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February 24, 2022

All About Digital Payments in Mutual Funds

CAMSPay ushered in 2022 with a brand-new Payments Insider Webinar, which included renowned experts from the Mutual Funds business. Leaders from MF Utilities India and PPFAS AMC spoke about how the mutual fund sector has evolved and how the adoption of Digital Payments has played a critical part in that evolution. We had a great time learning about the sector and its nuances with Ravi Kiran, CAMS – Head of New Business, moderating the event.

A quick introduction to our guest speakers:           

Ganesh Ram, MD & CEO, MF Utilities India Pvt. Ltd.

Ganesh has a background in financial services, capital markets, process transformation, and investment banking spanning over 20 years. In fact, he came to MFU after working as the MF Business Head at BSE Limited (Bombay Stock Exchange). Before joining BSE, he was the Head of Mutual Fund Ops & Digital Products at KFintech (RTA). He formerly worked for Bank of America Merrill Lynch India and GE Capital, where he oversaw areas such as Trading Operations, Middle Office, Global Securities, and Loan Services across Asia, EMEA, and the United States. He has a bachelor’s degree in finance, a PGDBA, and is a Certified Six Sigma Black Belt.

Jayant Pai, Head of Marketing & Products, PPFAS AMC

Jayant Pai has been with PPFAS for 15 years and is currently the Chief Marketing Officer of PPFAS Mutual Fund. Since 1993, he has worked in a variety of industries, including stockbroking, Institutional Equity Sales, and Investment Banking. In addition to being an alumnus of IIM Ahmedabad, he is also a Certified Financial Planner and holds a Diploma in Securities Law from Government Law College in Mumbai. He has written various articles on mutual funds, financial planning, and similar themes for publications such as the Economic Times, Business Standard, and has also been featured in relevant programs on TV networks such as CNBC, ET Now, Zee Business, and others over the past seventeen years.

Our panellists covered a wide range of topics, including:

  1. From the pandemic to the present, what have been some of the significant payment mode shifts in the mutual funds industry?
  2. Is SIP Payments truly the foundation of the MF industry? How are NACH, eNACH, UPI AutoPay, BBPS, and other products competing for this market?
  3. How will SIP Mandates fare in the future? What will be the change they bring in considering the most recent payment trends and techniques etc.

The Long-lost Era of Mutual Funds

Our panellists began by reflecting on the last two decades, claiming that the Mutual Funds business has grown gently and gradually to where it is now. Mr. Ganesh Ram expressed his delight at his company’s growth over the years and his anticipation for the future. He went on to talk about the most effective techniques to grow the mutual fund industry. He stated, “the goal is to collaborate with AMCs to standardize the Mutual Fund process.” He added that the gains would eventually accrue to the advisors, distributors, and investors. 

“Within next 2-3 years, I see MFU and payment aggregators like CAMSPay taking a pivotal role in adding value and simplifying the mutual fund process”

Mr. Jayant Pai began by describing the growth of the mutual fund sector since 1992 and how it had been benefitted from developments due to the rapid strides made by the digital payments sector. He ended the introduction, contending that Mutual Funds could be regarded as one of the best-regulated investment options for retail investors.

The Inevitable Entry of Digital Payments in Mutual Funds

Mr. Ganesh Ram described how there is a shift in preferences and digital payment usages between Tier-2 and Tier-3 cities and towns in India. While most Tier-3 locations still prefer to invest in mutual funds using cheques, there is a notable shift toward digital solutions in Tier-2 cities. He also said that digital solutions have made the onboarding process a lot easier.

Mr. Jayant Pai shared some revealing statistics, one of which was… Digital transactions, which amounted to 33% in 2013, tripled to 99.1% in the current year.

“We have been able to reach this stage, by standing on the shoulders of digital” he averred.

He went on to acknowledge the pivotal role played by CAMS during the early years and the thrust provided by BSE Star MF in the recent past.

Debit Cards Challenges & Steps to be Taken

Both guest presenters discussed how regulations on third-party transaction validation for debit card payments have created quite a few obstructions. Jayant Pai emphasized that the issue was unique to the Mutual Funds business.  Also, while talking about how MF is perceived by people – Ganesh Ram commented that a significant drop in crypto value is hugely overlooked yet a minor drop in mutual fund value is trumpeter loudly.

While certain regulatory changes and usual debit card challenges create concerns, Ganesh strongly believes that UPI will be a game-changer since it will continue to streamline and simplify the existing investment/mandate registration procedure.

Jayant Pai felt that while consumers across various locations were certainly getting more comfortable with digital, the Mutual Funds industry is not yet offering some payment options (like QR Codes) with which they were more familiar. Even UPI was a relatively recent addition.

SIP – Paving the Future of Mutual Funds

To start a SIP fund in 2001, Mr. Jayant Pai said that investors had to sign multiple cheques. Today, an investor has a digital payment mechanism that makes the process of investing a lot easier. He also expressed his gratitude to payment gateway providers, emphasizing how their unwavering support has helped the MF sector soar to new heights.

Ganesh Ram, on the other hand, stated that MF Utilities investors conduct 100% of their transactions online and make over 90% of their payments online. According to MF Utilities’ CEO, the E-mandate and physical mandate account for around half of the company’s payment module. He further said that SIP is growing rapidly, with E-NACH and E-Mandate controlling most of the market. With better marketing, he indicated that UPI and UPI autopay will establish themselves in the MF industry in the future.

Payment Experience & Better Future

Presenters reiterated how important it is for investors to have a simple process. They both agreed that a positive payment experience brightens the overall customer journey, allowing them to sustain a long-term relationship. Mr. Ganesh Ram further added that the MF industry and its participant should move from competition to collaboration. He then concluded that the banking sector should consider MF as one of the significant contributors and further help payments to get streamlined.

To summarise, our panellists believe that with the use of digital payments, MF will develop rapidly. The only challenge is that the digital payment infrastructure is NOT fully operational with public sector banks and other financial institutions in Tier 2 and Tier 3 locations. When this situation improves, it will pave the path for a better future.

In case if you have missed our webinar, do not worry, you can watch the webinar video here:

Visit CAMSPay to know how we solve Mutual Funds sector’s needs.

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