BFSI Leadership ExchangeET Edge
As a part of ET BFSI Leadership Exchange Summit 2017, survey was conducted during the event and views from several industry leaders were asked on recent developments in financial sector and Indian economy. We received responses from 46 experts, analysis of those responses is given below:
- When asked about GST implementation by the Government of India, we found that 65% of experts believe that GST implementation would help simplify the BFSI sector.
- Also, 54% of experts expect that GST implementation would help 5% to 7% increase in GDP for FY 2017-18, while 26% experts expect it to increase by more than 7%.
- When experts were asked about their expectations on further drop in interest rate over the next 3 months, we received mixed responses. 39% of experts believe that there will not be further drop in interest rate and same percentage of experts believe that there will be further drop in interest rate, rest of the experts were not sure about increase/decrease in interest rate.
- Experts were also asked to mention their views on recently passed RERA act. 65% of the experts feel RERA act would help boost the home loan business.
- 54% of experts think that with currently introduced Bankruptcy code would help in resolving current NPA issue which banking sector is facing, while 30% were not sure whether the Bankruptcy code will have any impact on NPA issue.
- Experts were asked about the major challenges as a leader they face in BFSI sector such as regulatory system, macro-economic risk, technology risk, rising customer expectations and restructuring for GST compliance, and also, they were asked to give ratings to these challenges from 1 to 5 (5 being the highest and 1 being the lowest). 30% of experts gave 3 rating to regulatory system as a challenge. 39% of experts rated macro-economic risk 3, 35% of the experts rated 3 to technology risk, 43% rated 3 to rising customer expectations and 41% rated 3 to restructuring for GST compliance as a major challenge. We can deduce that experts believe all these challenges are major challenges in BFSI sector.
- Experts were also asked question on technology in BFSI sector. They were asked to give ratings to each of Online & Mobile banking, Expanded ATM capabilities, Cloud, New Payment technologies, Analytics and Blockchain from 1 to 5 (5 being the highest and 1 being the lowest).
39% of experts gave 5 rating to Online & Mobile banking, 48% of experts gave 3 rating to Expanded ATM capabilities, 41% gave 3 rating to Cloud, 39% of experts gave 4 rating to New payment technologies, 28% gave 5 rating to Analytics and 61% gave 3 rating to Blockchain
Session 1: Decoding the omnichannel world
Panel Chair – Mr. Joydeep Roy, Partner – PwC
- Rajeev Ahuja, ED and Head – Strategy, RBL
- Naveen Chandani, CEO, BankBazaar
- D.P. Singh, ED & CMO, SBI Mutual Fund
- Rushabh Gandhi, Director – Sales & Marketing, India First Life insurance
- Mukesh Kalra, CEO & Founder, ET Money
The session began with ‘Decoding the omnichannel world’ which focused on marketing and sales channels. The session was moderated by Archana Tiwari Naidu along with Joydeep Roy from PwC. To begin with Ms. Archana laid the backdrop of the event, the conception and the basis of the entire event. Mr. Joydeep then laid the context and meaning of the omnichannel eco-system and what it meant for the BFSI sector.
The panel members were invited on the dais to share their views, in concise manner on the subject. The first person to be invited on the dais was Mr. Rajeev Ahuja, ED and Head – Strategy, RBL. He started with emphasizing the space the omnichannel services occupied in the banking industry. The comparable industry according to him was the e-commerce industry, which had greater exposure as omnichannel mode. The banking industry, according to him was disintegrated in to various product lines, which required greater exposure to omnichannel such as digital, branch, etc. The key emphasis lies on improving the customer experience, for which a single view approach wasn’t a good take. And that the banking channels had to be aligned as per the customer segments.
Next speaker to express his thoughts was Mr. Naveen Chandani, CEO, BankBazaar.com. He spoke about experiencing a paperless, frictionless experience while availing goods and services.
Next speaker was Mr. D.P. Singh, ED & CMO, SBI Mutual Fund. He spoke about the difficulties faced by products like mutual funds which had to sold from B-to-B. And which further had to be sold from B-to-B-to-C. He spoke about the obstruction in the growth of sales channel, due the channel partner viewing the company’s growth as a channel as an obstruction for its own growth.
Next person to speak was Mr. Rushabh Gandhi, Director-Sales & Marketing, India First Life Insurance. He spoke about the need of omnichannel instead of traditional channels of marketing and distribution of insurance products. He emphasized on the ease of availability of technology and smartphones, and the strategic budgetary allocation in this regard by the companies towards their distribution channels.
