A Complete Guide to Cashless Investing
Demonetisation has made cash dispensable to an extent most of us did not anticipate. Thirty-year-old Ravin Rawat, who works at a Noida-based infrastructure company, does not remember the last time he dealt with cash. He has switched to debit card, mobile banking, and installed mobile payment wallets such as Paytm and MobiKwik. He is not alone. The data from RBI and VC Circle pegs mobile banking transactions at Rs 3.9 lakh crore in Q4 2016 - a fourfold increase from the same quarter last year. The usage of cards has doubled at merchant outlets during Q4 2016 as compared to Q4 last year.
Wouldn't it be ideal if we could also invest our hard-earned money with just a few clicks as against getting caught up in arduous paperwork? Here are ways to go cashless and paperless when investing.
Getting started
All asset management companies (AMCs), today, are promoting 'paperless', 'presenceless', 'online', 'go green' options on their homepages. Investing online is not new for these companies, but they are now making the process more convenient by allowing investors to purchase and sell without physically visiting them.
To start with online investing, an investor needs to be KYC-compliant, should have a bank account, mobile number and email address. KYC can be done online through Aadhaar card, using the registered mobile number, where verification is done through a one-time password. You may either go to the AMC's website or the mutual fund transfer agency CAMS' website. SEBI has restricted e-KYC holders to invest a maximum of Rs 50,000 per mutual fund per financial year. You will need to upload your signature image in case you wish to invest or redeem through paper-based request in future. Once you are KYC-verified, you can start investing. Fill in the form online and invest funds through net banking or by using your debit/ credit card or UPI. Major AMCs do not even require you to log in; you can do so using the one-time password option.
MFs on your finger tips
AMCs are leveraging the increasing penetration of smartphones to make investing convenient. Reliance, Birla Sun Life and ICICI Prudential already have mobile applications which allow users to invest and redeem from their liquid funds 24X7. Liquid funds are suitable for very short-term goals. At the time of need or emergency, these apps allow you to redeem immediately or within a few minutes. What more? They earn you more than a savings bank account can.
Axis and UTI AMCs offer a comprehensive application allowing transactions in all their active schemes. Although DSP BlackRock does not have a mobile application yet, its website has a responsive design - it adapts to the device in use. Santosh Navlani, Senior VP, DSP BlackRock Mutual Fund, says, "Most retail investors do not invest daily or even weekly; they prefer the SIP route. So when we launch an app, it will primarily focus on keeping track of portfolios, and their analysis, as well as transactions."
Reliance Mutual Fund's Any Time Money card allows users to take out or spend against their mutual fund investments by providing access at Visa-enabled ATMs and merchant outlets across India. Here, too, investments are primarily made into liquid plans.
What happens if you invest in three different AMCs? Will you have to face the daunting task of compiling your different portfolios every two or three months? Thankfully, there's Mutual Fund Utilities (MFU) - a transaction aggregating portal started by AMFI which allows a KYC-compliant investor to transact in multiple schemes across mutual funds using a single form/ payment, and a common account number (CAN). As of now, 26 AMCs have joined MFU. AMC participants of MFU hold 94 per cent of the total mutual Assets under Management in the industry. It has a mobile app for smartphones which compiles and provides an investor's mutual fund holdings at one place. Use your CAN to request for the log-in ID for the mobile app, by sending an e-mail to clientservices@mfuindia.com from your registered email id. And you are good to go!
Bots help you Buy
If, like Ravin Rawat, you are not confident about which funds to choose from, there are several online platforms such as Funds India and Fundsupermart, which can help you in the process. Then there are robo advisors like Arthayantra, AdviseSure and Paisabazaar. Roboadvisors use technology in the form of computer programmes to decide a portfolio allocation based on your goals and risk profile. Unsure of taking advice from a bot? Here's what Nitin Vyakaranam, Founder & CEO, ArthaYantra, has to say: "It is an algorithm-driven model; we can churn out thousands of financial plans per hour which is not possible for a traditional advisor. Since the human element is used only for delivery of the advice to the client, and not for the creation of the advice, it eliminates the human bias from the entire process of financial planning, thus giving the customer an absolutely unbiased financial plan." Moreover, robo advisors charge lesser than traditional advisors.
Apart from being hassle-free, Naveen Kukreja, CEO and Co-founder, Paisabazaar.com, says, it is swifter, too. "Unlike offline brokers, online portals allow investors to invest or redeem mutual fund units at the same day's NAV, provided you complete the transaction within the stipulated cut-off time. Any lag on the part of your broker or courier service can deprive you from exploiting market opportunities."
