Fintech startups are lining up to enter the asset management space. The latest to join the queue is Niyo, a neobank which is already into mutual fund distribution business.
Niyo is in the process of applying to Sebi for a mutual fund licence, said Swapnil Bhaskar, Business Head, Niyo Money. "We are looking to apply in the next couple of weeks or so. Expected timeline to receive the licence is 9-12 months," he said.
Four fintech startups have filed papers for MF licences in the last five months. The startups are Samir Arora's Helios Capital Management, Rakesh Jhunjhunwala's Alchemy Capital, Unifi Capital and Wizemarkets Analytics. Paytm Money is also said to be considering the option.
SEBI in December 2020 paved the way for tech startups to enter the AMC space by waiving the profitability requirement and doing away with minimum promoter contribution.
"Fintech companies that are into MF distribution (direct plans) are looking at the change in SEBI rules as an opportunity to monetise their user base," Bhaskar said.
The white space
The fintech space in India is growing by leaps and bounds. While on one side there are companies like Google and Paytm that are digitising payments, the other side has dozens of startups looking to revolutionise the credit and insurance businesses.
Between these two broad categories of fintechs in India, Niyo sees a "white space" -- a room for innovation in the mutual fund business, both on the business and product fronts.
Big opportunity for fintechs
There are several data points that suggest there is a huge untapped market for fintech companies in the asset management space.
"Right now, there are about 25-30 million people in India who invest in MFs. If you compare this figure with the user base of ecommerce platforms (100 million), you can see how big the untapped potential is," Bhaskar said.
A BCG report published by AMFI in 2019 had also predicted manifold growth for the MF industry. The report said the investor base could reach 100 million and AUM could top Rs 100 lakh crore over the next decade.
'Will look to partner MFDs'
Though Niyo will focus on online distribution, the company sees scope for partnership with RIAs and MFDs. "They are good value addition to customers who are looking for some hand-holding," Bhaskar said.
“The market is huge. When I say 100 million customers, there obviously will be room for everyone to do business,” he added.
