Category: Banking & Finance

She said there are lot of changes happening in the banking sector at a fast pace through digitisation. (File)

Union finance minister Nirmala Sitharaman on Sunday said the government was able to bring back normalcy with regards to mounting non-performing assets (NPAs) in most of the public sector banks that have been a cause of concern since 2014.

The Centre, apart from infusing required capital, monitored  the PSU banks with regular assessment and reviews while taking prompt corrective actions.

Inaugurating the centenary celebrations of Tamilnad Mercantile Bank (TMB) at Tuticorin, Sitharaman said the problems in banking sector are major problems that concern the entire country which also made everyone feel concerned about the sector.

“Post 2014, we had witnessed major NPA problems in the PSU banks, it took five to six years to reverse the trend and bring back normalcy in most of the banks. While the banks spent energy in the recovery process, even as trying to grow their businesses,” she said.

While speaking on bringing about the efficiency in the banking system, she said the way forward for any bank was to adopt complete technology-enabled solutions.

“Today financial technology is the biggest area and using that we could cross-populate data into forms. Auto-populating data of a consumer has been very useful and it can be done only through digitisation and the management of TMB should think of greater use of digitisation. Digitisation cannot be avoided for your own good and for the sake of customers,” she said.

She said there are lot of changes happening in the banking sector at a fast pace through digitisation. “There is no necessity to open a branch in a place which does not have a  bank. To reach a customer’s bank account of the people who live there, all kind of technologies are available today. Even sitting from Tuticorin one can serve the banking requirements of people living in small villages through technology”, she said.

Sitharaman said even during Covid-19 pandemic with the use of digitisation through banking correspondents, the government’s financial disbursements were distributed to the needy after verifying their details.

“Prime Minister Narendra Modi was clearly aware that banking is important and did not hesitate that there can be zero balance accounts if they were opened under the Jandhan Yojana scheme, launched in 2014. He ensured that every one must hold a bank account and be able to transact,” she said.

K V Rama Moorthy, MD & CEO, TMB, said, “To help borrowers to overcome the adverse impact of Covid-19, till date, the bank has covered 13,753 beneficiaries and the exposure to the tune of Rs 1,567.62 crore. In the era of digital banking, we were the first bank to introduce robotics in currency chest to sort and bundling of currencies in order to provide quality service to the customers. Disbursement of loans to pharma and health care units will be at the heart of a year- long series of events and initiatives from us.”

It has been seen historically that disruptions in daily experiences, which can bring about long-lasting behavioural change, are rare. In ordinary times, consumers prefer holding on to old habits, with a very slow adoption of new methods that require them to change the way they have been traditionally thinking or interacting. It especially holds true for the financial services sector, mostly life insurance, which has typically been a traditional product.

However, the pandemic caused customers to change their behaviour – rapidly and in large numbers. Customers were forced to adopt newer ways of doing everyday activities, from grocery shopping to office work to online education for kids and even financial transactions, offering new experiences.

Long-held beliefs

When individuals are delighted by new ways, even long-held beliefs can change, making them more willing to repeat the behaviour, even when the trigger (in this case, the pandemic) is gradually easing out. The life insurance industry, too, experienced the same change and took some of its biggest leaps, in terms of digital, customer service and underwriting in the last one-and-a-half years. The next new normal will be all about focussing on these changing customer behaviours.

The ‘everything digital’ customer

Today, almost all age groups have begun to adopt a millennial mindset when it comes to digital. Speed and ease of transaction will be seen as key differentiator in the days ahead. There will be a need to enhance use of data and accelerate digitisation for heightened customer experience. Artificial Intelligence, Machine Learning, along with intelligent automation, will be the key source of better customer insights and, thereby, faster turnaround.

This customer behaviour will force companies to transition out of legacy platforms and collaborate with ecosystem players to speed up their game, leading to enhanced customer experience and understanding.

The ‘I need more’ customer

The world witnessed a massive shift in the purchasing behaviour of customers – personalisation of every aspect of the customer experience. One-size-fits-all products will not appease customers in the next new normal. The customer will need adequate life insurance and would like to be covered for specific risks. Hyper-personalisation will take a leapfrog, and companies will have to focus on simple, innovative, and differentiated products to cater to policyholders’ emerging needs. This will lead to innovations in the space of protection and health-related covers. These solutions will be simple to understand, will have hybrid features or bundled offerings, and will be available across channels. Simplifying products and the insurance ecosystem so that the customer experience becomes less complex, more efficient, and more tailored, will lead to insurance offerings becoming bespoke, simpler and cheaper.

