e-Commerce sites to drive mutual fund growth

e-Commerce is becoming one of the fastest growing channels for commercial transactions in India. According to a study done by ASSOCHAM-Forrester, (updated till July 2017) Indian eCommerce is growing at an annual rate of 51%, the highest in the world, and is expected to jump from USD 30 billion in 2016 to USD 120 billion in 2020.  The retail sector (which is one of the largest items in eCommerce) is also showing a promising trend of 11% CAGR and is expected to reach USD 1 trillion by 2020. More and more consumers are being added daily to the virtual world. The acceptance of the technology will not only have repercussion to traditional market such as clothes, books, electronic items etc but also to other markets that have remained untouched till now.

One such sector will be financial sector. Even in the financial sector, the mutual fund will get impacted majorly. Use of the Internet as a distribution channel will help increase the penetration of mutual funds, especially among the young investors, who are more tech-savvy. The government’s drive to boost digital transaction will further augment the process.

In the year 2015, market watchdog, SEBI had constituted a committee headed by Nandan Nilekani, entrepreneur and co-founder of Infosys, to recommend measures to reduce the 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. Nonetheless, SEBI is yet to come out with any such directive. However, we may see sooner than later this happening.

Transaction through e-commerce site will be lower than other source of transactions. This may boost the performance of the schemes as transaction cost becomes lower, which is likely to attract more investors. This will also help investors to buy and sell schemes like shares. With rise in robo advisory, we may see new products being offered that will cater to such short-term investors who want to trade in mutual fund schemes. Moreover, as investors will be buying mutual fund from websites and payment will be made through banks, additional KYC (Know your client) process will not be required since bank through which payment is routed may have already done their KYC.

Mutual funds in India are there since 1960’s and yet per cent of population investing in the mutual fund has remained low. One of the reasons for such low percentage is lack of awareness on how to buy and sell mutual fund schemes.

We believe digital is the way forward and will help to spread mutual fund penetration in India. We have already seen various sites through which you can make the online investment without much of hassle and transaction through e-commerce site will be another feather in the cap in terms of easy investing in mutual fund.