Industry experts are divided over possible benefits of e-wallet transactions in mutual funds. While most of the experts we spoke to are of the opinion that e-wallets can increase the penetration of mutual funds, others look at it as an alternative option to transact in mutual funds.
On Wednesday SEBI allowed fund houses to facilitate transaction in mutual funds of up to Rs50,000 through e-wallets/digital wallets.
Vishal Kapoor, CEO of IDFC Mutual Fund, is of the opinion that the move will help investors to execute transactions very swiftly and smoothly. “With e-wallets becoming popular, this move provides yet another convenient way for savers to invest in mutual funds,” said Kapoor.
Rajesh Patwardhan, CMO of LIC Mutual Fund, endorses Vishal’s views. “Post demonetisation, the growth of these payment wallets have been significant and people have adopted it as part of their daily life. Mutual funds should take advantage of the reach of these e-wallets. Going forward, with the help of e-wallets, costs are likely to come down and returns will also improve for investors,” he says.
“Different individuals have different choices. This would help improve the penetration of mutual funds among young people who use e-wallets and are yet to start investing,” says Vishal Dhawan of Plan Ahead Wealth Advisors.
“Just one wallet company already claims to have close to 150 million users. That is by any measure at least 3 times more than the number of retail accounts in the mutual fund industry. If this is read in conjunction with the framework given for instant access to investor money (instant redemption feature), it just means that the balance in your mobile wallets can start earning you money market returns just by tapping one button to invest, and tapping another to redeem and use it for your expenditure," says Rajesh Krishnamoorthy, MD, iFAST Financial.
On the cap of Rs50,000, Rajesh feels that SEBI wants to test these e-wallets; it will closely monitor the developments in this regard.
“The Rs50,000 cap at this stage could help keep money laundering concerns at bay and also popularise this mode of payment in the retail space,” says Vishal.
A few experts say that investor appetite to invest in mutual funds through e-wallets needs to be observed before arriving at any opinion.
“Though a few young professionals may start investing in mutual funds through digital wallets, I do not see serious investors using e-wallets for transactions as the limit is just Rs50,000 per mutual fund per financial year,” says Gajendra Kothari, CEO of Etica Wealth Management.
A senior official from a large fund house said that e-wallet transaction is just an additional choice. “Investors are already investing in mutual funds through net banking and debit cards. Why would people recharge their digital wallet through net banking and debit card to invest in mutual funds? It does not make any sense to me,” he says.
Last year, two fund houses – LIC MF and IDFC MF – introduced Unified Payment Interface (UPI) mode of payment for investing in their schemes.
Rajesh says that there has not been much demand for their UPI mode of payment as they need to further develop the process to provide seamless service to their investors.
On the other hand, Vishal is hopeful that as UPI picks up investors will use this as a mode of payment. “As UPI picks up, we are confident that investors will also use that as a mode of payment. People who have tried it are happy with it as they find it convenient,” says Kapoor.
