AMC Speak

12th December 2011

Capture your clients' savings flows with just an SMS
Kalpen Parekh, Deputy CEO, IDFC Mutual Fund
 
imgbd The MF industry is making its biggest bid yet to capture idle savings accounts floats of retail savers - and thus make mutual funds relevant to the vast majority of savers who continue to stay away from the industry. Hot on the heels of Reliance's new ATM facility, IDFC MF has introduced the simplest way yet to transfer savings account balances into liquid funds and vice versa - through a simple SMS. Kalpen takes us through SMS transact - a facility that can very simply allow any IFA to gain complete access to his clients' savings flows, and at the same time help them earn much more from their idle balances.

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WF: I understand Gamechangers is moving to the next level - from sales aids and educational material to an exciting new service proposition. Can you please take us through the new SMS Transact facility that you have launched?

Kalpen: The genesis of this idea was the realization that while our industry over a decade has seen multiple attempts in terms of product innovation, there is still a lot of scope in the area of process innovation to make the fund investing experience simple and convenient for investors.

We are witnessing a great time for ultra short term funds where short term interest rates are close to 9% and money market funds can also fetch close to 9% returns. With RBI liberalizing the savings account rate, some banks are offering 6% instead of 4% on savings accounts and have introduced 8.5% "unfixed" deposits - all of which is helping create awareness among investors about the need to make their idle savings account balances work harder. So this space is really warming up. The MF industry has a big opportunity to participate in this environment - for the benefit of the investors, distributors and the AMCs.

We all know that liquid funds offer great entry points to introduce customers to the MF industry. They do not have any after sales service, as they are not really impacted by market movements and therefore the client experience in reality will be aligned with expectations, even in the short term - unlike say, equity markets. We did some research into why consumers do not buy liquid funds, even when they offer significantly better returns than savings account, at equal or better safety because of diversification. The reason that came across was convenience - the inertia to sign long forms for investing and then for redeeming money was always a hurdle.

If convenience is the main hurdle, we thought the platform to address it will be mobile phones. Indians are increasingly living on mobiles. So we thought that the best way to migrate convenience into the hand of the customer is to attempt process innovation around the mobile instrument. The next issue after choice of platform is the manner in which the transaction gets executed. In a normal online transaction process executed over a mobile phone, the investor has to log in, remember his password and needs a strong internet connection on his mobile phone.

We said that if we can cut through the need for logging in, remembering passwords and needing a good internet connection and just give a solution to a customer where, by typing a few alphabets he can actually transfer his surplus money from a bank account to a liquid fund and do the reverse whenever he needs money, we will give him a level of convenience that can motivate him to use liquid funds as an integral part of his money management.

WF: So, how exactly does the SMS transact work?

Kalpen: We first take an auto debit mandate from the investor, like we do when we register SIPs. This debit mandate form will be captured in our system as well as with CAMS and once the debit mandate form is submitted to us it takes on the outer side two weeks to get it registered with us. Along with this he needs to obviously open a folio with us. You also have an option of zero balance folio that can be opened. Once these 2 are in place, you can start transacting by simply sending an SMS.

Now, if you have some credit that comes into your savings account, all you have to do is type INV and the amount you wish to invest and send that SMS 56767267. As simple as that ! Within a minute, you will get an intimation saying that, Dear sir, your transaction portfolio number so and so has been received on 22nd November at 13.06 hrs. So it will be basically an intimation that your sms has been received and depending on the cut off time and the time at which the message has been sent as soon as the transaction is executed, there is a transaction success or failed sms also which will come, that your transaction has been successful and so many units has been allotted to you at an NAV of so and so, as on so and so date. All investments for simplicity sake are currently into the IDFC Money Manager Treasury Plan.

After few days you want to redeem and you have 10 lakhs in the IDFC MMTP and you want to redeem 6 lakhs out of it, all you have to do is again take your mobile and just type RED, which stands for redemption 600,000 or whatever that amount is and press send to that same number and the redemption gets notified and captured.

