As part of its digital push, SEBI is considering facilitating MF sales through e-wallet/digital wallets, reports Mint newspaper. A few industry officials Cafemutual spoke to said that there were some discussions around this topic with SEBI.
e-wallet is an online pre-paid account which can be used by people to recharge mobiles, buy movie tickets and much more. Paytm 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. If the trend is replicated in India, it can give a boost to the industry. For instance, Alipay, the online payment service of Alibaba Group had launched a mutual fund called Yueabo which became an instant hit among people, with $30 billion being transferred in this mutual fund in just half a year of its launch in 2013, reports technode.com. Yueabo is managed by THFund, a mutual fund company, in which Alibaba has a controlling stake.
“Going by the China model, e-wallets have a good potential to grow in India. It will help the mutual fund industry to expand its footprint,” said C.V.R Rajendran, CEO, AMFI.
The CEO of a private sector AMC says that a few fund houses have sought clarity from SEBI on using e-wallet route to rope in MF investors. “The issue is more to do with interpretation. RBI norms say that some type of e-wallets can be used for buying financial services. So we need clarity on whether mutual funds are included in the term ‘financial services’,” said the CEO who was part of these discussions with SEBI.
According to RBI, semi-closed e-wallets can be used to buy financial services. “These are payment instruments which can be used for purchase of goods and services, including financial services at a group of clearly identified merchant locations/ establishments which have a specific contract with the issuer to accept the payment instruments. These instruments do not permit cash withdrawal or redemption by the holder,” states a RBI circular issued on July 1, 2016.
The CEO said that SEBI wants these online players to take up MF distribution by registering with AMFI. “SEBI wants AMFI to have discussions with e-wallet players and take this forward,” said the above quoted CEO. There are three types of e-wallets – open, closed, semi-closed with different transaction limits and usage facilities.
The money kept in e-wallets don’t earn any interest, so it can be used by customers to park this temporarily in liquid funds to earn some returns.
However, some are not very optimistic of this model. “While this may be good way to sell mutual funds, many e-wallet users open accounts where they get discounts. Such accounts are usually dormant after a few transactions,” said the CEO of mid-sized fund house.
Fund officials say that e-wallets can be successful in mobilizing money in mutual funds only if KYC hurdles are cleared. “This was one of the many options which SEBI is evaluating as part of its digital push. However, the major hurdle is related to KYC. You need to make sure that there is no third party payment. If e-wallets are allowed to sell mutual funds, it will be good for the industry,” said the CEO of a foreign fund house.
Sector officials say that with the introduction of Aadhar based KYC and Central KYC, onboarding investors through online platforms will become much easier.
Fund officials say that SEBI is trying to leverage the large customer base of e-wallet firms to popularize MFs. The move is part of SEBI’s push to make mutual funds accessible through online platforms. “The mandate that we have given to the committee is that if so many things can be bought online why mutual funds can’t be bought online, especially when it is a well-regulated industry,” SEBI chief U K Sinha had earlier told reporters in an event.
The regulator is expected to come out with e-commerce norms soon.