Last person to express his views was Mr. Mukesh Kalra, Founder and CEO, ET Money. He continued on Mr. Rushabh Gandhi’s perspective that there is an expected increase of close to 200 million smartphones in the country. The access to such a customer base made a case for the financial services companies to look upon and alter their distribution strategies. Also, he spoke about the increase in ease for customers to access the financial services.
The session went ahead, with Mr. Joydeep Roy emphasizing the need for engaging the customers through a digital channel. The session continued as the seeders encouraged discussions amongst the participants and present their point of views amidst the crowd.
One of the members from the groups highlighted the importance of the mutual fund industry and the way to access it by the way of smartphones and technology. The group came up with a 7-way approach to create a frictionless experience for the customers. The approach included adopting smartphones as a medium for access, increasing the interactivity between both the customers and the employees, consistency between the app which is device-agnostic and medium-agnostic, reinforcing the brand presence, getting on-board the new customers by way of paperless KYC by way of smartphones.
The next set of participants spoke about the importance of local touchpoints to sell the financial products, citing the trust enforced by the local people on such touchpoints and clubbing various sources of performing KYC procedures and payment methods.
The next participant spoke about increasing the omnichannel experience in view of affordable housing finance. He spoke about the distribution network enjoyed by the HFCs to acquire customers. He spoke about the intent to source the customers digitally. The problems arising out of such kind of sourcing methods included underwriting the liabilities of customers whose whereabouts are not known and hence pose a greater risk while selling such products, and hence the importance of physical presence in such cases.
The next participant spoke about the importance of presence of alternative channels in the insurance industry. The success of level of digital adoption in the insurance industry depended on the identification of the customers, approaching them with the right products and identifying strategies to retain them. He spoke about providing the services via IoT with their simultaneous interaction with the social media.
The next input came in as use of internet to survey the customers along with engaging with them. Defining the engagement plans, along with reinforcing the trust factor was one of the best-defined approach to customer acquisition.
The next input came in as an effort to differentiating between the point of sales and point of services. The way forward for this being aligning the KPIs together, which brought these platforms together to pay attention to the consumer interests.
The next opinion came in as difficulties in accessing the customers and servicing them through the brick and mortar kind of model. Creating central repository, digitization of the processes was few of the solution that it suggested.
The session went ahead with the panel discussion among the members on the dais.
The discussion stretched for a duration of 15 minutes over various topics like:
- Future of fintech space – Man vs machine
- Seamlessness of a knowledge process flow
- Product shape, size and features
- Frictionless world in times of improvising KYC
- Bringing people on board – aloof from the technology space
- Explaining the importance of point-of-sale to the general public
- Increasing the financial literacy
- Engaging with the intermediary and customers
- Importance of data in fintech
Session 2: Focussed Session
Technology: Empowering the Digital Transformation
Panel Chair – Manik Nangia, Chief Digital Officer, Max Life Insurance
- Deepak Sharma, Chief Digital Officer, Kotak Mahindra Bank
- M A Khan, MD & CEO, IDBI Intech
- Sumnesh Joshi, Addl DG, UIDAI
- Rajesh Mirjankar, MD & CEO, Infrasoft Technologies
The Panel Chair, Mr. Manik Nangia gave his initial thoughts on digital transformation. He said that
- One should look at digital transformation in businesses in three dimensions
- creating value in the existing value chain
- to reorient and build some foundational capabilities, be it culture, mindset, technological architecture, cloud versus on premise, managing and storing data
- completely new business models that emerge from various stacks of digital systems collaborating
- One can see the magnitude of change in the consumer behavior that digital technology has brought as –
- The consumers are now okay with algorithms, robo advisors giving advice and greater than 50% of customer engagement in transactions in financial services is happening digitally. This is leaving a digital footprint for us to analyse, learn from and personalize.
- The consumers do not seem to have patience any longer as they want everything instantly and in the manner in which they want. Consumers can now choose whether they want a face to face interaction or a remote interaction.
- The power of algorithms is emerging in a manner never seen. Gartner predicts that by 2020, more than 25% people will have more conversations with bots than their spouses.
