Regulations will become tougher and tougher; fintechs should foresee this: Salesforce India chief Arundhati Bhattacharya

Former State Bank of India Chairperson Arundhati Bhattacharya’s role as the India chief of Salesforce, which provides customer relationship management services on the cloud, could not have come at a more opportune time. After over 40 years at India’s largest traditional lender, Bhattacharya transitioned into a world where tech and innovation are driving the new-age consumption of everything from groceries to financial services.

She took over the role in April 2020, right in the middle of the pandemic, when the world was going into lockdown. It also resulted in an unprecedented demand for technology services as enterprises globally were forced to shift to digital to keep business running. This meant that demand for services like those offered by Salesforce spiked, including in India.
Since Bhattacharya came in, Salesforce’s headcount in India has doubled from 2,500 to 5,000. By the end of the year, this is likely to increase to 6,500.

During her tenure as SBI chief, she spearheaded the bank through the aftermath of demonetisation and the bank’s merger with its six associate banks. Now, Bhattacharya has a front-row seat to view the rapidly changing fintech and banking landscape, triggered by the second biggest disruption after demonetisation.

In this interview with Moneycontrol, Bhattacharya talks about working amid the pandemic, how Salesforce is gearing up for the massive opportunity the pandemic provided, as well as the evolving banking, regulatory and fintech landscape.

Edited excerpts:

You took over as Salesforce India CEO in April 2020. It has been more than 1.5 years since remote work became a norm. How have things been so far and what has changed?
When I joined Salesforce, I joined virtually. I didn’t think it would be virtual for so long, we thought it would be 3 months maximum. The whole idea of doing everything virtually was entirely new to me.

However, it wasn’t as bad as it sounds today. We also found the requirement companies were experiencing was something that in earlier times would have taken 3 years or even 5-6 years, but had become urgent. The transformation, which we thought we needed to convince people about, was something customers actually began to think about on their own.

The feeling was that there were a couple of things that needed to happen – omnichannel access for all stakeholders, and the need to own their customers or know their customers much more, especially those selling from a physical space and on third-party platforms. Customers wanted their own platforms because that would help them cater to customers directly and keep in touch with them.

All of this needed digital transformation and tools we are capable of providing. Therefore, there was much larger demand. We had 2,500 people in India when I took over and during the pandemic we’ve actually doubled headcount. We really expect to end the year with about 6,500 employees.

An IDC survey said that the Salesforce economy would create 9.3 million jobs and $1.6 trillion in new business revenues globally. Given that digital adoption has accelerated in India, even among small and medium companies, how is Salesforce gearing up to tap this opportunity in the country, especially given the huge talent crunch we are witnessing?
If you translate those figures for India. It would amount to around 1.3 million jobs, of which 500,000 would be direct and 700,000 would be indirect. The biggest challenge that we face right now is the skill gap, which is huge. Another report has said that it is not only in the area of Salesforce, the gap is in overall digital skills, and IT skills. If India doesn’t close the skill gap, then of all the countries India is the one that will suffer in GDP the most. It will have an impact of 2.3 percent of our GDP if we don’t complete skilling and upskilling.  Because it’s not only a question of skilling; it’s a question of upskilling since there are a lot of people in IT in need of upskilling.

(In terms of how we are dealing with the talent crunch) One of course is we have a gamified platform, Trailhead, which is free up to a particular level. We are also collaborating with several bodies, including NASSCOM, the National Skill development commission, and a few NGOs in order to popularise it. We have got some of our courses, which colleges under AICTE can actually give as electives with credits. Till now we had colleges and universities  providing these courses as electives, but without credits. Today, we have been able to get that authorisation done, whereby they can actually become credit courses, and therefore obviously can be made much more popular with  universities. We are also trying to enter into MoUs with large universities, to drive not only the graduate and undergraduate people into taking up these courses, but also people who are already working.

We are also currently doing a pilot in this regard for people who have been out of work for a period, and who want to come back to work. We call it Returnforce. The only criteria is that this person should have been out of work for six months and wishes to get back. But it could be six months, or six years, and we are willing to skill and certify them in Salesforce requirements.

We still feel that not only for Salesforce, but for the entire IT world, India has a huge talent that needs to be upskilled merely for it to become available to everybody. India is the only country I think in the world today where as many as a million engineers are graduating every year. But the problem with these people is most of them are not industry ready. That is where our emphasis will be: how to get them to become industry ready, and give them the right skills, so that they can be immediately employed in organisations that badly need certified people.

