Strategy Bytes: KASB Vs AKD & Others: Who has a better strategy to win investor base?

By: Baqar Jafri, CEO, Investors Lounge

Late in 2018, I was invited by a dynamic gentleman Ali Farid Khwaja who was planning to revive KASB Securities. I started my presentation with a fintech strategy to gamify the market, develop online customer acquisition funnel, and a game plan to achieve it. Within 5 minutes we had an agreement on the game plan, which is impossible to achieve in Pakistan with any broker. I have had 14+ years of experience in the industry and have briefed almost every sponsor personally, but none of them listened. He did. Although, we could not work together as I had been engaged with Investors Lounge full time; but I knew that he was right on target.

KASB’s Turnaround

After KASB Bank’s selloff in May 2015 for PKR 1000 (cheaper than a beef steak of average quality); KASB Securities, arguably the No.1 brokerage house of Pakistan at that time, was merged into BankIslami Pakistan Limited. It was later named as BIPL Securities Limited. Their customer data was distributed across the industry by its former employees, who later took jobs from the competitors based on that data. The sponsors of KASB were left crying to see their brand going down the drain.

Ali took a bold step to activate the License with the same brand name of KASB Securities, and took all the negative legacies on his shoulder (I advised him against it, as I told he could take a less risky path with a fresh beginning). Then, he focused exclusively on online penetration of retail business along with decent institutional and HNWI support, thanks to his family relationships and his reputation. He took KASB Securities from negative brand value (because of bank’s legacy) to Pakistan’s Number 1 Trading App within 2 years of launching. Today, KTrade has raised $4.5 million to take retail leadership position by leveraging on financial technology and tapping into a growing middle class. According to my sources, the company has raised the funding at a valuation of at least 5x more than BIPL Securities Limited (former KASB), the same company they had to relinquish when KASB Bank was sold off.

Lesson: With the right focus, you can lead financial advisory/brokerage industry, by leveraging on financial technology, and with a professionally managed team. The leaders of brokerage industry may not be the ones who started first, they will be the ones who ran faster than others with a clear direction. Remember, KTrade now has approx. PKR 680 million+ in cash to develop proprietary technology and team. They have the best chance on the paper at least to run faster.

AKD: Doing things the old-fashioned way  

AKD Securities was the leader in online trading back in November 2002 when internet speed and mobile phone connectivity was a major issue. They were ahead of their time. Ironically, when we have both mobile phone and internet penetration, AKD lost its steam to enhance online retail business and improve the trading technology. What was more intriguing from a strategy point of view was the news that they bought 100% of BIPL Securities with roughly the same amount i.e. PKR 663.2 million. From the customer acquisition perspective, BIPL had already lost the customers strength and all the data was shared multiple times in the industry. From technology perspective, BIPL Securities had no proprietary technology because all trading terminals are purchased from one of the 3 vendors in the brokerage industry. Buying the listed company and merging into existing company can be the major motivation behind it.

Comparison:

·        KTrade has the most cash in the bank in Pakistan than any other player to pursue retail expansion and fintech push. While AKD made the same amount of expenditure to have another entity which was doing the same business as AKD Securities;

·        Both companies will have to implement financial technology and investor education strategy to run faster. But KTrade has taken the lead with deeper pockets after this funding round;

·        KTrade tapped into international liquidity pool to get better valuation, while AKD Securities relied on Listed Company Acquisition Strategy;

Lesson for All Brokers/Investment Advisors

1.      Learn to run faster. The industry is evolving faster than you can conceive. Either close down the shop or completely remodel business by leveraging on financial technology.

2.      There is no secret to digital customer acquisition. Don’t waste time in signing exclusivity contracts with your technology vendors. Learn to run faster.

3.      Raise money to develop proprietary technology, builder better teams; and then run faster.

4.      Build fintech partnerships through cross-ownership and acquisitions. Vendors can’t make you run faster.

5.      You can’t run faster with the team who is worried about their own daily stock market gambles, their monthly salaries, and their Seth Politics. You need to induct people who align themselves strategically with you and your vision. The competition will be fierce.

About Author:

Baqar Jafri is an award-winning fintech entrepreneur with over 12 years of experience in financial markets and data-driven investing. He is the Founder and Chief Data Scientist of Investors Lounge, Pakistan's top financial intelligence platform. He also serves as Founding Director of Pakistan Fintech Network, the leading association of fintech companies that aim to digitize financial ecosystem of the country. He has introduced Robo-Advisory technology in Pakistan and helped SECP in developing regulatory framework as part of SECP Sandbox Program. He can be contacted at: baqar@investorslounge.com