Bengaluru: Paytm Money Ltd expects the number of mutual fund investors in India to more than double from the current 20 million to 50 million by 2023 and hopes that around half of them will be using its mutual funds app by then. The company has launched its mutual funds app, which enables customers to buy and sell mutual funds and manage their portfolio from a mobile phone. Investors will be able to download and start using the app from today.
Initially, the app will offer all schemes and direct plans from 25 mutual fund houses, including all large fund houses, that cover around 90% of the industry’s ₹ 22 trillion worth of assets under management. “Eventually, and very soon, we will have the rest of the fund houses on board," said Pravin Jadhav, whole-time director at Paytm Money.
Jadhav said Paytm Money will acquire new customers at a pace faster than the Indian mutual funds industry and will quickly enter smaller towns. Around 65% of the customers who have registered for the app so far come from ‘Beyond the Top 15’ (B15) towns, a mutual fund industry term used to describe smaller towns.
According to the Prime Mutual Fund database, ₹ 2.08 trillion—or 27% of assets in equity funds as on March 2018—belonged to B15 towns, up from ₹ 89,302.05 crore or 26% of equity mutual funds in March 2015.
Paytm Money will sell only direct plans of all mutual fund schemes. Direct plans come with a lower expense ratio as they do not have distributor commissions embedded in them. These are essentially meant for those who wish to invest with the fund house directly or on their own through third-party apps. As Paytm Money is a registered investment adviser (RIA) with the capital market regulator, the Securities and Exchange Board of India (Sebi), it is also mandated to offer only direct plans.
Over the past month or so, Paytm Money has been allowing customers to register on its website to get a chance for early access. Of the 850,000 customers who have registered for the app so far, the firm will start providing access to more than 2,500 customers per day, and eventually more than 10,000 customers per day, Jadhav said.
Initially, Paytm Money will not charge fees from their customers, even though it does not earn any commission as it is selling direct plans. Typically, RIAs who sell direct plans are eligible to charge fees from investors. Jadhav declined to reveal when Paytm could start charging fees. “We do not have any plan to start charging fees for now", he said.
Investors must complete Know Your Customer (KYC) formalities and create their risk profiles, which is stored in the app. These will be displayed every time the investor checks out a scheme, before actually buying it.
Despite being an RIA, Paytm would just facilitate buying and selling of schemes at the moment. However, in a few weeks, it would launch a feature called ‘investment packs’ whereby it would recommend a basket of schemes, depending on the client’s profile. A first-time investor, for instance, would be recommend a set of low to moderate risk prone schemes.
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Nilesh Shah, managing director, Kotak Asset Management Co. Ltd, said Paytm could double the customer base of the mutual fund industry much sooner than anticipated. “It took us around 58 years since UTI started US-64 scheme in 1964, to build a customer base of 1.8 crore. Paytm can double that in a couple of years," he said.
For now, Paytm will sell just mutual funds. Jadhav refused to comment on when and which other products would Paytm sell in future.