Exciting times lie ahead, thanks to Digital Transformation. Beyond e-Commerce, where the impact is explicit, financial services will see paradigm changes. A Boston Consulting Group study extrapolates that about 150 million people would have some digital experience in financial transactions by 2020. It also says that about 70 percentage of the urban population would be digitally influenced to use at least one financial product. Due to the immense cascading effects of the financial services industry, all other industries will be impacted indirectly and directly too, by the digital transformation wave.
At the same time, the financial services sector is evolving too. The extent of tech involvement of BFSI companies has culminated in a new genre of fintech companies, which think and operate like technology companies although their purpose is to cater to the financial service needs of customers.
The Forbes India Leaders Speak Digital Transformation series, powered by Microsoft, sought to understand how companies and institutions in the financial sector adopt and adapt to new technologies available at various levels of their business. It also investigated the gaps and what India – both private players and the government – should do take things forward.
In a thought provoking discussion between banking and financial sector stalwarts - Dharmesh Anil Mehta, MD and CEO, Axis Capital Ltd; Kamlesh Rao, MD, Kotak Securities; Munish Sharda, MD & CEO, Future Generali India Life Insurance; Nirmal Jain, Chairman, IIFL Holdings Ltd.; Aashish Somaiyaa, MD & CEO, Motilal Oswal AMC; Jorge Redon, MD, Principal Financial Group; Shilpa Kumar, MD and CEO ICICI Securities Ltd and Anant Maheshwari, President, Microsoft India - interesting insights emerged.
Anant Maheshwari opened the discussion by recounting four broad business areas of any company that are impacted by the ongoing digital transformation -employee empowerment, customer engagement, operational efficiency and most importantly, business models, which keep evolving based on pure data. “The banking and financial sector impacts all these four broad stakeholders as it has been the leading sector in terms of adopting digital transformation” he remarked. To illustrate further, he shared his own digital transformation experience, “Four years ago, when my phone prompted me to backup everything on to the cloud, I looked at that message and thought, seriously it's in my pocket right now, it's safe, why would I back up all my contacts and pictures and messages and everything that I hold dear on to the cloud? Four years later, having seen some device losses and device corruptions, I very quickly back up to the cloud everything that’s on my personal property, which is my personal digital space. And that, to me, is the phenomena that we are seeing in corporates too.”STAYING SECURE
Dharmesh Anil Mehta observed that there have always been security issues; but with mounting concerns about it and people moving their data offline to the cloud, security will keep getting stronger.
Making a very relevant point related to security, Kamlesh Rao said, “It's all about where the information is coming from. Today's people want to share their lives on public platforms – where they go, what they do, etc. I worry about the fact that data is being made available like this; worrying about the security of this data is secondary.”
Nirmal Jain acceded that security risks are always imminent. “But it’s not something which is insurmountable or something that will really jeopardize or put the whole digital transformation at risk,” he explained. “People learn fast and solutions evolve quickly and there is an entire industry working on cyber security. In my experience, mobile transformation is happening very quick and in multiple ways,” he added. “We are still discovering the power of mobile internet.”
COSTS AND BENEFITS OF GOING DIGITAL
Sharing the learnings gleaned from the online broking journey of ICICI Securities, Shilpa Kumar admitted that although their mobile platform is successful, the transition was challenging, especially due to the complex nature of the products on offer. “We invested a lot of time and energy into making it work,” she concluded.
Moving on to the benefits of the digital revolution, Dharmesh Anil Mehta pointed out, “The big advantage of digital is that alongside unlocking drastic cost cuts, it facilitates scaling up.”
Aashish Somaiyaa concurred that digital is a great enabler, “Today, we are able to create an asset management company where we have just 20 people in investment and 20 to 30 people in other areas. In fact, we don’t have offices in Jamnagar or Junagadh or Tinsukia in Assam.” He also marveled at the way the digital initiative of Aadhar has brought everything on a common platform, making performance a priority, rather than ‘reach’ and ‘legacy’.
Munish Sharda endorsed that though by illustrating how as a B2B company, reach was obviously enabled by platforms. “With KYC from a common platform, relationships don’t matter. Clients can just come to my website and close a transaction. People can buy on merit; they don’t have to see a branch or an agent to feel assured.”STRATEGIC CHOICES
Jorge Redon explained that for solutions to be truly digital, clients must be given a meaningful value proposition through a meaningful IT platform. At the same time, one has to use meaningful tools within the digital ecosystem to divert the traffic to one’s operation.
Munish Sharda enumerated four dimensions of technology or digital transformation that have an impact on a company - revenue, expense, experience and accuracy or compliance. Even in the case of hiring human resources, digital comes in handy. “Attrition in the insurance industry is very high. So, interviews are going on all the time in the company, via a mobile based app or video interviews. The data from these interviews can be shared all the way to the top level; it helps the management make better decisions about people.”
Anant Maheshwari took the discussion further saying, “Every CEO today in this industry is actually spending more time on tech than on a lot of other core business processes. And as tech platforms keep changing very fast, there is an equally fast need to replenish capex support for these platforms.”CONSTANT CHANGE
To stay current in terms of systems, products and everything, Nirmal Jain suggested that companies need to be ‘agile sprinting’. They cannot wait to develop a perfect product. Everything, including R&D, has to follow faster turnaround cycles.
Shilpa Kumar opined, “So much is changing, including basic products. So in addition to offering the best of service and access, you have to make sure it’s all at instantaneous speeds. That becomes very critical.” She went on to say that customers push for digital transformation as rapidly as possible and they will not tolerate any glitches. Ironically, while they seek change, they are also loyal to older systems and processes.
While she was confident that change will ensue the rate at which it happens is relevant. “The other thing is the scale at which the change happens; right now technology is actually changing ecosystems and therefore, who you thought was your competition may not be your competition. So you have to be alert about both the speed of change and the scale of change,” she advised.INNOVATIVE INITIATIVES
Anant Maheshwari suggested that innovation would have to be on many fronts in the form of agile sprinting in sales and products, agile sprinting in technology, agile sprinting on architecture. Dharmesh Anil Mehta agreed, “We have to be innovative as businesses become more competitive with greater digitalization as everybody has the same data. In contrast, when I started my career, information was a USP.” Accordingly, in the financial services space, the human touch would always be essential according to Dharmesh Anil Mehta. “Whatever platform one creates on advisory, despite the greatest speed and the greatest data, at the end of the day, your advice has to be right,” he explained. “Technology will become labor – it will take over from human labor, i.e. back office and other tedious manual processes.”LOOKING AHEAD
Dharmesh Anil Mehta summed up by observing that being in the early phase of digitalization, most companies are enjoying the honeymoon period benefits. The actual challenges may become apparent after five years. These could be in the form of how to scale up because costs are not decreasing or revenues are getting saturated. “For the next four, five years, India is in a honeymoon phase, because 4G and 5G are being introduced and when these reach the hinterlands, sales of financial products will increase exponentially.”
Jorge Redon said, “We are going digital, there is no way back. You don’t need to convince anyone that digital is the way forward in terms of providing services, engaging with customers and creating a different customer experience. But clearly a cultural change is still going on; it’s not there yet, so a lot of things to be done yet.”