BNPL for investment products? That’ll be a disaster: Nithin, Zerodha

Credit goes to SEBI & also all of us new-age online brokers who haven’t pushed customers to borrow and buy while placing orders. – Nithin Kamath

Unlike the previous bull runs, there isn’t a lot of leverage in the system this time. Stocks are mostly bought with full money upfront. So when there are drawdowns in the market on days like today, retail investors aren’t forced to liquidate, which also increases volatility. 1/4
Credit goes to SEBI & also all of us new-age online brokers who haven’t pushed customers to borrow and buy while placing orders. If platforms enabled greed by nudging users to borrow to buy more quantities, customers would ignore the risks of margin funding (MTF). 2/4
But given high customer acquisition costs for many brokers, what worries me is if someone launches a buy now pay later type of product for investing, it will end up pushing everyone else to start. Using this as a hook to generate revenue will not be right for the customers. 3/4
Buying stocks by borrowing at ~15% & risk of being liquidated in drawdowns, is probably the worst financial product for retail investors. Hoping that the broking industry like others doesn’t morph into a lending business to recover the very high cost of acquiring a customer. 4/4
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