- As consumers look at the financial services pyramid, payments come on top as they are ubiquitous. Then come savings, followed by risk containment and then the element of future planning. Whereas when you speak with a financial services consultant, you find the other triangle, which is a recommended triangle. The question now is that
- with algorithm, digital nudges and persuasive and compelling marketing hype, will there be a role in the future for humans to take the consumer from one side to the other side?
- with data science becoming active, computing capabilities becoming abundant and cheaper, will algorithms augment human intelligence?
The next person to speak was Mr. Deepak Sharma.
- He started by pointing out that each organization has its own in-built rigidity and it is important to look at what those rigidities are. Rigidity comes from 3-4 parameters. It could be because you are already a successful company, or you are in a knowledge economy and your business model has worked in the past, or you are a born old world analog company.
- Quite often, people ask him what his digital strategy is and he keeps saying there is nothing called digital strategy. If your organization has a digital strategy, it will fail. You need to have only one single fundamental organization strategy and digital is only the ways and means to help achieve it. Digital will only help to connect your organization vision with your strategy.
- Any transformation cannot happen with just a set of a few intelligent people or people who believe change can happen. There is a need to change and it is important for the boards and the CEOs of the organisations to realise that if they don’t change, they don’t have a future.
Mr. M A Khan said that
- Digital transformation started after the Prime Minister announced demonetization. The companies were planning to go digital, but nothing was happening on the ground and demonetization has helped them. The managements have started expecting things to be delivered urgently and this has become a challenge for IT companies like his as they have to come up with solutions within no time.
- Despite security concerns about cloud, the kind of transformation happening is forcing everyone to use cloud. There is a need to have vertical and horizontal scaling, which only cloud can give.
- One big challenge is cyber security. Recently, WannaCry attacked Honda and they had to shut down. When a company launches an app, it has to be user friendly, but if a lot of security is put into it, it will slow down. This trade-off is a challenge.
Mr. Sumnesh Joshi said that
- In India, reach is very important as it is a vast country and there are remote areas and to make digital transformation happen, it is necessary to reach every nook and corner of the country. Initiatives like Make in India, Digital India and the upcoming Bharat Net are making implementation of all technology possible even in the remote areas.
- Many digital applications are being launched. To make the people to be able to use them, ‘Vidya Danam, Param Danam’ (knowledge sharing) will be the key. When everyone shares their knowledge and spreads the word that digital is very convenient and smooth to use, it will make an impact.
- Many new applications are being launched, but the companies need to think a lot from the consumer perspective, as to what they want. If the companies can give the right products, which are convenient, they can be successful. For example, apps like Uber, WhatsApp. So, for any app, one should do proper due diligence, lots of research, put a lot of thought and efforts to understand the consumer type and how they will use.
- Another important point is perception. One wonders how people who are not well versed with technology will use technological products. Actually, it is a myth. Everyone can handle technology. If the products are made well, then digital transformation can become a reality and a success.
- The Government of India has set a target of 25 billion transactions in this financial year. Using new products like BHIM, Aadhaar Pay, every merchant can be automatically onboarded and start receiving payments through them. As on date, the penetration of credit card, debit card, internet banking, is still less, but Aadhaar has already reached 115 crore people and very soon, everyone will have an Aadhaar card. If any application can work using that unique number, it will be a game changer.
Mr. Rajesh Mirjankar said that
- Artificial intelligence and machine learning could drive efficiency in an organization to make it more vigilant. Digital dwells taking the decisions rather than humans, will also help.
- A maturity has been achieved in how we have look at digital transformation. It has moved from rule based engines, where we looked at rules in codes, macros, engines, etc. to statistical modelling, where we look at aspects of outliers and detect issues in the areas of compliance, money laundering, etc. We have now graduated to machine learning, which is the new era coming up, where we look at clustering based on the information that we have.
- Digital transformation will start from here, where we look at mass scale of data that we have in machines in the back end and teach the machines to use this data and then take decisions.
- Digital transformation reaching its pinnacle will be due to the aspect of artificial intelligence, where decisions would be made by the machines on specific boundaries, where you can have automation of your standard operating procedures to say that the machine can take this decision, be it based on credit policy decisions or anything else.
- The first stage of digital transformation will happen when we will have intelligence augmentation, where intelligence will be poured into machines based on data and also on how humans understand how the business should run. When organisations deal with people today, they are dealing with a different generation of people, which has taken up to bots already and is talking to bots. An organization needs to be able to drive intelligence that is augmented and then drive artificial intelligence for decisions.