The ‘experience-focussed customer

Tomorrow’s customer will value life insurance providers who understand his/her needs well and keep customer engagement at the centrestage. Like other e-commerce platforms, the insurer should be able to predict customer needs in advance and advise them through proactive engagement, with a 360-degree view of the customer. Personalisation in terms of tailored solutions, service and even in language, will be a key differentiator, especially in a country like India. Quick response time, faster resolutions, and robust self-service capabilitieswill be the ask of the customer in the next new normal. Life insurers will have to strengthen their use of the decision engine or next-best-action technology to have relevant insights about their customers, carry out need-analysis and, thereby, suggest appropriate products in line with an individual’s needs and behaviour.

The ‘omnipresent’ customer

Customers today have become used to having access anytime, anywhere. They expect services to be available on their fingertips, wherever they are. Customer preference for easy process and digital channels will continue to be on the rise. There will be a critical need to expand service channels, providing more options to engage – physical branches, phone-based contact centres, chatbots, WhatsApp, Mobile Apps and social media. Phygital will be the way to go as this will also take care of the customers in Indian hinterlands who are still looking for physical access. This omni-channel, unified, and asynchronous messaging will help insurers engage with customers on their desired channel and at their preferred time.

The ‘health-conscious’ customer

Anything propagating health and wellness will enhance customer affinity in the future. The pandemic has resulted in an increase in proactive consciousness towards health, and customers will value companies that understand this evolving need. The future will see life insurers evolving as holistic protection partners.

Life and health insurance companies will need to ride on each other’s expertise and work on combo solutions, which can be a one-stop-shop for the insurance needs of a customer. The proliferation of data and connected devices, particularly wearables, will continue to make it easier for life insurance companies to play an active role in shaping customer’s health – to everyone’s benefit.

The industry might see several tie-ups with wellness partners to look at the complete wellbeing of their customers and, thereby, also reduce risks. A definite win-win for both customers and insurers.

The experience of living through the pandemic has changed the way people live and behave. Changes which offered positive experiences will last longer, especially the ones driven by well-being, convenience, and simplicity.

Thereby, digital adoption, value-based personalised purchasing, and increased health awareness will be the customer behaviours that will shape the next new normal. This will be a game-changer for the life insurance industry and provide an opportunity for the industry to think beyond the usual, innovate, and offer granular, value-based and integrated products to meet customer needs.

The focus will be on insurance offerings, which will combine risk transfer with proactive and value-added services and emerge as a differentiator. It will be critical for insurers to stay relevant and adapt with the changing times.

As the world begins its slow pivot from managing the Covid crisis to recovery, it’s clear that some of these shifts in behaviour will define the next new normal. It will change the way consumers behave, in some cases for years to come.

(The writer is the MD & CEO of Aditya Birla Sun Life Insurance)

Getting a loan could get more simple with the Reserve Bank of India’s Account Aggregator (AA) framework having gone live.

Instead of having to submit a long list of documents to the bank, loan applicants can now simply give their consent to digitally share bank statements with the lending bank or fintech – a process that could take days can now be done in just a matter of seconds.

This is just one example and experts say the Account Aggregator framework can help consumers in many more areas such as getting a consolidated view of their financial assets for better money management and availing multiple options to plan better investments and insurance.

“The Account Aggregator ecosystem can help provide authentic, comprehensive and latest data to a lender about a potential borrower. It minimises time and effort to be spent on fraud detection as all data is machine-readable, directly from the source. Bank statements, loan documents, insurance policies and investments can all be verified in this format,” said BG Mahesh, co-founder and CEO of Sahamati, a collective of the AA ecosystem.

“Financial data of a customer is spread across multiple banks, insurers, mutual funds, goods and services tax, other institutions and there is no consolidated view to access this information. AA creates this unified consolidated view,” said Sameer Shetty, President and Head – Digital Business and Transformation, Axis Bank, adding that AA is a secure way of sharing information, which has customer consent and data privacy as its core design principles

Axis Bank is an early adopter of the AA framework and went live with it in November 2020.

What is an AA?

An Account Aggregator is a type of RBI-regulated entity (with an NBFC-AA licence) that helps an individual securely and digitally access and share information from one financial institution he/she has an account with to any other regulated financial institution in the AA network.

“Data cannot be shared without the consent of the individual,” said the Finance Ministry in a recent release.

According to the RBI, the business of an account aggregator means the business of providing, under a contract, the service of retrieving or collecting information of its customer pertaining to financial assets, as may be specified by the bank from time to time, and consolidating organising and presenting such information to the customer or any other person as per the instructions of the customer.

