From gifting gold to gifting growth: how mutual fund gift cards are changing Indian finance

For decades, Indians have been gifting gold at weddings, fixed deposits at birthdays, and LIC policies at graduations. These have been considered 'sensible' gifting options because they are 'tangible,' 'trustworthy,' and 'traditional.' But something is brewing in the gifting section, something disruptive, something subtle. That something is the 'mutual fund gift cards.'

The idea is simple. Instead of gifting flowers or sweets, gift cards can be given, which contain money value that can be invested in mutual funds. No demat account hassles. No KYC problems at the time of gifting. Just gift cards, QR codes, and the start of a compounding cycle. That's simple. And simple is what the entire idea is about.

Financialisation of everyday life

The term ‘financialisation’ is used by economists to describe the increased involvement of financial instruments in daily life. For the US and the UK, financialisation has been a gradual process. ‘Savings accounts gave way to money market funds, which gave way to index ETFs, which gave way to apps, payroll systems, and yes, gift cards.’

Similarly, India has been going through its version of financialisation, albeit on a much more compressed time scale. ‘The number of mutual fund folios has crossed 22 crore in 2024. Systematic investment plans have become a monthly ritual for millions of middle-class households.’

The MF gift card is more than just a new product. ‘It’s a symbol of the fact that investing has become as normal and as 'giftable' as a meal voucher.’

Why this matters for financial inclusion

But the beauty of a gift card is that it eliminates the activation cost. For the vast majority of people who have not invested before, their primary reason is friction. They don’t know where to begin, which fund to invest in, or how to do the KYC. A gift card avoids the first hurdle altogether. There is no decision to be made to receive the gift. All the recipient has to do is take an action to get the gift. By then, they are already one step inside the system. This is a behavioural design meeting the goal of increasing access to finance. Asset management companies and fintech players offering these cards are, in effect, building a pipeline of first-time investors, prompted by a friend or family member, not an advertisement.

The risks worth watching

Not all that glitters is gold. Critics would be right in pointing out the possibility of gift cards masking critical decisions, like which fund category? What sort of risk profile? The risk profile of equity for a 60-year-old retiree and a 25-year-old professional would be vastly different.

Regulations would need to be in sync. SEBI has traditionally been very considerate of the retail investor. Any expansion in this product would call for clear guidelines on the way the product would be disclosed and redeemed. There would be the issue of the gift cards not being redeemed at all.

Conclusion

When a society begins giving investments instead of commodities, it says something profound about its outlook. It says something about its growing faith in the idea that the future is worth betting on.

The Indian gift card for mutual funds is currently a small phenomenon, but it’s at the crossroads of increasing financial literacy, technology, and a changing perception of wealth. The best gift, it appears, might just be a head start.