Aditya Birla Sun Life Mutual Fund

Digitisation: Impact of Digitization on Mutual Funds in India - ABSLMF Blog

Digitisation: A must for deeper entrenchment of Mutual Funds

Jun 27, 2019
5 mins | Views 8956
Mr. Vikas Mathur

It has been 25 years since we began operations in mutual funds and we have come a long way in becoming one of the largest financial services players in India, enduring several market ups and downs in the process. Trust is not just our foundation, but also our currency, and has helped us reach where we stand today.

Currently, the markets are facing challenges both on the domestic and the global front. Namely, rising tensions brought on by the US-China trade conflict, contraction in global trade volume and a slower global as well as Indian growth rate. This economic scenario coupled with the host of changes that SEBI had introduced for the mutual fund Industry has brought on an obvious disparity between growth and growth potential for the Industry. Acquiring new clients and increasing wallet share from the existing ones must be the first priority for the MF industry. Loads of initiatives have been taken, not only by SEBI, AMFI but also by individual companies to fulfil this agenda. Given the tight margin framework that all stakeholders operate in, the focus must be on building distribution (enabling and showing the business opportunities to existing large potential setups like PSU Banks, creating new ARN holders while collaborating with governments through skill development programs and creating employment. Digital interface is the future which needs to be embraced by all existing stakeholders and should become an integral part of the journey for anyone joining in now.

Since mutual funds are typically sold and not bought, distributors play a key role in channelizing money Over the years, the distributors and IFAs have played an important role in the proliferation of mutual fund schemes as an optimum investment avenue among chiefly, the retail investors, which in turn has resulted in a significant contribution by them in the overall AUM garnered by the mutual fund industry.

While the increasing distribution force is a healthy sign, the industry needs to do much more to cater to India's vast population, especially to reach out to people who are not digitally savvy. We can learn from our close colleagues in the financial services industry (Life Insurance), the way they have increased distribution footprints across the hinterland and leveraged the existing Banking framework/infrastructure through bancassurance channel. One of the largest public life insurance companies has completed 63 years of operations in India in 2018 and has approximately 11 lakhs agents. Reaching even 50% of this large distribution force can go a long way in expanding the reach of mutual funds among households.

Technology is disruptive and it is positively impacting the mutual fund industry. It has immense benefits, primarily for the investors, along with the AMCs and the distributors. Digitisation and the expansion of distribution are where the competitive advantage will be in the near future of the mutual fund industry. Many distributors are embracing these changes and using them to grow their business too. In fact, with internet connectivity improving in B30 towns, usage of digital interfaces has improved significantly. The next step would be to educate the clients about the convenience of using digital medium and helping them experience it.

The technological developments are expected to bring increased efficiency and a 'customer delight' factor amongst our investors while increasing the efficiency. This will, I believe turn to be a blessing in disguise for us as the AMC, and the distributors in making us move towards being a more customer centric industry.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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