The Impact of Digitization on Money Market Funds

There is no question that technology has disrupted pretty much every industry, but arguably, none more than the financial services sector and particularly, Money Market Funds.

As we move from the traditional brick and mortar standard to digitized models, the financial service landscape is almost unrecognizable.

Today, we focus on the impact digitization has had specifically on money market funds (MMFs) in Kenya.

1. Ease of onboarding

For many years, anyone investing in an MMF or any other unit trust product had to fill a physical form and send it to a fund manager to process.

Then, one would probably have to go to the bank to transfer funds into your new MMF account.  This process would most likely take a few days before your account was up and operational.

In the current environment, most MMF managers have established quick and convenient ways to sign up.  These include online forms on their websites, via USSD or on their mobile apps.

These channels have shortened the process of signing up considerably, which means your investment account becomes operational almost immediately.

2. Increased convenience

Technology has made investing in an MMF so much easier.

The process of investing has become automated.  Take, for example, the Cytonn Money Market Fund, you can invest funds, monitor the performance of your portfolio, and even give instructions to liquidate your investments in real-time using your smartphone or personal computer.

3. Automation of advisory services

The lack of public awareness of investment products available in the country remains a challenge.  Many individuals with surplus funds lack the knowhow on where and how to invest.

Historically, the only way to educate the masses was through on-the-ground financial advisors, which is expensive and ineffective. That said, through technology, fund managers have access to a wider reach through various social media platforms, which enables them to provide advisory services to a larger audience.

Notably, developed markets are already using Robo-advisors, computer-automated investment platforms that offer customized investments advice for individuals.

4. Increased operational efficiency and service delivery

According to a report by Cytonn Investments, Kenyan fund managers are increasingly using technology to achieve operational efficiency.

The use of digital channels has served to reduce costs from streamlined operational processes thus improving the quality of services provided to customers through real-time customer support via channels such as chatbots and social media.

5. Higher financial inclusion and access

Perhaps the biggest impact of digitization on Money Market Funds and other unit trusts is that it has made investing more accessible to millions of Kenyans.

Since Money Market Funds already have a low minimum initial capital and top-ups, automation of the process increases the chances that previously untapped population can set up investment accounts and enjoy the benefits of investing in an MMF.

In closing, digitization appears to be a panacea for some of the challenges previously faced unit trust schemes.  Not only does it improve financial inclusion in the country, but it also increases the investor’s ability to engage with his/her fund manager, has control of his/her own investments and in turn, demand a better quality of service delivery from his/her fund managers.

By Cytonn Investments

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