Popular mobile wallets such as Paytm and Mobikwik now offer ways to invest in direct mutual fund schemes through their apps without any charges. With over 300 million registered customers using Paytm and more than 107 million registered customers using Mobikwik, mutual funds would get a booster dose in penetrating the hinterlands in India.
Users of these mobile wallets will now be able to pick and choose a mutual fund of their choice on their respective platforms and get to invest in direct mutual fund schemes on tap of the fingers through apps.
Paytm launched mutual fund investment services through a separate app called Paytm Money in September 2018. According to the company reports, since its launch, Paytm Money has now crossed one million users who invest in direct mutual fund scheme using their platform.
Now with recent developments, Paytm Payments Bank users would be able to make their account as the primary bank account on Paytm Money, and it will be the default choice for investment and redemption of mutual fund investments. Earlier the purchases were allowed through the wallets but the redemption could only be settled back in the investor’s bank account, which was a cumbersome process.
However, Paytm Payment Bank account is not mandatory to invest in mutual funds via Paytm Wallet. You can continue to invest in mutual funds by setting up auto pay (one-time bank mandate) on Paytm Money app to enable one-click investments from your primary bank account. Alternatively, you can invest using Unified Payments Interface (UPI), net banking and debit card of your verified bank account.
Following Paytm’s footsteps, in October 2018 Mobikwik acquired wealth management platform Clearfunds to enter into the wealth management business. Through this acquisition, the MobiKwik platform allowed its customers to start investing in direct mutual funds seamlessly from the app.
There seems a rat race to acquire new investors and make them habitual to savings and investing in mutual funds using their mobile wallets. The ease of investing is convenient, but are investors equipped to ascertain their risk profile and invest in the right mutual fund scheme?
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The biggest challenge for the mutual fund industry today is adoption and penetration. Out of the total population of 130 crore, we today have only approximately four crore mutual fund folios, which when de-duplicated (one person having multiple investment folios), falls more than 50 percent.
Traditionally, mutual fund investments can only be made from bank accounts. Learning from what wallets did to the payment industry in terms of penetration and adoption, SEBI allowed mutual funds to be purchased via wallets. However, we’re yet to see the benefits play out. And the reasons lie embedded in the SEBI’s circular itself.
According to the SEBI’s circular dated May 8, 2017, individuals could use mobile wallets to invest in mutual funds provided that the money is loaded into the wallet, from a bank account (a mobile wallet otherwise can be loaded through cash, credit cards, cashback as well).
Now, although this sounds simple, the challenge came in the form of mechanisms for identifying the source of money. No wallet company had anything in place to identify the colour of money as it was not only an arduous task but it didn’t seem to be that important.
These wallets are convenient to use and also give a very promising outlook for market penetration and adoption. And can be a game changer for enabling the new generation of digitally savvy users to start saving and investing, with professionally managed and efficient mutual fund products. But that can only happen if the regulations are eased.
It doesn’t matter if your mobile wallet is linked to the same company’s payment bank or not. None of the wallet companies today have an infrastructure to identify the source of the money (it has to be from your bank account) so no, you cannot subscribe to mutual funds.Srikanth Meenakshi, Co-founder of FundsIndia
Anything that motivates and sustains a regular investing habit is beneficial to an investor. Be it new varieties of systematic investment plan (SIP) or new methods of making the investment, if a new idea makes it more convenient or profitable for an investor, it’s definitely a good idea.
Wallets have found great favour among millennials in the country as the favourite way of moving money around. Mutual fund industry is constantly looking to see how it can tap the millennial market to get them going on the investment habit early in their life. Also, the industry needs to keep with the changing habits of its target market. So, enabling investments through wallets is simply a matter of industry going towards where the money is when it comes to next-generation investors.
For the young investors, this makes it easy and convenient to get started with investments and they can track it easily with all their other expenses and outflows. One thing to be cautious, however, is the ease of conducting a transaction should not be combined with ease of building a portfolio itself. If young investors can do sufficient groundwork to understand the investment process and instruments better before they transact, it will truly yield the ultimate benefits of investing for them.Kalpesh Ashar, CFP, Founder of Full Circle Financial Planners and Advisors
Using mobile wallets to invest in mutual fund schemes is not recommended to investors. Primarily for the reason that mutual fund schemes have undergone several changes with recategorisation and rationalisation. Even evolved investors face difficulty in understanding changes made by the asset management companies. So, for new investors, it will be a challenge to select the right scheme from mobile wallets as per their risk appetite and goals.
Second, mobile wallets have picked up pace among consumers to book movie or travelling tickets, pay utility bills, etc., which is fine. But using mobile wallets for making mutual fund investments is a little bit of delicate affair. I would not advise the investors to put their money for investment in mutual funds through mobile wallets as it’s still not investor friendly in terms of adaptability. Plus, on wallets, there is no one to advise the investors.
On investments done through mobile wallets, there might not be clarity on the process, reporting and monitoring of the investment portfolios. Investors should prefer investment platforms with more simplicity and structured process.
For investors, it’s always better to invest under the guidance and with the help of some financial expert who monitors the portfolio and explains them the pros and drawbacks of invested schemes on regular basis. It is better to invest directly with the fund house or through IFAs on recommended schemes instead of mobile wallets. Because there is monitoring, there is a responsibility on a financial advisor for recommending schemes that perform.
Also, there is a comfort level on advice between an investor and advisor, which is missing while investing through mobile wallets on your own.Sadique Neelgund, Founder, Network FP
Millennials who are hooked to mobile phones and prefer Ola, Swiggy, BookMyShow, etc. will opt mobile wallets for investing into mutual funds either with expectations of higher returns or due to sheer convenience of investing.
Also, retail investors who have burned fingers in the past due to wrong advice or inadequate handholding of some agents, bankers and distributors, may buy from mobile wallets due to transparency and feeling of being in control.
But, investors through mobile wallets are likely to redeem investments quickly or stop SIPs during the volatile markets since they might lack knowledge of mutual fund products and investment discipline. In future, investor experience of investing through mobile wallets will define the success of this model, not just the cost and convenience factor.
As investors evolve, they will prefer to work with a human financial advisor when they find a trustworthy advisor, easily accessible and cost-efficient. So, many of these young investors will prefer to seek offline consultation and then invest in mutual funds.