An advertising balloon for PayTM online payment advertisment, operated by One97 Communications Ltd. (Photographer: Dhiraj Singh/Bloomberg)

Paytm’s Mutual Fund Platform To Go Live This Month As It Expands Services

Paytm will this month start selling mutual funds through a separate platform as India’s largest e-wallet company with nearly 300 million users expands its financial services footprint.

One97 Communications Pvt Ltd., the parent of the payments bank-to-e-commerce player, has registered more than five lakh mutual fund users on Paytm Money Ltd., the company’s spokesperson said in an emailed response to BloombergQuint. “Once the platform is live and open for public, we will offer access on priority to those who have registered for early access.”

Registration, launched internally, will be thrown open for everyone through the official website of the company sometime this month, and only “direct” investments will be allowed, the spokesperson said. While the parent didn’t disclose names of the fund houses whose schemes will be available or the fee, at least nine fund houses, in emailed responses to BloombergQuint, confirmed to have tied up.

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It’s not just Paytm but the likes of PhonePe and Mobikwik are also exploring ways of launching mutual funds as payments players are finding it difficult to get revenue from traditional sources, according to Vivek Belgavi, leader for financial technology at PwC India. With a critical mass of users, it’s easier for them to transform, he said, adding that the opportunity is huge as the mutual fund penetration in India is in single digits. Mobikwik and PhonePe spokespersons didn’t respond to BloombergQuint’s calls.

Mutual funds are part of the third stack of services that Paytm plans to offer along with lending and insurance, Founder Vijay Shekhar Sharma had told BloombergQuint’s Menaka Doshi at the World Economic Forum in Davos in January. The first stack is the payments option, which is used for customer acquisition and breaking even. The second is the e-commerce business which generates margins but at the cost of aggressive spending. Financial services, Sharma had said, offer “large profitable delta margins”.

Also read: Davos WEF 2018: Paytm To Sell Loans, Insurance As It Builds Three-Stack Model, Says Vijay Shekhar Sharma

Patym Money, according to the company spokesperson, will not only cater to the needs of the existing and new investors alike, but also focus on expanding the market size by bringing in first-time investors to the mutual fund industry. That’s when average monthly inflows into equity mutual funds have surged to Rs 17,000 crore-plus over the last two years as Indians shift from like gold and real estate to financial instruments, more so after demonetisation.

The mutual fund industry has seen a massive scale-up both in terms of growth in assets under management and number of investors over the past four years, according to Ajit Narasimhan, chief marketing officer, Sundaram Mutual. “We believe new entrants like Paytm will help grow the industry even further by reaching new segments of the market who are used to consuming products and services digitally.”

One97 operates the wallet company and payments bank, majority owned by Sharma. It’s not allowed to lend but can take deposits of up to Rs 1 lakh. Investors, however, will be offered the flexibility to use any bank account of their choice for investing in mutual funds, according to the spokesperson. The company didn’t disclose if it will offer systematic investment plans of less than Rs 500, the minimum required by fund houses. While Paytm wallet has nearly 300 million users, the company said in April that it had completed KYC for nearly 100 million after the Reserve Bank of India made customer identification process stricter.

Vishal Kapoor, chief executive officer at IDFC Mutual Fund, said Paytm’s advantage is its existing user but its mutual fund platform’s advisory model is not known yet. The current market profile suggests investors need “advice”, Kapoor said, adding that he doesn’t expect the advisory business to suffer any turbulence because of Paytm Money launch.

Manish Mehta, head of sales, distribution and marketing at Kotak Mutual Fund, which has tied up with Patym Money, said with its customer base of over 300 million across the country, Paytm would be give the industry reach which otherwise would be a challenge.

That won’t Moreover, pivoting into a financial services player comes with its own challenges. The initial hurdle, according to PwC’s Belgavi, is to change user behaviour to buy mutual funds. Investors largely compare mutual funds online and buy via agents, he said. “To move to a marketplace, it’s almost a DIY kind of story and requires a change in habit.”

Also read: Paytm Acquires Savings Management Startup Balance Technology