Small wonder: Startup cracks MF code with help from small banks

Fisdom among few fintechs to generate revenue through MF distribution

The online mutual fund (MF) distribution space is a tricky business. While the potential is huge and the entry barrier is low, generating revenues is a tough task, with dominant players like Groww, Zerodha and Paytm Money offering commission-free plans. However, there is one platform that has managed to successfully crack the revenue-generation model.

Fisdom, which claims to have over 4,70,000 MF investors with the value of their investments exceeding Rs 5,000 crore, sells the regular MF plans as opposed to direct plans, which is offered by most of the platforms. Regular plan distributors get a commission while direct plan sellers do not.

The platform owes its success to the reach provided by its bank partners. The company has tied up with 13 small-sized and mid-sized banks, mostly in the public-sector space, to provide investment products to their customers. The money earned through commissions and fees is shared between Fisdom and the banks.

According to the company, over 70 per cent of its business comes through the banking channel. The investments that have come in through these partnerships is over Rs 40,000 crore.

In FY22, the startup earned gross commission of Rs 15.5 crore with the average value of MF investments being Rs 1,765 crore (under MF distribution licence), shows industry data. The startup has MF assets under registered investment advisor and stock broking licences as well.

The brokerage also offers other investment products like stock broking, alternate investment funds (AIF), portfolio management services (PMS) and tax solutions.

Anand Dalmia, co-founder and chief business officer, Fisdom, says that the company observed that most of the smaller banks have the capability to sell investment products, given their reach and the investor trust that they enjoyed, but lacked the technology and expertise. The startup decided to harness this opportunity.

"Unlike larger banks such as SBI, ICICI and HDFC, most PSU banks and smaller private banks do not have their own manufacturing outfits (asset management companies) and don’t have the expertise to distribute third-party wealth products," he said.

Over the last six years, Fisdom has tied up with banks like Indian Bank, UCO Bank, Punjab National Bank, Union Bank of India, Karnataka Bank, Bank of Maharashtra, Tamilnad Mercantile Bank, City Union Bank, Suryoday Bank, and India Post Payments Bank.

With tie-ups with Fisdom, banks have been able to offer online investment services to their customers without having to develop their own technology. The service is made possible through the integration of Fisdom's application with that of the banks.

Soma Sankara Prasad, managing director and CEO, UCO Bank, says that the partnership has proved to be a win-win situation for both the companies.

"While the partnership has allowed us to offer wealth management services to our clients, Fisdom has gained access to our customer base. As the revenue is shared, the tie-up has proved beneficial for both of us," he said.