With the Supreme Court verdict on usage of Aadhaar, new age financial distributors are likely to restrategise their business model.
Most online distributors to whom Cafemutual spoke to claim that they would bring new customers to the mutual fund industry. In fact, Vijay Shekhar Sharma, founder and CEO has assured the mutual fund industry that his company would bring two crore new investors in the mutual fund industry within two years. However, these distributors will face difficulties in onboarding new clients in absence of Aadhaar based eKYC.
Currently, these platforms offer seamless transaction experience to investors. With Aadhaar based eKYC, a new investor can invest up to Rs.50,000 per mutual fund in just five minutes and complete his CKYC subsequently. The key objective of Aadhaar based eKYC is to reduce turnaround time and paper work.
Udaipur based Virendra Ranawat of MySIPOnline believes that online distribution firms will be affected due to the Supreme Court verdict on Aadhaar. “We have been doing eKYC since we started our distribution business. I can say that Aadhaar based eKYC is the most effective way to onboard a new client in just a few minutes. However, in the absence of Aadhaar based eKYC, client acquisition will become a challenge for us. In fact, it is a major setback for distributors like me.”
Sharing his experience with physical KYC, he said, “Once eKYC was done, we had adopted a practice of sharing pre-filed Central KYC form which customer can download and send it back to us with supporting document to do CKYC. However, it did not work well for us as many people procrastinate. Since conversion was poor, we started sending such forms physically at our cost so that they can just sign CKYC form and send it us. We got a good response as close to 30% investors send CKYC form back to us. However, the cost goes up substantially through this route.”
Seconding his views, Chennai’s Vishranth Suresh of Asset Plus said that B30 investors who want to invest online, would suffer. “We are doing Aadhaar based eKYC of nearly 300 investors from B30 locations daily. However, in the absence of Aadhaar based eKYC, we cannot onboard them in real time and hence, they will go to simple products with minimal documentation such as bank FDs.”
He further said that the industry has taken a step back. With this move, the industry will again move to physical KYC era, which typically takes 5 to 10 days. He believes that the move will have a huge impact on retail online distributors compared to large fintech companies.
However, a few online players have a different view. Mumbai’s Sharad Singh, Founder & CEO at Investza believes that while turnaround time to invest in mutual fund would increase, millennials prefer online distributors considering the ease of transaction and their services. “Many millennials understand that these processes are due to regulatory requirement. They do not mind waiting for some time to get convenience of online transactions.”
Similarly, Nitin Vyakaranam, CEO, ArthaYantra, a Hyderabad based fintech distribution firm feels that there will be no impact of this move as they can continue to do Aadhaar based eKYC. “In my view, Aadhaar based eKYC is not mandatory; however, we can do it voluntarily by taking investors’ consent. Currently, we take consent of investors before doing their eKYC. In addition, UIDAI approved agencies such as CAMS and Karvy do eKYC for mutual fund investors. Such data is not uploaded on our server.”
Anurag Garg, founder and CEO of Nivesh.com, a Noida-based fintech distribution firm believes that the move will not have any major impact on their business. He said, “We carry out biometric KYC through IPV. We have a network of sub brokers at multiple location who are equipped to do biometric KYC. However, the turnaround time and cost of acquiring a new client will go up substantially due to this move.”
Online distributors such as Paytm Money, ET Money and Coin (Zerodha) have already reduced their dependency on Aadhaar based eKYC and started carrying out biometric KYC through IPV.
Though online distributors have to rethink their strategy, distributors who use services of exchange platforms or AMC mobile app to do Aadhaar based eKYC can complete the biometric-eKYC of clients through CAMS. However, you will need to buy a biometric device to complete the eKYC process. Currently, this device costs Rs.1,950 in Mumbai excluding 18% GST and courier charges.
