It is not tech versus humans; it will be tech with humans
When
was the last time you visited your bank branch (except during the
demonetization period)? Or hailed a cab without an app, boarded a flight
without a Web check-in, printed a photograph or booked a movie ticket at the
cinema hall’s box office? Here are some amazing statistics—it took the
telephone 75 years to reach 100 million users since its invention. To achieve
the same user base, the internet took 7 years, Facebook took 4 years 6 months,
WhatsApp took 3 years and 4 months and more recently Instagram took just 2
years. But the popular game Pokémon Go took only a month to cross 100 million
downloads.
Technology
is disrupting and at an accelerating pace. While the internet was the cause of
technology disruption in the previous century, smartphones are the disruptors
of this century. Smartphones have moved from being a mere mode of
communication, to an all-encompassing device that perform a range of tasks.
Social
media engines like WhatsApp, Facebook, LinkedIn, Twitter and Instagram have
been the biggest beneficiaries of smartphone penetration, making communication
agnostic to geography, time-zones and genre. I expect the smartphone to
continue to take big leaps over the next 1-2 years as technologies like
artificial intelligence (AI), virtual and artificial reality and internet of
things (IoT) help us work with remotely connected devices in our house or
office, help us reach our destinations in driverless cars and most importantly
bring in greater efficiencies.
The
financial services sector has also been revolutionized by technology. Starting
with internet banking, technology has covered most of the commoditized aspects
of the business like on-boarding, transactions processing, communication, audit
and payment systems, payments banks, payment wallets, and much more. Today,
smartphones are the new bank branches and your mobile number is the new
customer identity.
A
second leg was added when the government decided to cascade technology to the
grass roots using Aadhaar (more than a billion issued so far) and a third leg
when the government decided to open bank accounts for the unbanked, called Jan
Dhan accounts.
This
impetus has resulted in 60% Indians now being under the banking umbrella. The
country has thus created a robust financial trinity of Jan Dhan (bank account),
Aadhaar (biometric identity) and mobile (communication device)—JAM for short.
This can be used by entities across the financial services space to improve
their product penetration across the masses.
The
mutual fund industry, too, has taken technology in its stride by easing
on-boarding via eKYC using Aadhaar, providing a seamless transaction
experience, improving transparency, expanding beyond metros and reducing the
turnaround time for pre- and post-sale activities. Thus, mutual fund investing
can be executed in just a few clicks. Not only this, goal mapping, portfolio
tracking, asset allocation assistance and fund selection assistance are also
technology-enabled through financial technology or fintech.
While
technology has its advantages, it can also come with challenges. A key question
being asked by the distribution fraternity is whether technology will replace
the role of the financial adviser with the advent of robo advisory services
being offered by online do-it-yourself (DIY) platforms. My answer is, no.
As
a first step, one should understand areas that are technology relevant and
those that are not. I have already highlighted some of the former. However,
other areas, which I would argue are even more important for a trust based
business like financial services and cannot be managed by technology alone
include behavioural aspects like building a relationship, understanding a
customer’s context beyond the few risk-based questions and, most importantly,
hand-holding customers during times of volatility.
A
recent report from Karvy pointed out that 80% of direct equity fund investments
were redeemed within the first year of holding during turbulent times. This is
mainly due to lack of hand holding in times of market volatility. Hence, a pure
online model may not be fully effective in India where we still have relatively
low levels of financial literacy and penetration.
Investor
stickiness, and with that long-term wealth creation, can only come if investors
follow the appropriate buy low, sell high model and stay invested even during
periods of turbulence.
While
robo advisors will emerge to address a segment of the population, the most
successful models will be those that combine technology with human touch. This
is also the emerging experience globally.
The
role of technology in building momentum for the mutual fund industry cannot be
denied. Assets under management (AUM) was close to Rs18 lakh crore as of
February 2017, growing by over 22% annualized in the past 5 years and 18% in 10
years. Over 13 million systematic investment plan (SIP) accounts with a monthly
throughput of over Rs4,000 crore; 5.5 million SIP accounts added in the past 2
years till February 2017 versus 7.5 lakh in more than 20 years till March 2015.
To
continue this momentum, it is important to leverage technology as an enabler to
improve distribution reach across the length and breadth of the country using
the JAM trinity, reducing the cost and improving the ease of investing in
mutual funds.
I
firmly believe that the future is not technology versus humans but technology
with humans.
Sanjay
Sapre is president, Franklin Templeton Investments–India.
Source | Mint | 11 April 2017
Regards
Pralhad
Jadhav
Senior
Manager @ Knowledge Repository
Khaitan & Co
Upcoming Event | MANLIBNET 17th Annual
International Conference on 15-16 September 2017 at Jaipuria, Noida, India
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