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Business News/ News / India/  Mint BFSI Summit: ‘At scale, 2 per transaction can help execution-only fintech platforms build sustainable models’
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Mint BFSI Summit: ‘At scale, ₹2 per transaction can help execution-only fintech platforms build sustainable models’

Firms with execution-only platform 1 (EOP 1) licences can charge asset management companies a maximum of ₹2 per transaction.

Radhika Gupta, managing director and chief executive of Edelweiss Mutual Fund Premium
Radhika Gupta, managing director and chief executive of Edelweiss Mutual Fund

The cap of 2 per transaction that fintech platforms can charge asset management companies (AMCs) under execution-only platforms 1 (EOP 1) is sufficient if done at scale, Radhika Gupta, managing director and chief executive of Edelweiss Mutual Fund said at The Mint BFSI Summit and Awards 2024.

For context, the Securities and Exchange Board of India (Sebi) recently released a circular outlining a roadmap for how fintechs that sell direct mutual funds can start making money on transactions. It said EOP 1 licence holders could partner with AMCs and charge a commission from them, while EOP 2 licence holders could charge customers directly for providing a service.

For the EOP 1 category, the Association of Mutual Funds in India (AMFI) has proposed a cap of 2 per transaction.

“The per-transaction costs of AMCs are quite expensive," said Gupta, clarifying that AMCs also need to keep costs in mind while doling out commissions to fintech platforms. “We lose money on a 100 SIP [installment]," added Gupta, who moderated a discussion titled ‘Mutual Funds: MFDs, banks, RIAs or platforms - what's the road ahead?’ at the summit.

Commenting on the business model of AMCs and advisory services in a rapidly changing environment, Rajeev Thakkar, chief investment officer of PPFAS Mutual Fund, said that while brokers are moving towards flat fees and compete mostly on pricing, AMCs and advisory businesses have plenty of scope to add more value and go beyond pricing.

Vishal Jain, who heads the newly launched Zerodha Mutual Fund, said although it has a ready user base from its parent company, it will not focus only on cross-selling and will aim to bring in new customers.

Vivek Banka, co-founder of Goal Teller, said almost all existing tech platforms are execution platforms and there are practically zero advisory platforms. He said the lack of centralised financial data deters firms from providing advisory services, adding that the account aggregator framework is a step towards filling this gap.

On the other hand, Amit Bivalkar, founder of Sapient Finserv, said that even today, most distributors don't sell mutual funds as they earn a higher commission from selling insurance.

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ABOUT THE AUTHOR
Sashind Ningthoukhongjam
Sashind writes on personal finance, mutual funds, and all things money. He is a regular host of the 'Why Not Mint Money?' podcast.
Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint. Download The Mint News App to get Daily Market Updates.
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Published: 12 Jan 2024, 01:40 PM IST
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