India started integrating with the global economy in 1991 and got rid of the ‘regulatory Raj’ as well as the controls we all had experienced while doing business. India then, was suffering from lack of resources and Balance Of Payments crisis was threatening to drive the nation to economic starvation. This was not only an economic issue but an emotional concern too, to pledge gold for getting the IMF bailout.
Timely and well thought decisions to open up the economy by the then govt. led by P V Narasimha Rao successfully helped the nation to mitigate not only the economic challenges around the BoP crisis, current account and trade deficits, but also brought back the much needed investor confidence of doing business in India. Let’s recall the key changes we experienced with the opening up of the economy which directly impacted millions and thereby helped corporate India to ride back to its glory.
-- Mobile phone changed the eco system
-- Entry of private players in banking helped widen the market with newer products and services
-- Emergence of Private sector was a key contributor to exchequer and created millions of jobs
-- Allowing foreign direct investments and portfolio investments in select sectors of economy created size, capabilities and thereby employment opportunities
-- Emergence of knowledge services through Information Technology Enabled Services to the global economy brought home billions of export incomes which helped stabilizing the Rupee against international currencies
India has truly transformed from its days in 1991. After 25 odd years however, there are systemic issues which require attention to move India further upwards on the economic development index. Some of the critical issues which need attention and are being discussed widely are:
-- Foreign Direct Investments to promote job growth in key economic sectors
-- Adoption of online benefit transfer to the end recipient to cut slippage and distribution loss
-- Labor market reforms to help the private sector focus on business growth through a dynamic labor supply eco system
-- Banking sector reforms to enable the masses to benefit from various schemes and including millions in the overall economic growth through benefit sharing plans
In the following section, we will focus on the last point of the banking sector reforms (not only regulatory process reforms but a wider exercise for an era of all-inclusive banking for the masses delivering economic benefits through banking channels).
Demystifying the key factors of change
We start with identifying the key parameters which will be critical for the success of the current phase of economic developments which are being planned
-- Ability to reach out to the masses and better understand customer needs
-- Addressing customer needs at the correct time, correct place and at correct prices
-- Simplified processes to create and manage one’s identity information
-- Providing easy access to conduct banking operations
If we demystify these 4 points, we will recognize the emerging trends around customers and market outreach. We will further study how these factors will impact the banking and financial services industry and work as catalyst to bring the much required economic change.
Ability to reach masses and better understand customer needs
To simplify this, we have created a profile of a banking customer whom the Govt. is keen to reach out to as part of the ongoing economic development programs.
Rekha, a household maid migrated from the interiors of North Karnataka to Bangalore. Her monthly income is from a few households and a typical day starts at 5.30 AM with cooking food for her husband, a daily wage laborer and preparing her kids for schools. Work starts from 8.00 AM and goes on till 6.00 PM with a break of an hour in between. Majority of her break is consumed by household shopping and managing her home. She managedthese efficiently till some major changes impacted her world.
As part of ‘Direct Benefit Transfer- DBT’ the Govt. decided to pass on benefits directly to the recipients through their bank accounts. The issue is- Rekha does not have a bank account and thus is unable to get her weekly ration and fuel from the PDS shops and get the benefits reimbursed. When she tried to open a bank account the challenges faced were:
1. She cannot go to a bank branch during their business hours of 9.00 AM to 5.00 PM as she is working missing which will result in loss of pay
2. She does not have the required identification proofs required for opening a bank account. She has a paper ration card as address proof and a Voter ID but she does not have a photograph which is mandatory
3. The banks are offering various kinds of accounts and most of them comes with terms and conditions which do not suit her e.g. a monthly minimum balance of Rs. 2000.
This is not a standalone problem and not something unheard of.
Let us now address how these problems can be resolved through emerging technologies.
India started the nationwide biometric driven identity management program called Aadhaar (UIAOI). This helps the Govt. keep the identity of citizens tagged at a biometric level which cannot be duplicated or tampered. While the main purpose of this program was for DBT, imagine the quantum of information the single code stores. The demographic parameters can easily be used for cross selling and up selling of products. This ID also provides the masses with the power of not only opening bank accounts easily but also to avoid multiple other identification proofs with embedded information.
