Fintechs Raise Concerns Over New Mutual Fund Consent Rules, Cite Higher Costs and Customer Friction

Fintechs Raise Alarm Over New Mutual Fund Consent Process: Higher Costs, Customer Friction Feared

As India’s mutual fund industry gears up for the rollout of a new customer consent flow under MF Central by January 2026, fintech companies are voicing serious concerns over the upcoming changes. The new system, which replaces the earlier one-time OTP-based consent with a more complex process involving QR code downloads and uploads, is expected to increase operational costs, user friction, and potential customer drop-offs.

New Mutual Fund Consent Flow to Redefine Customer Access

The new process, introduced by the Association of Mutual Funds in India (AMFI) in collaboration with SEBI, aims to strengthen customer data privacy and transparency in the mutual fund ecosystem. However, fintech players argue that this comes at the cost of convenience and accessibility.

Under the revised framework, customers will now receive a One-Time Password (OTP), choose what data to share, download a QR code containing their mutual fund data in a PDF format, and then upload the same QR code on fintech apps or platforms. This contrasts sharply with the earlier single-OTP-based consent, which allowed seamless and instant portfolio linking across investment platforms.

An industry expert explained, “The earlier consent journey was simple and digital-first — a key reason why the mutual fund industry grew fivefold in the last six years. The new framework complicates this journey and could reverse the industry’s digital progress.”

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Fintechs Warn of Higher Costs and Customer Drop-Offs

The new process will substantially increase customer acquisition costs. The time-consuming and multi-step flow may discourage customers from linking their portfolios, resulting in higher drop-off rates.

“We tested the new process with a limited group of users. Barely 5% completed it successfully, compared to 50% completion under the old system,” said the founder of a leading wealth-tech platform. “Such friction can cause customer attrition and impact fintech business models that depend on real-time investment tracking.”

Additionally, fintechs fear that the added complexity could create disparities between digitally savvy investors and those less familiar with financial technology. “Only the most tech-literate customers will make it through the journey,” another product head noted. source: Moneycontrol

AMFI Introduces Stricter Controls After Customer Complaints

The revised process stems from customer complaints received by AMFI about fintech platforms allegedly accessing data beyond permitted boundaries. The earlier one-time OTP permission allowed platforms to fetch all customer data with little oversight, creating compliance concerns.

By introducing QR-based uploads, AMFI seeks to ensure explicit, voluntary data sharing by customers. However, critics argue that the new method merely shifts the burden onto users without necessarily preventing misuse.

“The QR process could be as vulnerable to fraud as before,” said a fintech executive. “The only difference is that platforms can now deflect responsibility by saying customers shared data voluntarily.”

Disrupting Business Models of Digital Investment Platforms

Wealth-tech platforms like Groww, INDmoney, Dezerv, and Dhan have built their value propositions on offering unified dashboards for tracking investments across mutual funds, stocks, and other assets. With limited or fragmented data access, these platforms risk losing a crucial part of their offering.

For fintechs that provide portfolio analytics or product recommendations based on mutual fund data, restricted access could severely impact business viability. “Without full visibility into a customer’s investments, offering intelligent insights or comparative returns becomes meaningless,” said a senior executive at a fintech firm.

Customer Experience at Risk Amid New Compliance Rules

The change also raises questions about customer service and transparency. Previously, if one platform displayed incorrect data due to technical glitches, investors could cross-check their portfolios on another app. The new system, which restricts real-time data sharing, may limit this flexibility.

“The old model was beautifully interoperable,” said another industry player. “If one app malfunctioned, customers could verify data on another instantly, since all fetched information from MF Central’s APIs.”

Digital Friction Could Reinforce Legacy Players

Another emerging concern is that the new process may favor older or less user-friendly platforms. The cumbersome QR-based consent could discourage users from switching to newer fintech apps offering better experiences.

“The app with a superior user interface won’t easily attract customers because transferring portfolio data becomes difficult,” explained one product head. “This incentivizes legacy systems over innovation-driven fintechs.”

Experts warn that such friction could lead to consolidation, with customers gravitating back to banks or traditional AMCs. Moreover, it might prompt more investors to rely on intermediaries like wealth managers — potentially exposing them to risks of mis-selling or data misuse.

Industry Calls for Balance Between Security and Simplicity

While fintechs acknowledge the need for tighter data governance, they argue that security shouldn’t come at the cost of user experience. They recommend exploring alternative consent mechanisms under India’s Account Aggregator framework, which still uses a single-OTP-based flow while ensuring granular data control.

“Regulation must evolve without undermining accessibility,” said a senior fintech executive. “India’s success in digital finance was built on simplicity. We need a consent framework that protects users but keeps the journey seamless.”

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