Straight from the Wallets
According to an Assocham-PwC report, the value of transactions through e-wallets witnessed a 301 per cent growth during November 8 - December 27, 2016. Mobile wallets are, hence, sprucing up their offerings. Paytm and Mobikwik now allow users to pay their insurance premiums for select life, health, and general insurance companies. The glitch, however, is that one cannot buy a new insurance policy via wallets yet. Freecharge, too, has introduced mutual fund investments on its platform. At present, it allows investments into Reliance's Money Market Mutual Fund, but only for Android users. The option will soon be open to iOS users. "We have begun with liquid funds which are a safe alternative to funds lying idle in savings bank account. We are actively working on adding other products to the mix," says Govind Rajan, CEO, FreeCharge.
Mobile wallets are now extending their services to the under-banked. ItzCash, a phygital wallet operates via online and through its 75,000 outlets across 3,000+ tier I and tier II cities. Its USP is that apart from e-wallet, it allows a consumer to visit its store, and the outlet will pay or receive money on the consumer's behalf. The outlets are equipped to do transactions via digital wallets on the consumer's behalf. Naveen Surya, MD, ItzCash, and Chairman, Payments Council of India, says, "Those who earn and spend in cash have 90 per cent of cash lying with them. We are focusing on bringing them onto digital by helping them use online platforms."
MobiKwik, too, is working with Tata Trust and Google India's Internet Saathi aimed at bringing financial inclusion to the grass roots.
Cashless Home Buys?Unlike more developed countries, we cannot buy a property purely via online channels. Aggregator websites such as Magicbricks.com and 99acres.com provide a list of properties depending on your choice. No further assistance is provided. In order to book, one has to contact the developer or builder to inspect the property personally, and carry out the due diligence.
Tata Housing, Puravankara Projects, and Godrej Properties have started selling properties online on their respective websites. But individual developers will only offer their own projects for sale online, which severely restricts a buyer's spread of options. Anuj Puri, Chairman & Country Head, JLL India, says, "Interested buyers can pay only the token amount online, after which they will inspect the property personally. They also need to see all the pertinent documentation for a property before they can make a sound investment decision. Availability of such documentation online is still very scarce in India."
Online retailer Snapdeal started its real estate portal in 2014 and has over 400 listed properties. One can compare and choose from the list of properties, and also get assistance with the entire transaction process. Snapdeal has partnered with JLL's Residential Services division to offer offline support. The team of specialists contacts customers who have expressed interest in a certain category of housing or a particular project online. The team also assists in vetting the listed properties for legal soundness and reliability.
While the importance of e-commerce in real estate market cannot be denied, at present, the buying process can only be initiated online. It cannot be completed online.
However, tenants can choose to pay rent via credit cards. This can be handy for those who pay a substantial portion of their income as rent and would like to delay it for a month or two, owing to more pressing needs. One can use RedGiraffe.com to pay home rent through credit card. As long as your landlord is not strictly in favour of cash receipts, you need not seek his/ her permission. The process includes filling an online form and uploading rental details, after which you will receive a unique code from RedGiraffe to register. Manoj Nair, Founder and CEO, RedGiraffe, says, "Paying rent through your credit card will help you build a strong credit score. You can also avail cash backs and other offers." There is no limit on the rental amount, and no change needs to be made in the rental contract. A bank transaction charge of 0.39 per cent per transaction is charged, which is Rs 39 for every Rs 10,000, plus service tax. Moreover, you get credit facility of upto 60 days, and your money continues to earn interest.
Word of Caution
One of the biggest impediments in going cashless is the vulnerability attached to it. In October 2016, thirty two lakh ATM cards belonging to major banks were hacked. The RBI registered 16,468 cases of fraud involving credit cards, ATM/ debit cards, and internet banking during 2015-16. Sophos, a global player in network and end-point security, in its research revealed that India stood fifth in the world in terms of cyber attacks in 2016.
As per the data maintained by National Crime Records Bureau (NCRB), 11,592 cyber crime cases were registered during the year 2015, more than double the number recorded during 2013. These include cases registered under the IT Act and related sections of the Indian Penal Code, and special and local laws involving computer as a medium/ target. The growing penetration of IT and related services calls for stricter cyber laws and more secure payment gateways.
Until then, upgrade your investment routine while exercising due caution.
