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POWER POINT
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Explore Opinion | Retail financial services in the 99+
e-paper
next decade
Home 2 min read . Updated: 06 Jan 2020, 06:00 AM IST
Smita Aggarwal
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Budget 2020
India has made rapid progress in financial inclusion,
NRI Investment Queries
formalization and digitization of financial services. As we begin
the new year, here’s a peek into what the next decade holds for
retail financial services.

Relevant and contextual products that address the needs

of consumers: Consumers have used credit as a single blunt
tool to meet most of their financial needs—whether to build a
house or pay school fees or to meet a health emergency.
Proportion of unsecured debt in total liabilities of a household
is among the highest in India at 56% and it often comes at a
cost that is detrimental to the financial health of the
household. Ideally, planned expenses should come out of
savings. Sudden shocks and losses like health emergency
should be covered through insurance and credit should be used
to purchase assets, acquire new skills or to grow a business.
Indian households hold less than 5% of their assets in financial
products. This provides a great opportunity for banks, asset
managers, neobanks, insurers and fintechs to design products
beyond credit that are simple, relevant and affordable.

Business models that are built on winning the trust of

the consumers: The future of sustainable and scalable
businesses lies in creating win-win solutions, i.e., offering
products and services that serve the interest of the consumers
and make profit. Edelman Trust Barometer, which measures
trust in institutions across various countries globally, shows
that financial services is the least-trusted industry among all
the respondents. Financial services in India is expanding
rapidly and there are many first-time customers being brought
into the fold. Building their confidence in using new services is
important through simplicity in communication, transparency
in charges and reliability in deliverables.

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Creative use of customer data in providing a better value

proposition: The account aggregator framework would
provide easy transfer and usage of data with the consent of
consumers. This shifts the power balance in favour of
consumers and allows them to go to whoever is offering the
best service or product at the right price. Going forward,
success of financial service providers would not lie in
generating and hoarding lots of data about consumers. Instead,
success would be in creatively using that data for the benefit of
the consumers. Use of non-financial and continuous data
streams about consumers opens up new opportunities for
tailoring products, while also placing additional onus on them
to use it responsibly.

Role of big tech players in financial services: Consumer-

centric tech platforms that aggregate multiple needs may
emerge as a natural choice for availing of financial services. The
customer engagement model would change and different bank
and non-bank entities may assume different roles in a single
service from customer origination to product and analytics to
risk management. In the US, tech giants like Google, Apple and
Uber have announced their strategies for financial services. In
 China, two large giants, Alibaba and Tencent, dominate the
financial services market. In India, the market is likely to be
more fragmented with multiple players being successful in
their chosen segments.

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New technology-driven models will challenge existing

regulatory frameworks
frameworks: Regulators and policymakers would
evolve too, with access to digital tools for supervision, blurring
of jurisdictions in an internet-driven world and new emerging
risks to address. Innovations by regulators around digital
currency, regulatory sandbox, cross-border collaborations,
activity-based regulations would lead the way for the industry
to reinvent financial services that empower and improve
people’s lives.

Smita Aggarwal is a fintech investor and advisor

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