The participants in different tables then had discussions on different topics like consumer behavior, demonetization, technological changes, digital payments, fintech, artificial intelligence, etc. and submitted their views.
The panelists then gave concluding remarks.
Mr. Manik Nangia said that a couple of very interesting points emerged.
- Clearly, consumer behavior is shaping a whole lot of what financial services organisations are doing. The companies are in the services business and the way in which they engage with customers should be in a manner adjacent with what consumers define and not what their prophecies dictate.
- As the financial services industry, with demonetization, gets a lot more people in their ambit, there is going to be tons more digital footprint and data to analyse and algorithms will surely augment the internal efficiencies and the manner in which companies are engaging with customers in a personalized way, cross selling, upselling and getting a larger share of their customers’ wallets.
Mr. Rajesh Mirjankar said that he picked up a couple of points.
- There was a doubt on whether to move to cloud or not and whether it is a good thing. The customers no longer visit the branches and they are all in the cloud. The companies are reaching them through cards, mobile phones, and now, Aadhaar cards, which provide various details of the customers as well. The fact that they are driving a business model on the cloud could give them enough confidence that the cloud itself is a business model that will succeed from a technology perspective.
- There are efficiencies to be drawn from a perspective of getting artificial intelligence to serve the customers proactively rather than reactively and that is a big plus. There is a need to look at how banks can hugely profit from artificial intelligence and machine learning and it is actually in the back office. Most banks already have captive customers and the back office will need a lot of this knowledge in terms of making the banks more efficient, because the way in which pricing of products is happening is not getting any more profitable. There is only more mining to be done for getting profitable now.
The challenge is the fact that things like UPI will open up the world for the bank’s customers to go to some other bank’s app and transact from there, which means even the bank’s interchange is at a loss, if it does not service the customer. When the banks use artificial intelligence and machine learning, they need to have enhanced vigilance on compliance because otherwise, it gives a bad reputation to banks.
Artificial intelligence is also ensuring smooth running of processes, of which an ideal example is reconciliation – making sure that it can be automated and making the banks more efficient.
Mr. M A Khan gave an example of Paytm, which came out with an interface by which you can buy gold even worth one rupee and said that it is a wonderful disruption. It is an account for gold, where you can buy gold of any denomination and time it based on the rate, which changes every 6 minutes. For this, Paytm has tied up with MMTC, which is a government owned company. These kinds of disruptions are going to arrive in the market and disruptive technologies have just started and the whole peak is still to come.
Chief Guest speech: SS Mundra, Deputy Governor of RBI
The performance of BFSI sector and specifically the banking sector are the two sorts of barometers for the performance of the economy & thus if the BFSI sector must do well by transition; the economy should do well.
The growth of the BFSI sector is expected to come from the following sectors:
- Manufacturing Sector: The government initiative “Make in India” has usually targeted to achieve 25% GDP from this sector by the year 2022 against 16.5% GDP in the current year. Several other policy initiatives including relaxation of FDI norms in the sectors like defence, railway, space, etc. have been introduced by the government to boost this sector.
- Challenges: This would open huge lending opportunity for the banks; but to grab this opportunity, the banks should learn from their past mistakes which have led to deterioration of their quality of assets, identifying corporate defaults such as over-leverage, high growth ambitions, very optimistic projections, lack of equity, etc.
- Green Financing: With the launch of sustainable development goals along with the adoption of climate change agreement in Paris, India too have become the part of the efforts to move towards low carbon inclusive & sustainable global economy. As far as Indian banking is concerned, they should be very sensitive to lend to industries that might create carbon foot-prints. In the Forum of Financial Stability Board i.e. the Forum of G20, the work is already going on to include the climate related disclosures in the company’s financial statements.
- Job Creation: According to the recent estimates, India has become the most popular nation in the world almost 5 years ahead of the expectations. With the median age of country standing at 29 years i.e. more than 68% of India’s population, is expected to be in the working age range & thus there would be obvious requirements for continuous job creation. However, fulfilling such huge requirements becomes almost impossible if we take into account only formal sector.
As per the recent reports of World Bank data, it has predicted that the job creation in India by automation would be as high as 69%. Job creation should be the central part of the policy making decisions are concerned. Financial Literacy and Skill Development are the two components which will help to shift the focus of financial inclusion from supply to demand.
- Urbanization: By witnessing the continuous growth of urbanization in India, it has been estimated that by the year 2030, the urban population is expected to rise to 631 million. By the year 2030, 42% of population would be living in the urban areas against 32% of the population living today.
