Visa Debit Cards Now Accepted for Mutual Fund Investments

Ramakrishnan Gopalan, Vice President and Head of Products & Solutions for India and South Asia at Visa, expressed that this feature aims to improve customer satisfaction, broaden the base of retail investors, and contribute to the growth of digital payments.

He said, "Starting with Federal Bank and ICICI Bank debit cards, this service will soon be available to more Visa cardholders in India. We believe debit card payments with their inherent benefits offer a strong alternative to current payment methods, helping build investor trust and ensuring they can invest with ease and confidence."

Given the substantial growth in the Indian mutual fund industry, which saw its average assets under management reach Rs 46.94 lakh crore in August 2023-a six-fold increase over the past decade-this development will provide retail investors with a secure option to use their debit cards for mutual fund investments.

How to Invest in Mutual Funds Through a Debit Card?

On the fund house's website or app, customers have the option to pick a mutual fund and then select debit cards as their preferred payment method before proceeding through the customer journey to checkout. The process for making mutual fund payments using a debit card remains the same but now includes extra verification steps to ensure security.

This functionality is currently operational and accessible through fund houses and their distribution channels. Customers have the flexibility to invest a lump sum or initiate Systematic Investment Plans (SIPs) using their Visa debit cards.

For recurring payments like SIPs, customers only need to activate the recurring payment feature. To comply with regulatory guidelines, the card details are subjected to validation by both the aggregator and the issuer to confirm that they match the account used to fund the investment and indeed belong to the investor. Cardholders will also receive a pre-debit notification before the next payment is automatically deducted from their accounts.

How Will It Benefit the Investors?

Here are the key benefits of the initiative to the investors:

1. Convenience: Visa debit cards are a widely accepted and commonly used payment method. Allowing investors to use their debit cards to invest in mutual funds makes the investment process more convenient and accessible.

2. Simplicity: The process of investing with a debit card is quite easy. It doesn't require setting up new accounts or dealing with complex payment methods.

3. Instant Transactions: Debit card transactions are typically processed quickly, allowing investors to enter the market promptly when they spot investment opportunities or want to automate regular investments through SIPs.

4. Enhanced Security: Visa, in partnership with fund houses and issuers, adds extra security checks to verify the cardholder's identity, reducing the risk of fraudulent transactions and enhancing investor confidence.

5. Flexibility: Investors can choose between lump sum investments or setting up SIPs, providing flexibility to suit their investment goals and preferences.

What are the things to take care of when investing in mutual funds through a debit card?

Depending on the mutual fund house and the specific debit card used, there may be fees associated with debit card transactions, which can eat into the investor's returns over time.

Investing through debit cards can provide quick access to the market, which might lead to impulsive investment decisions driven by market volatility rather than a well-thought-out investment strategy. Furthermore, if the investors don't manage their investments prudently, it may potentially lead to financial strain.

To conclude:

The introduction of debit card-based investments can contribute to the growth and development of the mutual fund industry by expanding its investor base, streamlining the investment process, and adapting to changing consumer preferences in the financial services landscape.

Investing in mutual funds through debit cards offers ease of use and accessibility, but investors should also be aware of potential fees, the temptation to overspend, and the need to ensure that their debit card is compatible with this service. Careful consideration and robust financial planning are essential to make the most of this investment option.

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KETKI JADHAV is a Content Writer at PersonalFN since August 2021. She is an MBA (Finance) and has over seven years of experience in Retail Banking. Ketki specialises in covering articles around banking, insurance, personal finance, and mutual funds and has been doing it for over three years now.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.