Can you tell us more about the scale of the Returnforce pilot and if this is India only, or is it a global initiative?
This is India only at this point of time. I think we were just planning on one cohort of around 30 to 50 people, and it will go beyond that once we understand how the whole thing works.

What does Returnforce hope to accomplish and which demographic are you targeting? Is there a specific metric that you are looking at to measure your success?
The initiative is actually targeted more towards women, because we know that a lot of women have fallen off the workforce during this period. It is mainly because childcare was not available at home since it got disrupted during the lockdowns, and as a result a lot of women had to give up their work in order to take care of their children. Secondly, what happened was schooling became homeschooling. You know how difficult it is at your age to sit in front of a screen. A child having to do that is very difficult and in need of parental help in the digital classroom. Sometimes it is the woman who gives up on her work in order to take care of these issues. As a result, what has happened is we have seen a steep fall-off of women from the workforce and therefore we want to make sure that these people can be properly skilled in order to return to work today.

While earlier there were questions about monitoring productivity, the pandemic has proved that notion wrong. We have continued to work from home, monitor productivity and deliver targets working remotely.

So, the fact of the matter is, now that we know that remote working is possible. There are many who are not able to leave home, either because they have very small children or elders to take care of. Now, these are the people who have discontinued their careers, and many of them are very well educated, they had bright careers. I see no reason why they should not resume. So with Returnforce, we will be specially targeting people such as this. Having said that, it will definitely be expanded far beyond that. And we can take in not only those whose jobs have been interrupted because of these reasons, but also people whose job sets have seen the sunset. There are skill sets that are no longer required. But these people still have the grounding of how things work in IT companies. They just need to be reskilled, not upskilled. So, there is a lot of opportunity in this Returnforce piece, I think. But as I said, let’s start that off and then see how we can broaden it and where we will find success.

What kind of role will India play for Salesforce and how important is the India market for the company?
India is important to Salesforce, not only because of this market but because of the depth of its talent pool. I don’t think you measure India in the same way that you can measure many other countries. Because there are very few countries that have the same number of global innovation centres (GICs) or agencies that have back offices in any other country other than India. If you look at the top 1,500 companies in the Fortune list, you will find a large number of them have their global innovation centres here. We call them centres of excellence in Salesforce and we have a very large one in Hyderabad. So, you know India is important to the organisation for its vast talent pool and ability to deliver implementation across the world. This is true not only for us but also for many  global companies such as Accenture, Deloitte, KPMG and PwC.

To that extent it is very difficult to put an exact value to it. Because how do you put an exact value to part of the research that is getting done here? With certain things getting done here and certain things getting done somewhere else, it’s not as though these are ringfenced projects happening only in India. People collaborate across the globe nowadays.

After investment in fintech firm Razorpay, which are the areas that Salesforce Ventures will look at investing in the startup space? Is there any particular amount that the company has decided on to invest in Indian startups?
No, we do not have a committed amount. There is a global pool, and it all depends upon the opportunities that come up. We try to make strategic investments in those companies that have adjacencies to what we are doing. Also we are not very early-stage investors. We are middle- or late-stage investors. And the reason for that is the risk appetite has been enunciated accordingly.

We will definitely try and look at companies that have extremely innovative entrepreneurs, companies that have a business model and not merely an idea. The company should typically have some kind of relationship with what we are doing. So, it’s not something that is just an investment for investment’s sake, but an investment where we ourselves can bring in strategy, bring in our understanding and ensure that it’s a win-win situation we can create with the company we are investing in.

Before Salesforce, you headed India’s largest bank, which is a traditional PSU lender. Both lending and banking have seen drastic changes with digital adoption rising rapidly. How do you see this landscape evolving for banks and fintech players?

One must accept that technology will evolve. And as technology evolves, what is going to happen is that consumers will be spoilt for choice. So, unless and until you have an outside-in view of how to handle your business, you are likely to get disintermediated and become irrelevant. And what I mean by an outside-in view is that you have to understand what it is that the customer is looking for, and then go ahead and deliver.

There was a time when banks would come with products that they felt addressed the needs of the customer. They felt this, mind you, not the customers. Now, this feeling that we know best has got to go. Because you really now need to be very much in touch with customers in order to understand how they want their stuff delivered. Earlier, it was far more difficult to understand customers because you were entirely dependent on the data they provided you. Today, lenders are no longer dependent only on the customer. There are several sources of information that allow you to analyse what the customer profile actually would be like.

Now, the fintechs are taking advantage of this, they have no baggage. They start with a clean slate and they start from the pain points of the customer. If they start resolving those pain points and make financial transactions simple, then they are definitely going to disintermediate bigger players with older processes that require a lot of to and fro before decisions can be made.

