Incumbent distributors confident despite talks of Paytm's MF foray

Most don't see their business getting impacted by the entry of mobile payments giant

The widely heralded Jio moment of the mutual fund industry is right around the corner. Paytm is set to go live with its mutual fund distribution platform, Paytm Money, anytime this month. However, mutual fund distributors, which at the last count accounted for Rs 1.8 trillion of industry assets, are confident that there is no need for them to reshuffle their business model and reiterated the importance of timely advice for investors.

“Those just looking for transaction convenience and parking surplus funds on a temporary basis would get drawn to platforms like Paytm Money. However, serious investors with long-term horizons would continue to prefer platforms like ours where they can get timely and customized advice. We are going to stick to our business model despite what the competition is doing,” said Srikanth Meenakshi, co-founder and chief operating officer of online FundsIndia.

The Chennai-based firm has among the highest assets under management (AUM) of Rs 43 billion when it comes to digital-only platforms, earning Rs 496 million in distribution commissions in 2017-18.

Unlike most mutual fund distributors in India, Paytm Money will be offering low-cost direct plans which don't charge for distribution expenses. Paytm Money is a registered investment adviser (RIA) with the Securities and Exchange Board of India (Sebi) and will charge a nominal fee for buying funds.

 

A Paytm Money spokesperson said, "We are fully committed towards building a platform for long-term investors and bringing mutual fund investments to masses. Paytm Money will focus on providing convenience of digital investing, ease of payments, real-time transaction processing and updated investment portfolio at all times with powerful insights.”

According to people in the know, Paytm Money has tied up with third-party mutual fund research firms such as Value Research and Morningstar.

Mukesh Dedhia, Director of Ghalla Bhansali Stock Brokers, said most investors find it quite difficult to manage their own money, given their limited understanding of mutual fund products. “Even MBAs in Finance and CAs are my clients as mutual fund is not their expert domain,” Dedhia said.

Paytm Money spokesperson said “we are offering direct plans that have lower expense ratios versus the regular plans for maximum benefits to investors”.

Industry experts say that direct plans make more sense for those looking at shorter tenure investments in categories like liquid schemes. “For sophisticated investors which park surplus cash in liquid schemes, ease of transaction matters. However, for long-term investors transaction comfort is not enough as they need someone who stays with them throughout their investment journey and understands their requirements,” said Neeraj Choksi, founder and joint managing director of NJ India Invest -- India’s largest distributor in terms of commissions.

According to sources, Paytm Money has tied-up with Billdesk for their payment gateway services. Both Paytm Money and Billdesk didn’t respond at the time of going to press.

As reported earlier, the company is in final stages of testing the Patym Money app before it goes live. The company recently gave access to employees of its parent company, One97 Communications, and Paytm Money to test the beta version of Paytm Money app. Already around 15 AMCs have empanelled with Paytm Money, as per industry sources.

 

What is Paytm's play?

• Offering low-cost direct plans
• Backed by Alibaba group, which has various technology investments
• Around 15 AMCs have already empanelled with Paytm Money
• Tie-ups with Morningstar and Value Research for third-party advice