Launched in 2015, the mutual fund industry’s order routing system MF Utility, or MFU, is fast gaining acceptance among distributors and investors. With over 3.50 lakh transactions being executed every month, close to 90% of these transactions are paperless.
Managing Director and Chief Executive Officer V Ramesh talks to Ravi Samalad about the progress of MFU thus far and how it can emerge as a go-to-market platform for startups in the robo-advisory space.
Currently, MFU has 27 participating fund houses. When do you see all fund houses joining MFU? What roadblocks are you facing?
MF Utility is an Association of Mutual Funds in India (AMFI) initiated industry promoted company. While AMFI has initiated, it was not made mandatory for fund houses to join MFU. It is purely voluntary. It is the respective fund houses that need to decide on the same. We are hoping that all fund houses will come on board soon. This month, one more fund house is joining MFU to make it 28.
How many transactions are you seeing on MFU currently?
Currently, we are receiving more than 3.50 lakh transactions every month. It is increasing at about 10-15% every month. We get transactions even from small towns like Betul, Chachar, Dumka, Gonda, Gondia, Surguja, Jind, Kher, Kaithal, etc. On an average 900 common account number (CANs) are opened every day. Around 1,000 fresh SIPs are being registered every day.
What challenges do you see in moving investors and advisers from physical to online?
We do not find any challenge at all. Almost all distributors who adopt MFU quickly go paperless. More than 90% of the transactions received by us are paperless and submitted online. In fact, more than 50% of the CANs opened are paperless and online.
Since direct plans are also available on MFU, there is a fear among distributors that their clients will migrate to direct plans. Have you seen this kind of migration happening? What is the breakup of direct and regular investments/transactions on MFU?
There used to be a fear on this due to rumors spread by some people with vested interest. However, today more than 7,500 distributors are signed up with MFU and we have not received a single complaint from any distributor on this count. More than 90% of the CANs are opened by distributors. Moreover, they are also aware that MFU does not contact or communicate with any investor directly for any purpose other than transaction related. Further, customer data is completely secured. Therefore, the fear among distributors has waned off. In fact, many distributors who were afraid of using MFU and used other platforms, have now moved to using MFU.
A few direct investors, who started using MFU since the beginning, are very actively using MFU for transactions. About 40% plus transactions are in direct plans. These include transactions based on recommendations in direct plans by Registered Investment Advisers (RIAs). Interestingly, the average number of transactions per CAN are almost five per month in direct plans. For every market dip, they submit a purchase transaction due to the immense convenience brought in by MFU through the system as well as the App “goMF”. At the same time, the regular plan has an average of 2.5 transactions per CAN per month. In this case, there is no impulse transaction because the distributor needs to contact the investor and only when investor agrees, a transaction is submitted. Therefore, the frequency of transactions in distributor driven assets is fewer than self-directed investors.
How many RIAs are using MFU for executing direct transactions? Does MFU also provide a fee collection facility for RIAs?
Currently we have more than 100 RIAs using MFU and close to 50% of them are using fee collection facility offered by MFU. More than Rs 14 lakh has been collected by RIAs as fees through “eCollect” module.
What is your roadmap for MFU? What new features are you looking to add in MFU?
Introducing new features is a continuous process. Based on the feedback and usability, we will continue to evolve and create features/system/processes as may be required to ensure transacting in MF becomes as easy as possible. We aim to be industry’s transaction aggregator which will bring benefit to all stakeholders. The MFU aims to bring convenience to distributors and investors, provide a quick go-to-market for new platforms with technology cost advantage, be a seamless one-point access for existing platforms, reduce operational issues for distributors, bring cost benefit to AMCs and provide real-time information on transactions.
How are you planning to attract more IFAs towards MFU?
As an industry initiative and a no-profit oriented organization, we do not intend to do any marketing initiative or advertisement. However, as I see it, we will continue to connect with distributors whenever fund houses give us a chance to present MFU during their interaction with distributors. In any case, more and more distributors are joining MFU through word-of-mouth after hearing the seamless experience of transacting from existing distributors.
Industry estimates suggest that around 30% of mutual fund transactions are now done online. When do you foresee transactions becoming completely paperless in the mutual fund industry?
The objective of launching MFU by the industry is to act as an aggregator and, thus, create more and more platforms which will help investors go online to transact in mutual funds. As far as we are concerned, we encourage more and more startup platforms to be launched with seamless connectivity through MFU so that there is no huge technology cost. Without more platforms coming in, we do not see the industry going 100% paperless. Having said that, currently 90% of the transactions in MFU are completely paperless. MFU has definitely changed the way transactions are being submitted.