The fact remains that if you don’t want to be disintermediated you have to be with the customer and the market — you have to be in the market. Of course, there will be a time for migration. It is not as though it is going to happen tomorrow, especially in a country like India, which has a demography that ranges from the very young to the old.

But you have to remember that unless you have young customers, you will not be able to sustain as you go along. The older generation will fade out in a period of time, and by that time if you haven’t gotten the younger generation in, then you’ll be in for a shock because your business is just going to fall. Needs and likes are changing and if financial institutions don’t keep pace with them, it is at their own peril.

Demand for digital loans, especially 0 percent EMIs and Buy Now Pay Later (BNPL) models, has seen a spike. With so many new fintechs offering credit do you think customers might be over-leveraged?
See, if anything goes overboard, there will be pain in the system. It doesn’t matter what it is. However, the fact remains that our retail loans-to-GDP, and household debt-to-GDP ratios are still among the lowest (vis-a-vis other counties). So, there is no doubt that there is space to grow.

But if it doesn’t grow in the right manner, i.e. if you haven’t done your due diligence and you have gone ahead and given loans to a person who already has five loans, then you are running a risk. That risk cannot be denied either. So, whether it is a bank or an NBFC, they need to do proper due diligence and make sure that the cash flows are available.

And in the current scenario, data is almost easily available. And yet, if you’re not doing the due diligence then you’re in for a rude awakening. But hopefully that will not be the case. Especially once the account aggregator system gets really functional and more banks attach themselves to it — the system will be far better protected than it was, merely because far more data is available.

The regulatory environment, too, is changing. We already saw the new norms by the RBI on recurring payments causing widespread disruption. Next will be the guidelines for payment aggregators and payment gateways, which will come into effect on January 1, 2022. What is your view on how these changing norms will impact fintechs and banks?
The regulator’s job is to try and protect consumers who are unaware. So, you cannot expect regulations to not become tougher and tougher. It is going to happen. Especially in respect of the retail industry, mainly because the bigger players are normally aware of the risks they run. Smaller players, on the other hand, often don’t bother because they don’t really understand.

So, fintechs should be able to foresee some of the regulations that will happen because they are in the interest of the consumer. And they should be able to work all those into the processes that they are going to follow. Because, at the end of the day you want a sustainable business. You don’t want a business that implodes because you have not taken care of the risks, or the regulators are going to clamp down on you. You have to take these into account instead of trying and taking advantage of any small regulatory gaps. It is better to ensure that the consumer is fully protected before you start doing such businesses. Because that is what will ensure that even if the regulators come with whatever regulations, you are still more or less in compliance.

But in terms of recurring payment norms, enough extensions had been given by the RBI. And yet we saw a lot of disruption and failure in compliance by banks, except a few…

It will take time. You can’t press a button and suddenly change systems. That doesn’t happen. There are a lot of ramifications every time you make a change in the system. It’s not easy to do. And it’s not only a question of changing the system, it’s also a question of changing the mindset of customers. It’s a question of retraining them. As time goes, we’ll have to forget many more things so that we can make room in our minds for many new things to come. So, regulators, too, will have to be a little patient.

And somehow, I don’t think regulators are always ahead of the curve. Many times, you will find regulators sort of catching up, rather than being ahead of the curve. If they are ahead of it, then they can proactively prescribe how things could be done so that this kind of a catch-up game is not something that one has to do regularly.

But no doubt, given the speed of innovations today, that is very difficult. Every day somebody is innovating something or the other and to keep track of what everybody is doing is no mean job. So, you can’t blame people if they’re catching up.

After payments, what financial services will be the next growth drivers for fintechs?
There is more and more awareness happening regarding the financial sector. Unfortunately, in schools, there is no curriculum on finance, and I personally believe very strongly that they should have it. We are now beginning to see far more awareness about the stock market as well. Banks have stopped being the de facto pensioner support, because interest rates are coming down so much. There is also awareness that health costs have gone up, and therefore you need insurance to protect against it. Earlier what happened was that we had joint families, and therefore if there was a mishap with one part of the family, the others would step in and you didn’t need insurance. Your family was your insurance. Today, we are not only nuclear families, we have become sub-nuclear families, so we are now beginning to feel the need for insurance.

All of these pies are growing, and you are not battling for the same share of the pie. As the pie increases in size you will see these fintechs come, because somebody has to fill the demand gap, whether it is the capital market, mutual funds, insurance or banking. As long as demand is there, you will see innovation. Interest rates going up or coming down has got nothing to do with this, because demand is being led by the way the demography is.