New Delhi: Paytm today launched its mutual fund app enabling customers to buy and sell mutual funds from a mobile phone. Through its app, called Paytm Money, the company expects a more than double increase in the number of mutual fund investors in India from the current 20 million to 50 million by 2023. Paytm hopes that half of the mutual fund investors in India will use their app by 2030.
One can download the app and buy direct plans from the app. Currently, the company has tied-up with 25 mutual fund houses. In terms of Assets Under Management (AUM) it covers around 90 per cent of the industry’s Rs 22 trillion worth of assets under management. Pravin Jadhav, whole-time director at Paytm Money was quoted as saying, “Eventually, and very soon, we will have the rest of the fund houses on board.”
Paytm Money will sell low-cost direct plans. Direct plans are cheaper because they do not charge you for distribution expenses. Given there is no distribution cost, direct plans of mutual funds offer comparatively higher returns than regular plans. To give you an example, the difference in returns between direct plans of mutual funds and regular plans can be as high as Rs 68 lakh. Consider this: For a Systematic Investment Plan (SIP) of Rs 10,000 for 25 years, at an annualized return of 15 per cent, one can save Rs 3.97 crore through direct plans and Rs 3.29 crore through regular plans. Under Systematic Investment Plans (SIP), one invests a fixed amount at regular intervals to average out cost in the long run.
Jadhav told mint, Paytm Money is expected to have a quicker entry into small towns by acquiring customers at a faster pace when compared to the Indian mutual fund industry. So far, around 65 per cent of the app users belongs to the ‘Beyond the Top 15’ (B15) towns category. In the mutual fund industry, smaller towns are described as B15.
Paytm is a registered investment adviser (RIA) with the Securities and Exchange Board of India (SEBI). RIAs who deal with direct plans are eligible to charge fees from their investors. However, Jadhav reportedly said, “We do not have any plan to start charging fees for now.”
Moreover, considering KYC needs are already met for Paytm customers, there will be no limit on the amount of mutual fund you can buy from the platform.