Why are millennials, Gen Z, drawn towards micro-investing apps?

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Low brokerage charges, easy-to-use apps and small investments are the key factors pushing the use of micro-investing apps 

Low brokerage charges, easy-to-use apps and small investments are the key factors pushing the use of micro-investing apps 

Devashish Motawani, 28, a Lucknow-based entrepreneur, has been using an investing app to safeguard his financial future. He has nothing but praise for the Upstox app for the ease of investing it gives him. 

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“I am at an age where I want to make investments, both long- and short-term, and apps like Upstox make it easier for me to follow the market without having to spend hours gathering information about where I should invest,” Motawani said.

Millennials and Gen Z are able to choose from a variety of options to invest in stocks both for long-term and short-term gains. As some people put their money in cryptocurrencies, others focused on equity investing, now made easier by micro-investing apps. 

Zerodha, Paytm Money, and Kuvera apps let people microinvest. And their breed has gained popularity in the market backed by endless streams of advertisements, including by social media influencers. Digitisation, coupled with ease of use and easy access, has propelled the use of app-based investing among youth in the country. 

Aman Agarwal, 27, a young professional based in Noida, uses apps to invest in shares. “Ease of use, simple UI, plus low brokerage costs” have made him use micro-investing apps. 

Apart from the ease-of-use aspect, Motawani points to the app’s feature that encourages small-size investment. This lets him ensure his lifestyle is not affected by how much he decides to invest. 

Talking about his experience, Agarwal says, “Zerodha offers add-on tools to their platform, which help in analysis. They also have a learning platform called Varsity, which actually converted me into its customer.” 

For Lagan Gupta, a 25-year-old gaming industry professional, Zerodha’s regular interface updates make it difficult for users to find transaction history. “Other better options are available but I started using this app because of its low brokerage and now I’m too lazy to switch. Plus, it is evolving regularly so it’s fine” he said. 

Other users have complained about bugs on the stock trading platform. Reviews on the iOS app store for Kite@Zerodha have users complaining about lack of transparency regarding charges. Users have also complained about slow responses to complaints arising from bugs in the app and services provided. Some have even complained of slow updates for changes in stock prices. Users of the Upstox app have similar complaints about the app. 

Both the apps have good ratings on Android’s Play Store with an average 4.2 overall rating. Upstox has some 5 million plus downloads with 118K reviews, while Kite@Zerodha has 284K reviews with 10 million plus downloads.

“Reviews aren’t really representative of what’s happening any app related to money faces similar problems,” Zerodha told The Hindu in a statement. 

The statement also pointed out that as people have money on the line, even small problems that may not be due to Zerodha’s interface are often blamed on the app as it is the touch point for consumers.

The rise of micro-investing 

Micro-investing is simply investing small amounts, sometimes as low as ₹10 with the view of ensuring that users continue to invest without taking major risks affecting their lifestyle. The reason why micro-investing has become a rage among the youth is easy enough to understand.  

Users, we spoke to pointed out the ease with which new-age fintech apps like Appreciate, Jar and Niyo allow them to track their expenses and ensure that they invest the change leftover from their expenditures.

Say for example you spend ₹99 on a cup of coffee, the remaining ₹ 1 is often ignored. However, these apps keep track of this loose change and prompt the user to invest this change when it reaches ₹100. Thus, users can track their expenses while at the same time invest for long-term benefits. 

Other apps like Smallcase, while taking a different approach towards enticing users, have a strong presence. Smallcase provides users the ability to connect with curated portfolios managed by investment professionals. However, their appeal amongst users lies in the ability to invest small amounts over prolonged periods.   

According to the Consumer Spending Outlook 2022 report, about 40% of the population in the country is likely to invest in equities and mutual funds. Now, view this through the prism of data from Scripbox. It states that 81 lakh investor accounts were added in 2020-21 in the country, with city-wise assets under management data of mutual funds witnessing a sharp increase. This points towards a shift in people’s willingness to invest. This willingness, then, is one of the key factors driving the user base of investing apps. 

Zerodha, one of the most popular micro-investing apps, currently has an active user base of over six million users. While micro-investing apps have been able to grow their users exponentially, the role played by social media influencers in promoting these apps cannot be ignored. 

While some people are influenced by YouTube creators into investing, other young investors, like Agarwal, say they generally rely on articles and commentaries by authors who write on finance. “To do my own study I use platforms like Tickertape and Screener,” he added.

Initiatives from investment apps are also becoming a source of information for people, both to educate themself about the stock market and about areas they can invest in. Like in the case of Zerodha, Varsity, an educational app described as “An easy to grasp, collection of stock market lessons with in-depth coverage and illustrations”, presents information in byte sized cards to attract the younger audience.

So, while micro-investing apps continue to grow, their prospects for the future seem even brighter with users like Aman saying that their “Experience over the years has been great. I have learned a lot, which I can definitely attribute to the services offered by these micro-investing apps. I would definitely recommend them to my peers.” 

Opportunity and risk go hand in hand

Risks associated with investing online without prior research are a recipe for disaster. In 2021, according to reports, the Cyber Cell department of Delhi Police arrested 11 persons for scamming over 5 lakh individuals using Android apps promising lucrative investment opportunities. 

The apps in question, Power Bank, and EZPlan could be downloaded using their APK files. However, to make matters worse for consumers, the Power Bank app was also available on the Google Play store and had been trending before it was taken down, adding to the damage it caused. 

In another case, according to a PTI report, the Mumbai Police arrested five individuals who had allegedly gained access to demat accounts of customers of a share broking firm. The accused allegedly stole ₹3.5 crores. Complainants reported that the accused gained access to the WhatsApp number which was used by the firm, using it to reach out to customers and gaining access to OTPs and subsequently their mobile trading apps. 

Though steps like two-factor authentication and time-bound OTPs have been put in place by online trading apps, risks arising from compromised passwords and lack of safe sanitary online behaviour still prevail.