an ASBA investor has to fulfil some basic conditions.
- He must be a resident individual applying under the Retail Quota
- Bid must be at cut-off price with a single option of number of shares bid
- ASBA application has to be made through self certified syndicate bankers (SCSB)
- Such price intibid made in ASBA cannot be revised later on
- ASBA cannot be used for other categories like employees / shareholders etc.
What are the advantages of ASBA?
ASBA comes as a major boon to retail investors. Here are some of the major advantages.
- Since the amount is only blocked, you continue to earn interest
- You don’t worry about refunds as only the allotment money is debited
- The application process is very simple and you can apply through your bank
- The blocked amount is included in average quarterly balance (AQB)
- Even through bids cannot be revised, they can be cancelled.
How can an ASBA application be cancelled?
While an ASBA application cannot be revised as per the rules, the ASBA application can certainly be cancelled. There are two distinct situations here. If the IPO has not closed, you can cancel the ASBA application through your online trading account or through the bank. Your SCSB will cancel the bid and unblock the amount right away. However, if you withdraw after the issue closes, then you have to write to the registrar to cancel the bid. The SCSB will only remove the block after the allotment is complete and they get intimation from the registrar.
Here’s All You Need to Know About Getting a Demat Account
Demat Account is almost like a bank account. Just like you hold funds in your bank account, you hold shares and other securities in the Demat Account. Having a Demat Account is mandatory for trading in equities as per SEBI regulations.
How to open Demat Account?
Demat Account can be opened online or offline. It is normally opened along with trading account (TCD) by the broker. Demat Account can be opened with any authorised depository participant (DP); which could be a bank or a broker. Here is how to open a Demat Account.
For offline Demat Account, you need to fill up the demat form and sign the demat agreement and submit to your DP. Basic documents like PAN Card, Proof of identity, Proof of residence and cancelled cheque are required. Copies of self-attested documents must be submitted to the DP along with the signed DP agreement. Carry the originals for verification by the officer. Demat account opening can take up to 4-5 days, if all the documents are in place.
Online Demat Accounts can be opened by filling up the online form on the DP website. You must authenticate your identify and address with your Aadhar Card and verify the same with OTP sent to mobile. An in-person-verification (IPV) has to be done before fully activating the demat account. Only Aadhar address will be considered for online demat.
How to use the Demat Account
With a demat account, your purchase, sale and holding of securities are in electronic mode. You must issue a signed Debit Instruction Slip (DIS) to sell shares or you can give a power of attorney (POA) to the broker. When you sell shares, the demat account gets debited and when you buy shares the demat account gets credited. All corporate actions like bonuses and splits are automatically credited to your demat account. Dividends are directly credited to the mapped bank account.
Documents Required for Demat Account
As stated earlier, demat account opening requires proof of identity and proof of address. Proof of identity can be any statutorily issued photo identity like passport, Aadhar, driving license, voter card etc. Proof of address can be any of the above with complete and latest address or electricity or land line bill. In case of online demat account opening, the Aadhar address will be considered. In addition, submission of PAN card and cancelled cheque are mandatory for opening demat account.
Importance of having a Demat account
Here are some of the key uses of having a demat account.
1. It facilitates non-physical holding of securities
2. Demat account can hold equities, bonds, ETFs, gold bonds and other securities
3. Corporate actions are automatically executed in demat account
4. One point intimation of change in address, email, mobile to all companies
5. Eliminates risk of physical holdings like bad delivery, mutilation of certificates, loss in transit, forgery, fake certificates etc.
6. Trading shares, holding in demat and bank transfers become one seamless chain if you opt for online trading
7. Demat is also cost effective compared to dealing in physical certificates