Now think about a bank representative carrying a hand held device which allows him to onboard new customers, verify their identification through a mobile connection based data authentication, providing a randomly generated customer ID tagged to a specific branch, opening a savings bank account, depositing cash and finally providing a printed receipt to the customer. All this is being made possible through solutions like ‘Tab banking’ where a handheld device having a simple banking application can perform all these tasks. The bank representative can also carry an integrated bio-metric device to do further authentication for cash withdrawal by the customer using the same device. An analysis of the pattern and seasonality of the transactions provide the banks with better understanding of customer needs at specific times of the month and helps them offer customized products for the customer. A simple cash loan, a preloaded cash card or similar products can be offered using these transaction data.
Banks are now using handheld devices with banking applications and bio metric authentication processes to expand their database and the same solutions and services provide high end wealth management or investment advisory services for customers at their residences and offices.
Addressing customer needs at correct time, correct place and correct price
Understanding customer needs have always been a major challenge for the sellers.
However, increased competition has forced suppliers and sellers to make an extra effort to understand customer needs, the periodicity of these needs, the price points at which these needs can be satisfied and how best they can be fulfilled. Analyzing customer behavior & spending patterns linked to their demographic parameters has added a new science to selling.
Advanced analytics today uses statistical and predictive models to understand customer needs. While these analytics majorly support the buying behavior, they also provide inputs on post buying behavior which helps banks/sellers to take required actions. Using analytics for risk management purpose along with cross and up selling of products is being practiced extensively in all major banks. There are tools and systems available today to design statistical models based on observed data as well as predict on the buying needs of consumers. These techniques are helping banks to expand their customer and services base while addressing three key parameters, items, price and timing. Social media data also adds to the analysis where socially driven decisions and mindsets are used to create a profile for a prospect and approach with a tangible product to address the ‘emerging needs’. Analytics today, thus, supports sellers with both structured data sourced from their own customer connects and operations as well as unstructured data sourced from wider social media channels.
Simplified processes to create and manage one's identity
Managing identity efficiently is a critical task. From photo based identity management, the systems and procedures have moved much ahead and now incorporate all forms of biometric dimensions e.g. retina scans, finger prints, voice recognition etc.
Assume a situation where a centralized identity management facility is able to provide all forms of identity retrieval support for service providers – not only to confirm the recipient but also to ensure the desired outcome of reaching out to a specific person is successful. ‘Aadhar’ is key to such an identity management process which enables service providers to cross check validity and move ahead.
Expansion of banking services to the ‘un-banked’ population in semi urban and rural areas is a key focus. With additions of DBT and other Govt. processes, identity management has become extremely critical for completing the process. Technology companies are working extensively with service providers, both banking and non-banking services on how best the services can be delivered through the optimal usage of the ID management infrastructure. Systems are enabled to do an online real time ID validation from the field using a handheld devices connected to wider network through mobile connectivity. This helps in addressing the problem of mass market outreach and ensuring that the user of the system is the true recipient of the service. While the Aadhar based ID management process started to address the DBT related issues, these are being extended beyond that and being used for supporting the overall individual requirements.
Providing easy access to perform banking operations
The most critical piece of selling a product is its usage. Unless the product is used extensively, it is very difficult to know how to improve it and hence, increase its sales . The challenges for the usage are typically,
-- Lack of access to use the product by end user
-- Lack of clarity and information on product
-- Lack of support for post sale guidance and product issues
While these 3 are critical for all products, banking products typically suffer from the first two points where customers do not have a chance to use the products and services due to physical limitations as well aslack of awareness.
In such a situation where physical limitation prohibits one to use certain services, bringing the service provider closer to the user will bridge this gap. Coupled with increased awareness on benefits, users will be keen to experience the features and enjoy benefits (Rekha will be keen to put a daily deposit to her savings accounts and she can save for contingency).
India started the financial inclusion programs using the Micro Financial institutions and deploying Business Correspondants (BC) who will reach out to people and provide easy access to banking channels. The current technological advancements on cloud and mobile based offerings in banking services is pushing the envelope even further. It is no longer a simple model of collecting cash but provides services that include insurance and small scale investment options. Once the customers are aware of the benefits of traditional banking, their interest to do more will force the banks and service providers to make the accessibility easier and will help secure a win-win situation for both the banks and - the customers.
Banking as a sector has been in the forefront of technology adoption.. This time it is to create a broader market and to do more than just sustain. Growth for banks is important and providing technology driven market outreach, analytics based offerings and increase usage is critical. Technology in the mobile space has changed the economic contours of the country a few years ago and the same technology used in a different format will further broaden the market base . Technology advancement and faster adoption are working as catalysts to bring the changes as visualized by the Govt. and also the services industry.
Let us all hope and work together to ensure that technology continues to brings in the cheer in the second big leap for the 'Tiger'.