As far as rural areas are concerned, the bank would get an opportunity for lending to non-farming activities, which has eventually undertaken a great lead when compared to the revenue of the farming activities, thereby witnessing major shift in recent years.
- Technology: Technology in recent times has generated its own set of challenges. Digitalization, has made fundamental changes in the way of how the products & services can be delivered. Business model of traditional financial sector players is already being challenged through their advanced tax saving counterparties including technology companies.
There are many challenges from regulatory front, in HR, risk-management, technology adoption and challenges from Non-BFSI players. Following are the challenges in detail:
- Coping with the Regulatory Prescription: The post crisis reforms required the banks to maintain larger & higher quality of capital. Capital being the center of the measures, banks were needed to be more pro-active in raging the same through all the possible means in fusion, from most of the owners raging from the market, selling non-core investments and assets and realizing that their portfolios are in the favor of less risky asset classes until the growth returns.
- Human Resource Challenges: The attrition rates across the institutions have increased manifold as, the days of career long commitments to a single institution are over. Development of number of process and systems within the banks; the less tech-savvy staff may find themselves ill-equipped to handle various tasks. Also, the introduction of new global regulatory standards and domestic standards like Indian Accounting Standards (IAS) will also challenge the skills of the existing staff.
- Technology Related Challenges: Cyber challenges which most of the companies face now-a-days poses a critical risk due to its potential negative impact on the objective of maintaining the safety & soundness of the financial system including the payment system. Unlike other risks, cyber risks are that type of risks which does not give any indication or warning signal from any source and has the potential to bring down the whole institution. Therefore, robust cyber securities preparedness & swift response system when the cyber security incident surfaces, assumes great significance & BFSI sector needs to be adequately equipped to respond to such challenges.
Session 3: Leading Lights – Being the true North for BFSI Leadership
Panel Chair – Dr. Arvind Virmani, Former Chief Economic Advisor of India
- Zarin Daruwala, CEO, Standard Chartered Bank
- Seetharaman, Group CEO, Doha Bank
- Rashesh Shah, Chairman & CEO, Edelweiss Financial Group
- Sanjiv Vohra, MD, Deutsche Bank -Singapore
Mrs. Daruwala started her discussion, by narrating her story during the time when she joined ICICI, the Development Financial Institution as it was rightly called during those days. At the that time, there was IDBI, IFCI and ICICI. IDBI was two times the ICICI’s size but if we look today then we observe that as far as IFCI is concerned, nobody talks about it, while IDBI has become half the size of ICICI whereas ICICI has taken the lead. When she joined ICICI in the year 1989, during that time ICICI was going through the difficult phase and that’s where the leadership opportunity took a great leap; ICICI embarrassed technology, the proportion of balance sheet was expanded due to its stressed assets and the bank entered in retail banking, when such type of banking was not in existence in India. ICICI was the front runner in starting credit cards, ATM’s, home & car loans, etc. ICICI was the first bank to introduce Internet Banking. Another thing which she learned was to develop “Never say Die” attitude in being persistent because when you try to solve tough issues particularly “stressed assets”; the only way to solve these issues is to be persistent. She further said that ICICI really allowed her to develop the spirit of entrepreneur. Mrs. Daruwala was appointed to handle the Rural Banking in the year 2002 when ICICI joined with ICICI Bank and this work further helped her in developing her entrepreneurship skills and confidence when she later joined Standard Chartered Bank.
According to Dr. Seetharaman, Corporate Social Responsibility (CSR) should be the integral part of the business strategy. Throughout his journey, Dr. Seetharaman has articulated that shareholders are the best possible returns. However, the transparency should become the major perspective. Dr. Seetharaman insisted that the human capital which we drive is the primary force value. Dr. Seetharaman explained that the main driver in his 16 years of journey in Doha Bank is the sustainable credibility. It is very much important to build the knowledgeable society. Education, grooming people for building the knowledgeable society is the corporate culture we need to develop, thereby helping to build corporate transparency.
Mr. Rashesh Shah has learnt that leaders have tendency to grow rather than assuming that leaders are born. Mr. Rashesh Shah says that they invest a lot in Edelweiss to build leaders all the time and he thinks that it’s the exposure, perspective and trial & error. According to Mr. Rashesh Shah, every leader has their own way and style of leadership, where some leaders may be introvert or extrovert, some may be external focus & analytical. When we are manager, we become in-charge of our own people & business; but when we become a leader, we become in-charge of lots of people. Growing, grooming them, making them work at their best level and to become responsible for that is a big responsibility, a leader will face. Leaders infuse the sense of optimism and they inspire people.
