Digital platforms have dictated the way of life for a few years now, and in the COVID 19 world this can be observed more than ever. In the Indian financial sector, fintechs have been able to demystify online transactions to the general audience, from UPI payments to mobile banking. This is highly applicable to the mutual fund investment sector as well, and FinTechs like Zerodha and Paytm have leveraged this potential to combine low-cost offerings with superior experiences by cutting out the complexities involved. By launching “mobile-first” platforms, they have been able to establish themselves as preferred platforms for MF investments. As a result, third-party aggregators have established themselves as the primary beneficiaries in the peaked interest and investments in mutual funds, especially by emerging customer segment segments like millennials, leaving behind asset management companies (AMCs) in the race to build digital preference. Lines are blurring between online and offline brokerage with advancements in digitization.
The current economic environment has made it increasingly difficult for AMCs to expand and drive up investments. While contingency plans have been implemented, the true impact of widespread lockdowns and layoffs is unforeseen. However, third-party distributors have emerged as the winner during lockdown, recording strong growth figures. With decrease in interest rates and the faltering real estate market, experts believe more money is going to flow into stock markets. Online platforms have been able get the most out of this traction. Take for example Zerodha. Nikhil Kamath, Co-founder and CIO, Zerodha, in an interview to Business Line stated that Zerodha has seen a significant increase in the number of new investors, recording 100% month-on-month growth for March.
So why are AMCs losing out in the COVID 19 market surge? The answer lies in the fact that AMCs have largely been digital laggards, and have been slower than other financial institutions to adopt pioneering digital practices. Third-party apps have implemented digital innovation quickly and have been able to provide pioneering solutions to their customers. Due to the seamless onboarding experience and ease, and convenience in investing and portfolio management, emerging customer segments prefer to invest in these platforms instead of direct AMC platforms. Here is a comparison between features of AMC platforms and third-party platforms:
AMC Vs. Aggregators - a comparison of digital focus
Focus Area
AMC Digital
Aggregator Platforms
Distribution channels
Owned digital properties
(websites and apps)
Via aggregator and distributor platforms
Owned digital properties
Demography
Traditional investors
Non-digital natives, GenX, and early Millennials
Concentrated in Metros and Tier 1 cities
New investors
Digital Natives, Late Millennials and GenZ
Concentrated in Metros and Tier 1 cities
Innovation QuotientPoor digital innovation
Innovation in customer experience
Portfolio Management
Customer Support
Customer Experience
Poor and cumbersome
Rich and engaging
Commission
Charges levied based on point of sale and type of mutual fund
Free to investorCharges a fee ofDigital Focus
Consumer education and brand awareness
Secondary investment channel
Primary Investment Channel
On increasing customer lifetime value
Real-time portfolio Management
It is high time that AMCs put digital experiences at the heart of their strategy. Effective user experience and digital design can simplify every phase of an investor's journey, from onboarding to tracking of investments and can solve multiple pain points in their current journey. Emerging customer segments are looking for the democratization of investment services, and for AMCs to engage with them, rich user experiences are a must. These seamless and frictionless experiences can drive more and more first-time investors to explore the platforms created by AMCs and invest through them, rather than using digital aggregators for a superior experience. UX design also gives way to the cheaper and automated delivery of services, enabling AMCs to reduce their costs and expand their reach to digital audiences. Digital product and service design is centered on user empathy and takes into account the users' needs, wants, and pain points for curating an intuitive and frictionless experience that can maximize the returns of digital spend. It has the potential to lead to increased loyalty, satisfaction, and retention which ensures the maximization of digital ROI. The importance of this needs to be understood by AMCs to reassess their digital strategy and unleash the true potential of digital innovation.
Aggregator Platforms
