Deloitte foresees more banks expanding wealth management services to mid- and high-income groups

The DBM report highlights a 16-percentage-point rise in India’s score since 2022. Can you deconstruct this in terms of policy and infrastructure, such as UPI and DPI?

The 16-point increase stems from three key factors. First, Indian customers have significantly matured in their digital banking habits, with a shifting demography raising expectations. Second, banks have stepped up, enhancing their digital offerings to meet these demands. Third, infrastructure like UPI, video KYC (know your customer), and regulatory frameworks has acted as a catalyst. This triple impact with mature customers, responsive banks and robust infrastructure has driven the score upward.

Nine Indian banks have achieved 'digital champion' status. What sets them apart?

Digital champions rank in the top 10 percentile of the 349 banks assessed. They excel in three areas: embedding themselves in ecosystems beyond their platforms, leveraging customer data for tailored offerings and prioritising user experience. For example, champions integrate seamlessly into e-commerce checkouts for financing options or cater to niche segments, like colourblind customers, with customised website designs.

Beyond UPI, what innovations contributed to the 2.4-percentage-point rise in transfers and payments?

Beyond UPI, low-cost internet and 5G have bridged the gap between metro and tier-2/rural customers, aligning their aspirations. Behavioural shifts, like widespread WhatsApp adoption, have also spurred innovations such as WhatsApp banking, benefiting both B2B and B2C segments.

Account aggregation in India improved by only 0.5 percentage point compared to a global 3-point rise. What challenges are banks facing?

Account aggregation is still nascent in India. Challenges include limited ease of integration across banks and varying customer willingness to aggregate accounts. It’s a two-way street requiring both bank and consumer maturity, but it’s a step toward reducing inefficiencies. Over time, as seen with credit bureaus, collective benefits will drive adoption.

Given India’s crowded fintech space, what are banks planning to retain app engagement through value-added services without becoming bloated?

Fintechs aren’t bloated. The right ones, with strong business and governance models, will thrive alongside banks. India’s diversity demands more fintechs, and banks are already expanding offerings, with bundling of services like insurance and tax solutions just a matter of time.

Are there signs of such bundling of services like banking, insurance and tax services onto one super app?

Super apps succeed by weaving relevant ecosystem services into a customer-centric platform, not just digitising existing products. For instance, a home loan super app could integrate home-buying or renting services. Innovating bite-sized products, like 15-day home insurance for travellers, enhances appeal. Success hinges on end-to-end propositions and ecosystem relevance, not just app creation.

India lags global digital champions by 6 percentage points in expanding customer relationships. Are structural gaps in cross-selling or investment journeys to blame?

Expanding relationships involves engaging customers across their lifetime and household needs. Indian banks excel in collecting customer data and generating insights but struggle with last-mile execution. Unlike digitally savvy markets, India’s complex fulfilment modes hinder seamless, branch-level campaigns for cross-selling or retention. India’s scale and diversity demand mass customisation, which requires rich data and advanced analytics. While banks are progressing, the maturity gap persists due to the country’s size and complexity. As data richness improves, customised offerings will close this gap.

The DBM report notes that India’s public financial management (PFM) scores improved by 1.9 percentage points, compared to just 0.1 point globally. What drove this progress?

Four main drivers underpin India’s PFM improvement. First, rising consumer awareness, amplified by financial journalists, has boosted understanding of personal finance goals, especially among Gen Z and Millennials entering the workforce. Second, the ease of accessing diverse financial options beyond banking, like market investments, has empowered consumers. Third, abundant avenues for self-education on financial products, though sometimes debated for accuracy, enhance participation. These factors, combined with India’s less mature but rapidly evolving market, have outpaced more stable, mature global markets. While the 1.9-point rise is notable, India’s PFM growth comes off a low base compared to the last DBM study. There’s still significant room for improvement in awareness of financial instruments, structured financial planning and banks’ ability to offer mass-scale financial advice. The progress is encouraging but the need for better PFM remains critical.

Are banks and financial institutions increasingly venturing into wealth management, targeting not just HNIs but also the middle and upper-middle classes?

Absolutely. In India, where retail banking has dominated, banks will extend their wealth management offerings for not only HNIs and ultra-HNIs but also the mass affluent. Customers now expect differentiated services, akin to premium seating in movie theatres. The affluent seek comprehensive financial advice and wealth protection under one umbrella, making this a key growth area. Banks need to build robust wealth management propositions, especially for the mass affluent, while multi-jurisdictional solutions cater to ultra-HNIs. This is a booming area in India. The focus on mass affluence reflects evolving customer expectations for tailored financial solutions.

Why do HNIs show low interest in the debt market, particularly government securities (G-Secs)? Is complexity a factor?

HNIs’ limited interest in debt instruments like G-Secs likely ties to their life stage and asset allocation. With sufficient wealth, their portfolios already cover standard money market investments, prompting them to explore other asset classes for wealth management. It’s less about G-Secs specifically and more about the broader money market and liability-side priorities.

Do you foresee public-private collaborations, like those involving ONDC or the Aadhaar Stack, accelerating value-added services within Indian bank apps?

Absolutely. India’s digital ecosystem thrives on strong government involvement, and maximising banks’ digital footprint requires leveraging both public and private facilitation. More such collaborations are essential to ensure the digital customer benefits, creating a virtuous cycle that boosts the economy. A prime example is the RBI's Reserve Bank Innovation Hub, which advances digital lending, particularly in semi-urban and rural areas. Take micro-loans against property—these small-ticket loans rely on government-provided data, like property ownership records, to streamline processes. Such public-private partnerships make customer journeys seamless and are poised to expand, enhancing access to innovative financial products.