Over the years, tech has revolutionized countless industries — both large and small, and mutual fund industry is no exception. In recent years, the Indian mutual fund industry has grown considerably, and there is no doubt that technology has been among the key drivers fueling its growth.
As technology continues to advance, many traditional methods in the mutual fund industry are being replaced by their technological counterparts. Technology is essentially laying the fundamentals of the new emerging landscapes for the rising mutual fund ecosystem. There has been an increasing number of innovations targeting different aspects of the industry, be it portfolio management, data analysis, or overall penetration of mutual funds among the masses.
In this article, we discuss how the mutual fund industry leverages technology to grow:
Lack of penetration has always been the biggest challenge faced by the mutual fund industry in India. However, in recent times, the exposure to internet and social media among the masses has increased considerably, making it easier for the industry players to relay information to remote areas of the country. Today, social media is becoming an effective low-cost marketing tool for fund houses, allowing them to establish dialogue with their investors real-time. This technology revolution in the industry benefits the investors, enabling them to get all necessary information online without relying on agents.
The days have gone when investing in mutual funds required investors to go through extensive paperwork. Today, the entire process of mutual fund investment, from transaction money to investment to KYC verifications can be seamlessly done online without the needing to fulfill physical or on-paper requirements. The introduction of e-KYC using Aadhaar plays a crucial role in online investing. It benefits both the investors and the fund houses by enabling instant verifications while eliminating the costs incurred in paper maintenance and movement.
Investment advisors play an active role in shaping the market. Investors typically invest their money in schemes recommended by their advisors. However, it is of course, unlikely that all advisors will have the same understanding and grip over the market, which sometimes results in contradictory investment advice. To make investment advice more transparent and reliable, many fund companies in the industry have started using robo-advisors. For those unfamiliar with the term, robo-advisors are a class of financial advisors that provide financial advice or investment management tips online with little to moderate human assistance. Services provided by robo-advisors are based on mathematical rules or algorithms which are executed by software. Robo-advisors have expanded the reach of investment guidance directly to those who were unable to afford advisors’ fees.
As the world continues to adopt a mobile-first strategy, every major industry is transitioning to mobile platforms from traditional methods. A seamless, coordinated and easy digital access to information and services is being demand more than ever among the consumers. The mutual fund market is flooded by countless applications providing all sorts of financial services, and this trend is expected to grow further in the future.
Mobile applications have completely transformed investing. People now have instant access to possibly every financial service on their mobile devices, whether it is money transactions, portfolio management facility, information asset allocation, or complex market analytics. For example, if an investor wants to invest in Birla Sun Life Mutual Fund, he/she can instantly easily get all the required information on his/her mobile device within minutes.
Mobile devices have become very critical in penetrating rural areas of the country with some fund houses even allowing mutual fund investments by merely sending an SMS.
With the rise of digital platforms, an increasing number of young investors, especially those who are tech-savvy, are opting for online platforms for buying mutual fund schemes as well as systematically managing their money invested in various funds. To meet the investors’ requirement and to make the schemes easily accessible, several fund houses are now making their mutual funds available through online marketplaces. Internet-enabled devices are becoming instrumental in expanding the sales channels to previously unexplored markets by educating the people about various products and schemes.
In this highly competitive mutual fund market, it is critical for the Asset Management Companies (AMCs) to be aware of the investment habits of the consumers. The companies rely on predictive analytics to have a statistical perspective of investor actions and the possibilities of potential investments. To make future asset management strategies, AMCs are now heading to social media platforms for direct communication with the investors and to gather relevant data through these interactions. Companies then use this data to produce data-driven models by deploying big data and cloud computing techniques to drive maximum efficiency in the asset management process while strategically lowering the costs.
Technology has had a substantial impact on the mutual fund industry. The industry has been able to solve many problems only through technological innovations. Tech innovations in the mutual fund industry have assisted fund houses in lowering the operational cost while simultaneously benefiting the investors by providing services in an instantaneous and transparent manner. The Indian mutual fund industry still faces many challenges, but with the aid of this tech advancement, it’s the growth path is expected to continue a steep climb in the future. It’d be prudent to jump on the bandwagon!