Competition in the online platform heats up as several players eye a share of the market
Mumbai: At a time when commissions have shrunk and costs are up, MF Utility, a transaction platform to be launched by AMFI in April 2012 is likely to usher in relief for distributors. Although there will be some fees charged for executing orders on this platform the portal is expected to cut down the costs for distributors by eliminating the physical commute to registrar and transfer agents office.
AMFI will decide the charges for executing orders once the platform is ready. The company set up for running this platform will run on a ‘not-for- profit’ model. It will collect the transaction charges to fund the costs associated with running the portal.
It is believed that distributors and investors can put in orders by registering themselves on the website. Distributors will have to select the fund house, the scheme and the investment amount. The orders will be directed to the concerned R&T of the fund house. MF Utility’s advantage is that the transactions will be on a real time basis which cuts down costs and time required to invest.
The utility will not offer any investment advice and will only facilitate investments. Industry estimate suggest that the initial investment for building the platform and setting up a company could be around Rs 10 crore.
The detailed features of this portal are still being worked out.
Existing platforms
The online platform space is already witnessing a surge in competition with every player eyeing to capture a pie of this segment. Although online investments hitherto are a minuscule portion of the investments in the MF industry, the potential is huge.
Currently FinNet, a web-based platform developed by R&T agents Karvy and CAMS in 2009 provides a similar platform which accepts time stamped applications from distributors. It covers the fund houses serviced by both the registrars accounting for 95% of the fund houses in MF industry. However there is no online payment gateway facility integrated in this software, so the cheques are collected daily from the distributor’s office. But the time stamping ensures that investors get the same days NAV. FinNet charges an annual fee of Rs. 1,031 from distributors. Around 2,200 distributors are using FinNet currently.
Chennai based Mywealthadvisor and Mumbai based iFAST also offer online investment platforms for distributors as well as investors. Both run on a sub-broker model wherein a part of distributors trail commission is retained by the service providers in return for their administrative and research work. Apart from these entities, a group of Mumbai based distributors are also working on developing a similar platform for investing in mutual funds. These platforms offer a lot of value-added services to both distributors and investors. The other advantage is that these platforms offer many other investment products in addition to mutual funds.
Apart from relying on third party entities to get investors, fund houses also accept online investments from investors through their websites wherein investors have a choice of keying in distributors ARN which ensures that distributors receive commissions on such investments. Recently many fund houses have started allowing investments via visa enabled debit cards.
All these platforms facilitate investments in mutual funds. The MF industry has a bigger task of first educating people to look at MFs as an ideal investment avenue. The effort has already started with AMFI’s ongoing advertising campaign. One needs to wait and watch how the combination of investor education and online portals gives a fillip to the industry.
