The competition in the online mutual fund distribution space is heating up.
India’s largest e-commerce giant Flipkart is likely to start distribution of financial products like mutual funds and insurance, says a report in ‘The Economic Times’.
The report says that the company has already started offering loans to sellers in partnerships with banks and NBFCs. “Now, apart from loans, Flipkart is also looking at mutual funds and insurance products.” To start with, Flipkart would target its seller to distribute financial products.
Chinese e-commerce giant Alibaba followed a similar strategy where they deployed the surplus funds of their sellers in liquid funds through their wealth advisory arm Ant Financials (then Alipay), which proved to be a big success. Later, the company expanded their distribution business by offering other mutual fund schemes and financial products.
Other e-commerce giants like Amazon already owns stake in online distribution and robo advisory firm, BankBazaar. Similarly, Snapdeal had also invested in financial services startup Rupeepower, which help people compare credit cards and loans across banks.
Two years back, SEBI had constituted a committee headed by Nandan Nilekani to recommend measures to reduce cost structure of mutual funds. The committee had recommended SEBI to introduce a new distribution channel through e-commerce websites like FlipKart, Amazon and Snapdeal.
Also, the market regulator has allowed investors can invest up to Rs 50,000 per financial year per mutual fund using one time password (OTP) through eKYC. SEBI is likely to approach the ministry of finance requesting allowing bank KYC and Aadhar as valid KYC and IPV to invest in mutual funds. If implemented, it will help distributors especially online players to on board clients on a real time basis.
In addition, payment banks like Airtel Payment bank and Paytm have expressed their interests to launch financial distribution services. Recently, SEBI has allowed fund houses to facilitate transaction in mutual funds of up to Rs50,000 through e-wallets/digital wallets.
G Pradeepkumar, CEO, Union Mutual Fund and Vice Chairman AMFI believes that e-commerce players like Flipkart may not create significant impact on the industry. “Currently there are many online distribution platform in India and we are yet to see traction in this segment.” He believes that e-commerce distribution will not hinder the growth of IFAs as people need handholding for investing money. “Today, many people do not know that they have to invest in mutual funds to grow wealth. We have to nudge them to invest. So we will need advisers to onboard new investors,” added Kumar.
The online MF distribution space is already getting crowded with many players lookng to cash in on the growing e-commerce trend.