Alot of what we do in life is defined by convenience. Is it easier to drive or to take the local train? Make a call or send an SMS? These are convenience choices we make every day without giving them a second thought.
Investing in mutual funds (MFs) through your mobile is one such convenience that you can choose. A handful of fund houses offer this facility, but each has its own process. In fact, some fund houses launched this service as far back as 2008, but they are still testing the success of this service and most are yet to launch a comprehensive platform.
How is it done?
This is how it works: 7 out of 44 asset management companies (AMCs) currently offer the facility—two let you view your portfolio by sending an SMS, while others let you transact through your mobile by downloading an application on your phone and using the Internet to carry out a transaction. In case of the latter, you typically get a wider choice of transactions.
In both the cases, you have to start by filling up a physical form and registering with the fund house. In most cases you can use the facility only if you are an existing folio holder; however, the registration form has to be filed whether you are an existing customer or not. This is akin to a standing instruction for the AMC to debit (or credit) the specified bank account when you send a purchase (or sell) instruction through your mobile. Also, it identifies the broker code (if used), so the broker’s role in the process is automatically recognized.
You can even use a basic handset: To use the SMS facility, you can use just about any mobile handset that allows you to send an SMS. If you want to invest in a scheme where you have to download an application, a basic Java-enabled phone with an Internet connection will suffice. So to transact through your phone, you don’t need to upgrade to a smartphone or an Android.
Is it secure?
The structure is such that both options are secure. When you send an SMS to invest, nothing gets stored on the phone. So if you lose the handset there is no sensitive data on it. Even if you use the mobile application to invest, the personal identification number (PIN) requirement to access the application makes it safe. Moreover, even in this format, information does not get stored on your handset.
If you use the SMS format to invest, then the form registers one mobile number as the delivery point for your transactions, so no other number can be used to transact on your folio.
Works well for both investors and distributors
AMCs that offer this service say that while it lets the investor transact on the move, the idea is not to cut out the distributor. Your initial registration form will have space for you to enter your adviser’s distributor code. Distributors can save costs by completing transactions on the phone itself.
Says Ajit Menon, executive vice-president and head of sales and marketing, DSP BlackRock Investment Managers Pvt. Ltd, “The idea is not to eliminate the distributor, rather to make transacting more efficient for all concerned and we recognize that distributors are needed to reach investors.”
Essentially, this kind of facility gives maximum efficiency where you have to make many frequent transactions and that usually happens in short-term funds such as liquid and ultra short-term funds. Says Manish Gadhvi, head (Mumbai operations), NJ India Invest Pvt. Ltd, one of India’s largest retail MF distributors, “This seems to be a great facility for high networth investors who transact frequently in liquid funds. But for retail investors, it doesn’t matter much if you are making one or two lump sum investments a year or through systematic investment plans.”
Should you go for it?
If you know what to do—in other words, where to invest and are a self-guided investor—this is definitely a convenience for you. Having said that, even if you use an adviser, it makes things convenient. You can now complete an entire transaction starting from the conversation on where to invest to the actual investment/redemption on the phone without the need for physical form pick-ups or cheques.
Mint Money reviewed the demonstration on cellphone transactions for ICICI Prudential Asset Management Co. Ltd and IDFC Asset Management Co. Ltd. In case of IDFC, it took less than a minute to invest Rs 5,000 in Sterling Equity Fund via SMS! For ICICI Prudential, too, which has an application-based facility, the transaction time was under two minutes; here it takes longer, thanks to a wider choice and the need to enter a PIN number.
At present, industry insiders indicate that transaction volume through this channel is less than 1% of overall transactions and in terms of value, the proportion could be even lower. In case of one large fund house, the number of registrations have been less than 1,000 so far and the number of transactions less than 100. Clearly, such forward moves take time to pick up in an industry where awareness is still being built. Agrees Kalpen Parikh, deputy chief executive officer, IDFC AMC, “This is not going to be a game-changer till the entire industry participates. While talking to investors we found that it’s not so hard to explain the ‘why’ for investing in mutual funds, but when it comes to the ‘how’ it gets more complicated.”
Hence, he says that giving investors an immediate investment option will be appealing. Ultimately, how far this initiative succeeds will depend on how many fund houses offer the service and how confident you are in making quick investment choices.
ALso See | The Process (PDF)