Mr. Sanjiv Vohra started his discussion on leadership with the help of the disclaimer and the disclaimer was “Past Performance is Not the Indicator of Future Performance”. According to Mr. Sanjiv Vohra, leadership is contextual. It does not have any kind of definition; rather leadership style changes depending upon the situation. He further said that the leaders need to look forward to the four main types of Duality namely;
(i) be disruptive and pragmatic, (ii) be risk-taking and reluctant, (iii) be heroic and vulnerable and (iv) be galvanizing and connecting.
Based upon the above-mentioned Dualities of “Be Risk-Taking and Reluctant” and “Be Galvanizing and Connecting”, he tries to explain his leadership journey.
- Be Risk-Taking and Reluctant:
Mr. Sanjiv Vohra narrates his journey, when he was offered to handle the Citi Bank franchise in Philippines and so for that purpose he had to leave India in late 2005 and early 2006. Most of his colleagues, mentors and friends had denied him to accept the offer because, during that time Philippines was in the throes of political, economic and all such other types of issues. But rather turning down the offer, he forecasted certain growth in Philippines &the decision of accepting the offer made him realize that it was one of the best decisions he could’ve taken in his life.
- Be Galvanizing and Connecting:
According to Mr. Sanjiv Vohra, it is necessary to keep connections with the people. There’s a need to pat them, give credit, otherwise leaders can become self-delusional and lead the wrong way. Going back and relating this duality to the time when he was in Philippines, it became very clear to him at initial stages that, to connect with the people it was necessary to connect at an intellectual level and once we are connected to the Philippines people with the heart, we become “Barkada” for them which means that we are like family for them. He further added that, in this era there is a fusion between physical, digital and the biological world.
Session 4: Trialogue: Conquering by collaborating & Co existing – Future of Traditional banking & Fintech
Panel chair – Sachin Seth, Partner – Financial Services Advisory – Digital, Fintech & Innovation Leader, Ernst & Young LLP
- Ashwini Kumar, Chairman & MD, Dena Bank
- Jitendra Gupta, Founder, Citrus Pay & MD, PayU India
- Gautam Jain, Managing Director and Global Head of Client Access, Standard Chartered Bank, Singapore
Panel Chair Mr. Sachin Seth started the session by pointing out that the most debated topic in the BFSI sector in the last one year was – Demonetization and NPAs.
Mr. Jitendra Gupta believed that the entities can just enter in the fintech space and disrupt only by bringing in new processes and improving them. He led down a comparison in ways of doing business by a fintech company versus a bank. Fintech gives the convenience to the customer.
Mr. Seth then asked Mr. Ashwini Kumar, Dena Bank, as to what was his opinion in fintech trying to disrupt the banks. How would this go and what would the future look like? According to Mr. Kumar, divergent views would not help, as ultimately banks and fintech companies have to collaborate to work together and function efficiently.
Turning to Mr. Gautam Jain, Mr. Seth asked him his point of view with respect to fintech disruption in Indian and global markets. He pointed out that not a single bank or business has shut down cos of these fintech companies or start-ups. And hence collaboration is the way forward.
Mr. Seth asked a general question, as to what would happen if banks started behaving like start-ups.
Mr. Jain responded saying that banks have the talent, money, manpower and technology. If the mindset changed, it would become very easy for them to become a fintech.
Mr. Kumar pointed out that the internal or external innovation would meet the customer requirement.
Also, according to the discussions on the panel, there is an inter dependency between banks and fintech. Fintech provides banks with agility and alternate options of doing business, whereas banks provide capital supply, helps in scaling and risk management which fintech is unable to do. There is no room for disruption for those who collaborate. Both can learn from each other and collaborate wherever required. Partnering would prove great.
Session 5: Leaders’ View: Trends in Unconventional BFSI Marketplace
Panel chair – Mr. Ashvin Parekh, Managing Partner, Ashvin Parekh Advisory Services, LLP
- M. Vishakha, CEO, India First Life Insurance
- Arun Parmeswara, Managing Director, VMware
- Srikanth, Chief Financial Officer, Apollo Munich Health Insurance
- Vaithianathan, Managing Director, Tata Capital
According to Mr. Parekh, BFSI sector is filled with paradoxes within regulations, distribution architecture and between social v/s commercial financial services and technology. He asked the panelists on how do the respective leaders manage these paradoxes within the sector.
