The digital payment ecosystem in India has been made smarter. Having changed the face of money transfer by people, the Unified Payments Interface (UPI) is currently poised to reform the system in how investors utilize their mutual fund holdings.
The latest innovation-Pay with Mutual Fund-enables users to pay with a mutual fund specifically out of the liquid funds. It is an innovative product introduced by ICICI Prudential Mutual Fund and Bajaj Finserv AMC with the cooperation of Curie Money that combines the mobility of the UPI with the potential returns of mutual funds.
What Is Pay with Mutual Fund?
Pay with Mutual Fund The Pay with Mutual Fund allows investors to spend the money saved in their liquid mutual fund schemes to do an instant transaction with UPI. Rather than leaving your idle cash in your savings account as dead money, you can invest it in a liquid fund, which yields returns that will be related to the market, and yet you can pay with it for your daily transactions.
Here’s how it works
- You connect your mutual fund account to a UPI-enabled app that supports this feature.
- You only need to pay through UPI, and the amount of payment is automatically redeemed out of your liquid fund.
- The redemption is automatically undertaken by the background, and the transfer is sent to the receiver in real time—as with a regular UPI.
In essence, your mutual fund is your new payment account, which will provide you with liquidity and returns.
The main advantage of paying with a mutual fund by UPI.
1. Instant Liquidity
Conventional mutual fund redemptions may take a day or two before they are processed. With this feature, the amount is redeemed and paid instantly courtesy of UPI integration.
2. Improved Investment of Unutilized Funds.
The interest on money in a savings account is about 3.4 percent, and the returns on the liquid mutual funds are about 6.7 percent per annum. No longer will you have to face fewer returns and remain inaccessible to liquidity.
3. Seamless Digital Payment
You do not need to send money to your bank and spend it. Using UPI, you can pay merchants, bills, or people directly out of your balance in mutual funds.
4. Secure and Regulated
The service is in full compliance with SEBI and NPCI requirements, making it safe and transparent. The whole process of redemption, payment, and transfer of money occurs within the regulatory framework of the mutual fund.
Who Has Launched It So Far
At this point, the first movers in India with such a feature are ICICI Prudential Mutual Fund and Bajaj Finserv Asset Management Company (AMC). Both AMCs have partnered with Curie Money, which is a fintech platform through which solutions based on mutual funds are provided.
According to ICICI Prudential Mutual Fund, this will enhance the power of mutual fund investing for basic transactions, and more investors will be encouraged to invest actively using liquid funds. Bajaj Finserv AMC also has the feeling that it will open the doors of mutual funds to make them more accessible and convenient and bring them closer to the everyday use of finances.
How Does It Work Technically
1. You are bound to hold a participating AMC liquid mutual fund.
2. Sign up to pay with a mutual fund using the partner platform of your AMC (e.g., Curie Money).
3. You make a UPI payment when:
- The trade provision will initiate an immediate redemption of the necessary shares.
- The redemption is done at the backend in the AMC.
- UPI system makes payment immediately to the recipient or merchant.
This is The UPIUPI, a few seconds and it is as easy as paying out of your bank account but with a higher rate of earning on idle money
Why It’s a Game-Changer-and
- Bridges investing and payday-to-day—and ready to spend.
- Promotes monetary inclusion and intelligent liquidity.
- Helps investors to have the maximum returns without sacrificing convenience.
- Enables integrations of UPI investment in the future, in which retail payments can be directly powered by financial instruments.
Experts are confident that this may be the second breakthrough of the fintech revolution in India and that it would involve a combination of UPI and the power of mutual funds to invest in a real-time network.
Things to Keep in Mind
- This is only possible with liquid mutual funds and certain AMCs.
- Certain transaction limits (such as daily limits) can be specified as per NPCI standards.
- Mutual fund redemption could still be taxed; hence, the investor should consider how often these redemptions could impact the capital gains.
The Future of Smart Payments in India.
There is something beyond a payment tool in the Pay with Mutual Fund feature by UPI; it is a preview of what personal finance might be in the future. With additional AMCs and fintechs integrating this innovation, it is possible in the near future to make everyday payments directly out of investment accounts as opposed to savings.
This combination of returns, liquidity, and convenience is a new age in the digital economy in India, where your money has a reason not to lie idle but to continue to grow even as you spend.
