You may have booked tickets for Baahubali via Paytm this week to avail of 50% cash back. Who knows, someday, you may use these cashbacks to invest in mutual funds.
Yes, that’s right. Investing in mutual funds just got simpler. As part of its digital push, SEBI allowed fund houses to facilitate transaction in mutual funds through e-wallets/digital wallets. To start with, the market regulator has put a limit of Rs50,000 on such investments.
e-wallet is an online pre-paid account which can be used to recharge mobiles, buy movie tickets and much more. Paytm, Bhim and Pay U Money are among the e-wallets with the largest user base in India. Such e-wallets are already popular in foreign markets.
Currently, the first time mutual fund investor can use a debit card and net banking to invest up to Rs50,000 in mutual funds through Aadhaar based Know Your Customer or eKYC procedure. However, such limits do not apply after completion of KYC.
In addition, SEBI has restricted digital wallet users to use credit cards and cashback money to invest in mutual funds. This could further limit its scope.
However, if digital wallet companies and fund houses implement it well, it could give a fillip to the Rs.19 trillion MF industry.
Senior MF officials, whom Cafemutual informally spoke to, believe that the move would encourage young professionals to invest money in mutual funds. Every time they open their digital wallet, they may see a pop up of a liquid fund encouraging them to park surplus cash in liquid fund account to earn interest on a daily basis. This could be their first step in the world of mutual funds.
Once investors gain confidence in mutual funds, they may explore other schemes like equity funds, balanced funds, ELSS and ETFs.
In addition, fund houses can leverage these wallets to spread awareness about mutual funds among people. Post demonetisation, many smartphone users, including vegetable vendors and auto rickshaw drivers have started using digital wallets. They are prospective customers for the mutual fund industry. Fund houses should encourage them through educational videos and contents to invest in mutual funds with just Rs.500.
In future, if the market regulator allows investors to invest cashback proceeds in mutual funds, it could help the industry to grow manifold. Cashback encourages people to take financial decisions. In fact, many people use digital wallets to book tickets and pay their utility bills for cashbacks. They use these cashbacks to avail other services like buying insurance policy and book a hotel on digital wallet. Such an incentive can attract investors to put money in mutual funds too.