According to R.M. Vishakha, people in rural areas have been teaching ways to do things, and get their work done, which sometimes seems impossible for people in corporates. India First has a vast rural presence with varied products and the digital initiatives by India First have been spread across the length and breadth of the country.
According to Mr. Srikanth, insurance has been a game of distribution. Technology has always played a different role in health data and quality management according to Mr. Parekh. Issues like branches, time required to set up to go the market especially in Tier II and Tier III and IV towns could be addressed through a digital platform. Due to short fall in medical underwriters, an automotive medical underwriting tool has been set up, which has reduced the procurement of processes from the external vendor.
For housing finance sector, R. Vaithianathan pointed out that they started using artificial intelligence. They believed that customers enjoyed the experience of going online and researching and connecting with the bank to compare and take a decision based on commercial rates.
Mr. Ashvin Parekh has partnered with world’s largest social media listening organization. They provided tools to social media. Originally it had started with behavior evaluation, then artificial intelligence. And then they reached a point where they could carry out customer acquisition and risk management.
Mr. Arun pointed out that the biggest paradox was innovation. The products built by multi-national companies, were not built at the scale at which India created those products. This scale was never seen in any other part of the world. Transaction processing happening at banks was not envisaged at the level of scale needed. Innovation has always been welcomed, but how to match that up to the scale required and delivery of the same to customer must be taken care of.
According to Mr. Parekh, meeting with the challenges of today and tomorrow have never been enough. Looking beyond those challenges would certainly help. Things change constantly at brisk space, where leadership would matter.
Social v/s commercial financial services
Both are very unconventional. Social finance – in the insurance sector, the penetration has grown tremendously, cause of government’s yojanas.
According to R.M. Vishakha, all the yojanas did not come out as a freebee. However, India First insurance company was one of the first to file for the product and got an approval against some of the bank promoted companies which have not yet got the approval. These products should have been made mandatory, because according to her there was no scope of mis-selling associated with this kind of product. In the budget, there was a target set for crop insurance penetration. Similarly, such a target should have been introduced in penetration of Jeevan Jyoti Bima Yojana as well.
Ashvin pointed out that, in health, the disruption was caused through RSBY, but however it did not click well. According to Srikanth, technology was used extensively. Challenge was the last mile connectivity where frauds happened. Government have been looking at re-inventing and planning to get back in a year or two.
Ashvin turned back to Mr. Vaithianathan asking about, insurance products that are distributed through chat boxes, used by web aggregators, etc. Intention to judge the customer was relevant according to Mr. Vaithianathan. Personal interaction, social environment of the customer would help to judge the intention to pay back the loan, which has to be known at the timing of granting the loan.
According to Vishakha, there is a need for sector specific KYC which will get one to central KYC. It is very difficult to sell insurance product. Ashvin said that he has been on the trust board of NPS which has crore of beneficiaries, which is trying to get KYC done through Aadhar enabled kind of area.
Session 6: Reinventing norms to stay relevant
Panel Chair – Mr. Sumit Lakhutia, ET Now
- Andrew Holland, CEO, Avendus Capital Alternate Strategies
- Tarun Chugh, MD & CEO, Bajaj Life Insurance
- Anuradha Rao, MD & CEO, SBI Mutual Fund
- Rajesh Mirjankar, MD & CEO, InfraSoft Tech Technologies
- Vighnesh Shahane, CEO, IDBI Federal Life Insurance
Mr. Sumit, Panel Chair of the session started discussion on strategy for any company and asked Mr. Tarun how does he manages change in strategy of the company as the market also keeps changing regularly.
Mr. Tarun, who is in life insurance sector, said that in last 7 to 8 years, there were a lot of changes in the life insurance sector and they are used to it. He was of the view that now technology shift is not happening anymore, they need to focus on how the regulator keeps moving. He said, organization should be flexible and should possess ability to adopt to those changes which are going to come in the future.
Mr. Shahane was of the view that culture of an organization plays an important role in this regard. Organization should be culturally fit for adopting changes and it should skill the people to make and adopt to those changes.
