The mutual fund industry has witnessed a momentous growth trajectory in the last decade; growing at the rate of over 400% in the last 10 years. More so, the mobile trading platform launched in 2010 is now the fastest growing in the world.

However, these astonishing feats were accomplished on a consumer base of about 0.3% of the entire population.

Online broking platforms must leverage sophisticated UX and UI capabilities to extend this user base through financial literacy and enable the masses to partake in the capital value creation through mutual funds.

1. Introduction

1.1 Market Scenario

As a culture, India has a precarious relationship with money. Deeply ingrained societal values dictate that we work hard to earn money and save consciously to secure a better future for our family.

Investment instruments like physical gold and community based chit funds that encompass a majority of population till date are being considered secondary at least in metropolitan cities.

Mutual funds account for a total of Rs. 23.21 trillion worth of Assets Under Management (AUM); a whopping three-fold increase from the March 2013 figure of Rs. 7.01 trillion.

Its place has been taken by stock trading platforms that allow people to partake in the wealth creation in the capital markets. We here take a close look at the Mutual Funds (MFs) market.

The Indian Mutual Fund Industry has grown by leaps and bounds to become the fastest growing segment of our financial sector.

The value of assets held by individual investors showcase an absolute increase of 35.8% wherein the Institutional assets increased at an absolute growth of 8.90%.

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Data shows that in the first eight months of 2015-16, some 35 lakh new investors put their money in mutual funds through the SIP route, signaling a major shift in the investment mindset of the nation.

Systematic investment plans (SIPs) have now become synonymous with MFs. For most salaried professional who take home a monthly salary, a monthly SIP that automates the investment process fits well with their cash flows.

The disciplined design of an SIP allows for the allocation of regular investments in a majority of equity-backed mutual funds, which helps investors make the most of the volatile nature of capital markets.

Industry data shows that the mutual fund sector added 19 lakh Systematic Investment Plan (SIP) accounts in the first nine months of 2015-16.

1.2 Shift in Market

The last decade has witnessed a tectonic shift in the financial sector on account of the new emerging target audience and their investment patterns.

The current generation of investors is increasingly tech-savvy and this attribute is widely recognized in the online broking industry. India’s mobile-based stock trading platform, launched as recently as 2010, has become the world’s fastest growing mobile platform by volume.

Data states that the annual turnover of mobile transactions on the NSE has increased by nearly 130% over the past year. Today, the online trading industry accounts for 25-30% of retail market and fetches an annual revenue of Rs 400 crore in brokerage.

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The internet boom has spearheaded the ecosystem shift in the web based stock trading platform. Let’s look at the major points that reimagined the trading game in India:

Shift in Users Habit

  • About 33% of India’s population, ie, 300 million people have access to smartphones. Widespread affordability of smartphones and Internet plans have lowered barriers to entry for retail investors.

  • With changing and fast speed lifestyle people are becoming more used to quick solutions. Mobile trading is enabling users to buy and sell securities, as well as monitor their investments while they are on the move.

  • 49% of the investors residing in metropolitan cities and tier 1 cities are likely to use mobile based software or broking apps to trade in securities online. Mobile trading is generally popular among retail investors who make small ticket investments.

Smart-phone users image

Shift from web to mobile

  • All stock-brokers registered with the SEBI to provide Internet-based trading services are eligible to provide mobile trading facilities as well. Since no additional license is required, all leading brokerages now offer mobile trading platforms as well to suit the accessibility needs of its users.

  • Changes in technology have led to the emergence of discount brokerages that offer unique features to their users in the form of mobile specific features on the app. Mobile first traders account for 30-40% of their client base thereby prompting most traditional brokers to develop their own software platforms for the mobile or develop an app.

  • Mobile trading is a minimum service broking model. Hence, broking houses charge competitive rates on their web-based and mobile trading platforms. Additional services like Call-in-trade or appointing a dedicated relationship manager is treated as a value-added-service and attracts an extra charge. The rampant growth of discount brokerages have made it more competitive for investors to trade online compared to commissions charged by traditional broking houses.

1.3 Insights from Lollypop Research

Demographic Characteristics of Target Audience

  • Higher middle and middle income group that live in metropolitan cities are the main target audience. 49% of the retail investors in metro cities are leaning towards mobile services for online trading in the future, This figure is expected to be as high as 67% and 69% for Mumbai and Delhi respectively.

  • 44% of investors who have started investing in the last 3 years fall in the 31-40 year age bracket. About 32% of new investors are under 30 years of age.

  • Mutual funds attract investments from about 50% of the urban rich population. 36% of the rural rich still prefer to invest in traditional investment carriers such as gold and about 18% in post office schemes.

  • A growing segment of women prefer to use mobile trading platforms.

  • A large segment of the target population especially in tier-I and tier -II cities is not comfortable with the use of technology. Service providers will need to invest in simplifying the technology and interface, and in educating customers.

Lollypop Research of fintech

Behavioural Characteristics of Target Audience

  • They prefer low risk investments

    Mutual Fund Monthly Income Plans provide regular recurring earnings to investors along with a stable rate of return on capital over the long term. The target audience understands the importance of protecting the capital invested and margin of safety.

  • Most investors do their own research.

    Investors are privy to plethora of information online regarding past performance of a fund and the opportunity it offers. Investors do their homework before identifying a mutual fund they want to invest in. Data states that three out of every five respondents supposedly do their own research to when picking a mutual fund. Only one in five investors engages a financial advisor’s help to build a fund portfolio.

  • Most investors seek the expert help

    When we researched target audience most of them said that though they do their own research, their investments are guided by the experts in the field and they go strongly ahead with their suggestions. They also suggested that personalised advices are what they seek for from financial advisors to ensure wealth creation.

Behavioural Characteristics of Target Audience

We have mapped the retail investors into four distinct persona categories based on their knowledge level about mutual funds:

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