We have tied up or partnered with seven banks as of now, with few more in progress. These banks are Kotak, Axis, City, ING Vysya, Standard Chartered, SBI, HSBC and we are talking to ICICI bank hopefully in the next week are so, they should also join. So if a client has an account with one of these banks he can use the SMS Transact facility.

In our database of the active folios that we have, there are over 200,000 investors who are mapped to these seven banks. Now for these investors or for any new investors, what one need to do to start with is to give me a sms registration form. Once the mandate is registered, all these investors can start using the SMS Transact facility straight away.

WF: This sounds really neat and simple. Tell me, is this really an industry first? What are all the SMS numbers that we see on so many mutual fund hoardings - they also say SMS Invest to so-and-so number? What do they offer under the SMS facility?

Kalpen: Most of the hoardings, including ours which always say that sms invest on so and so number are mainly lead generation initiatives. The sms to invest on the hoarding will ask you about the type of funds you want and send an advisor to you. Most of these campaigns initiate customer conversation. It does not allow you to transact at all.

The new facility that we have launched is an industry first in that you can invest and redeem through just a simple SMS on your mobile - whether or not you have an internet connection. You do not log in anywhere, there is no password to remember. Just SMS and your investment is done.

WF: Another innovation that is built around promoting liquid funds among retail savers is the Reliance ATM facility. How is your SMS transact facility different from the new Reliance ATM facility?

Kalpen: They are significantly different. But before I comment on the differences, I do want to mention that when a market leader like Reliance works on process innovation and launches an industry first initiative, it does push the industry to better standards of excellence.

The ATM facility is very different in that it operates once you have made your investments into a liquid fund. It promotes ease of use of the money invested - for normal expenses, by allowing redemptions through a debit card, within defined limits - just as you would use a debit card to withdraw money from your savings account for normal expenses. In a way this is the second leg of any client's cycle, which is the redemption phase. And definetly it will help and give more comfort as investors realize that money is easily accessible to me. So it captures that space, while on the other hand the SMS transact facility that we have launched is in a different segment altogether where it initiates the customer into the industry and into the liquid fund as a category. It is more in terms of starting a transaction. Starting a folio or making your first investment and it is available at all points in time then. You do not need to step out of your chair to transact in this case. So wherever you are, all you need is your mobile phone.

WF: So it actually encourages people to save more efficiently.

Kalpen: Absolutely - it inculcates real time saving. Indians are value conscious as well as convenience conscious. If you can show them how to extract better value for their idle savings account balances in a most convenient way, they will go for it.

WF : Thinking aloud, Kalpen, this is a great extention of the Joshi Bank concept you have been promoting. IFAs should be told to educate their clients that whenever they get an SMS alert from their bank regarding a credit into the account, they should immediately send and SMS and transfer surpluses into a liquid fund. That way, IFAs will have a lot more access to idle balances than they ever had before - which can put them in a much better position to proactively advice their clients on investment options - just like a bank RM does.

Kalpen : Yes, it is a continuation of the Joshi bank concept - where we have been encouraging IFAs to get access not just to the 5% of his client's money that comes to him, but a much larger share of the pie, by becoming his banker and managing floats. Also, once the mandate is registered with the IFA's ARN number, all subsequent transactions in that folio are automatically mapped to that distributor. This way, all that the IFA needs to do is to educate his client about this facility and help him set up his sms registration. Once this is done, he not only gets commissions for all investments made by his client, but equally, he gets to know when his client has moved some money into MMTP, so that he can proactively advise him. This can be a gamechanger for both - his client as well as for himself.

WF: What are your plans ahead, is it possible for customers to switch between funds, or will that complicate the matter?

Kalpen: What we visualize is multiple schemes beyond just liquid funds. But before that, we want to test if this is adding value to our distributors and investors. Once we go past the test phase, we want to scale this up and get this habit inculcated among our distribution partners and from them onto investors. Post that, we can look at adding more features and schemes. The end objective has to be to get many more investors into the industry using the most convenient way of earning better returns on their idle savings balances - with just an SMS.