Mr. Sumit then talked about the biggest change which took place in November that is demonetization. He asked Ms. Rao how her organization deal with changes and how their strategy changed to deal with demonetization. Ms. Rao started with demonetization saying it was very positive for the industry and she mentioned that the RBI was trying to transmit the cut in interest rate to the consumers but was not able to, demonetization has done that for them. Due to demonetization, large amount of liquidity generated which forced banks to cut interest rate leading people to move towards asset management companies to get more returns on their investment. She also said the stated objective of demonetization was to reduce black money and stop regeneration of black money. Because of this, people stopped dealing in traditional avenues like gold and they also got used to various digital payment methods. The important thing according to her was that even after cash is back to normal level in the system, people are using digital payment methods.
Mr. Sumit turned to Mr. Andrew asking him about how leadership decide the strategy and percolate it down the organization. Mr. Andrew said that every change comes with a vision, the vision of demonetization was to bring digital technology too. Then he talked about organization and its ability to change.
Mr. Sumit asked Mr. Mirjankar asking him about decision on investment in technology. Mr. Mirjankar replied saying organization spend on technology, not on the current one but on the upcoming one. He further added that it is important to invest in the right platform and the elements to check in any technology would be something which would increase the efficiency of an organization. He also said investment by banks in platform reaching out to their clients and it is important to invest in back office technology which would help in better management of books.
Mr. Sumit then talked about cyber security. Mr. Mirjankar mentioned this is very critical area for bank. The challenge to banks is not about securing firewall but it is when they get hacked what they have to do.
Mr. Sumit then turned to Ms. Rao asking her about the situation in mutual fund companies. He asked whether investor awareness is the main focus now and how it is changing. Ms. Rao replied that there is a positive growth in the industry with AMFI creating a lot of visibility. Also, individual AMCs have their own ways to create investor awareness which they run passionately. She said now SIP has become a household word, in order to save tax efficiently people should also know SWP (Systematic withdrawal plan) so that their corpus doesn’t get affected and provide regular returns.
Mr. Sumit asked Mr. Shahane about essence of strategy, whether it is to choose what not to do. Mr. Shahane replied that what to do and what not to do, both are important. He further added that now long-term strategy is for six months which should have a broad framework and vision. The broad framework should be very flexible which should adopt to change very quickly.
Mr. Sumit asked Mr. Andrew about how do he plan for the strategy. Mr. Andrew was of the view that organizations should stick to their core business if they are doing well. More successful companies do that.
Mr. Sumit asked for comments from everyone on the one global event on the next one year which is going to impact the industry.
Mr. Tarun said it is a regulatory landscape. Various new guidelines and trainings on those guidelines would be the challenge
Mr. Mirjankar replied that the trend in digital adoption would be the challenge. He said companies would have to come up with process automation and the opportunity in the next one year is to rescale the companies to adopt artificial intelligence.
Mr. Shahane said it would be regulatory system and customers.
Ms. Rao mentioned C-KYC and its design would be the main thing in next one year. She explained that as of now most of the people have multiple bank accounts, they should be able to invest through these accounts so that entire people can invest and participate in India’s growth story.
Guest of Honour address: Multilateral Development Banks: Global view and national opportunities
Mr. Dinesh Sharma – Special Secretary, Dept. of Economic Affairs, Ministry of Finance, Govt. of India
Mr. Dinesh started by giving his introduction and stated some facts like global economy is expected to increase by 3% which is not bad and our economy is going to increase by twice of that.
He mentioned that our currency is strengthening, CAD is comfortable, currency reserves have increased but we are yet to achieve pre-crisis growth rate. Investments in infrastructure is increasing at a rapid rate and it will come from both domestic and international. He also said that overall, USD 1.5 trillion rupees is given on credit by major multilateral development banks out of which India gets USD 5-6 billion. New multilateral banks have formed to increase credit to India which are AIIB (Asian Infrastructure Investment Bank) and NDB (New Development Bank), both of them are going to give USD 1.5 to 2.5 billion each of which large chunk would come to India. So, there is going to be huge supply of funds. He further said that we need to look on how to improve the demands side. He explained this with “ABCD” where “A” means Acts, to get legislations right like GST and IBC. He added “B” means Business, there should be easiness in doing business. He explained “C” means Cleaning of corruption. He mentioned “D” means Digitization and use of technology to do businesses efficiently.
Further, he ended by mentioning of cyber-attacks on BFSI sector and said there should be emergency response system to deal with this.