According to experts, the direct platform space can see more consolidation as existing players try to deal with pricing pressure posed by new entrants like Paytm.
Speaking to Business Standard, Vijay Kuppa, co-founder of Orowealth, said, “This is a period of consolidation. We have seen fewer number of new mutual fund (MF) apps coming in the last year.” The fee-based advisory model in the MF industry is yet to pick up as investors traditionally don’t prefer to pay for advice.
Moreover, industry observers said the entry of new players with deep pockets and zero-fee structure is going to make it difficult for others to levy a charge.
Both Orowealth and Wealth Trust had started offering some premium plans where investors could access some of their advisory services. “To compete with these new players, we will also have to re-look at our monetisation strategy,” Kuppa added.
Cashbacks and discounts are among the options being explored.
Meanwhile, cost pressure remains. “There are several costs involved such as cost to service, product development, technology and growth-related costs. Monetisation can kick-in after building a sticky customer base,” said Harsh Jain, chief operating officer and co-founder of Bengaluru-based digital platform Groww.
For some platforms, the pushback or slowdown of monetisation plan is making fresh venture capital money less forthcoming.
Experts also point out that such platforms run the risk of getting ‘commoditised’ as transaction platforms if they don’t differentiate themselves.
Jain said the platforms would need to diversify beyond the MF products to build a sustainable business model.“We are focusing on advisory and offering other products besides mutual funds. We are currently also giving stock advisory and offering financial planning. Soon, we may even look at loans and insurance,” Kuppa added. While the opportunity is large for such platforms, some industry numbers show slower pace of growth for direct plans.
A recent note by HDFC Securities highlights that the share of equity assets sourced from direct channels just improved by 500 basis points (bps) since March 2015, standing at 16 per cent at the end of September 2018.
Another industry number stacked up against such platforms is the large share of individual investor’s assets coming through regular plans. As on March 31, 2018, 86 per cent of individual investors’ assets came through regular plans; only 14 per cent was accounted for by direct plans.