Seven entities had received approval from the RBI to act as AAs, of which, NSEL Asset Data, CAMS FinServ, and Cookiejar Technologies with its product Finvu and FinSec AA Solutions for OneMoney have an operating licence. Three more – PhonePe, Perfios and Yodlee – have received in-principle approval, and there are many more in different stages of applications.

Many of the AA apps are already live on PlayStore and users can sign up for them to manage the consents given and even revoke them.

At present, asset based data, including bank accounts, deposits, mutual funds, insurance policies, pension funds, can be accessed through an AA.

Eight major banks, including State Bank of India, ICICI Bank, Axis Bank, IDFC First Bank, Kotak Mahindra Bank, HDFC Bank, IndusInd Bank and Federal Bank. have already joined the AA ecosystem and account for about 40 per cent of all bank accounts of the country.

Since the AA framework started on September 2, five of these eight major banks have also gone live with it and over 10,000 customers have already used it.

According to Mahesh, the major use cases have been for getting auto loans, small business loans, personal loans and personal finance management. HDFC Bank and Axis Bank have been using AA for auto loans; LendingKart has been using AA for MSME loans, while IndusInd Bank has been using it for Personal Finance Management.

Shetty said being an early investor in the AA framework helped Axis Bank in refining the customer onboarding journey to make it seamless. The lender is working on multiple use cases targeting retail and small business customers.

Sumit Gwalani, co-founder, neobank Fi, which is among the first fintechs to join the AA ecosystem, believes it has myriad use cases. The neobank plans to use the AA ecosystem to help users demystify their finances and plan their saving in a better manner.

“Users have multiple bank accounts, so when they leverage a feature like Ask.Fi, and ask for example how much they’ve spent, or how much they’ve saved, Fi can now give them an answer that scans all their accounts, in milliseconds,” said Gwalani.

“The AA framework is an excellent initiative that will compile all the digital footprints of the customer in one place and make it easy for lenders like us to access it. It will enable us to provide very quick turnarounds to our customers,” noted Manoj Viswanathan, MD and CEO, HomeFirst Finance.

Financial inclusion

Nandan Nilekani, co-founder, Infosys, has likened AA to what UPI did for payments and said that it can lead to democratisation of credit.

“If a business has a digital footprint of its business, then that information can be used by a lender to make a decision to give that SME a working capital loan,” he had said at an online event to launch AA by iSPIRT.

Mahesh also said AA can help in financial inclusion as many people who are new to credit or do not have a bureau score but still have proof of regular income may be able to qualify for a loan.

While there can be many more use cases for account aggregators over time, experts point out that there is also a need to build more awareness among consumers about this.

Also, the AA network will become stronger with more banks and financial entities joining in. Only entities registered and regulated with any of the four regulators can join the AA network.

Despite facing challenges, Tamilnad Mercantile Bank (TMB) has exhibited an impressive performance and attained new heights, said Finance Minister Nirmala Sitharaman.

“Today, the Indian banking sector is stable after continuous prompt steps taken by the Central government. Many banks in the public sector have come back to normalcy now. At the same time, TMB, while facing similar problems, performed well and managed well and sailed through the sectoral problems,” she said while launching the centenary celebrations of TMB at Thoothukudi in southern Tamil Nadu.

“This is not a small achievement; there are many companies and organisations that have lost their path after years of existence. But, with an existence of 100 years in the banking sector, TMB has done extremely well,” she added.

The lender started as a small-level bank and has now spread its services to 26 States and 4 Union Territories.

“The bank, which started as a community bank in Thoothukudi, has spread across the country and reached new heights, she stated.

Highlighting the bank’s formative years and its contributions in the priority sector areas, Sitharaman acknowledged TMB’s efforts in digital banking, and urged to take it to the next level.

“The banking technology has reached great heights, even without opening branches in rural areas, through digitisation, you can offer banking services. So, the way forward for any bank, particularly TMB, is digitisation. Technology-related solutions take away a lot of other problems. Fintech is the biggest area, using which we are able to cross populate data. Auto population of data, which is available, can assess credit rating, and this is possible only with digitisation. I am sure that TMB management is thinking of greater digitisation to ease out the process of banking for the bank and the customers,” she added.

“TMB has always added value to all the stakeholders for the last 99-plus years. The bank has stood the test of time and seen various historical events such as independence, emergency, liberalisation of the economy and, most recently, the pandemic,” said KV Rama Moorthy, MD & CEO, TMB. He added that to help its borrowers overcome the adverse impact of Covid, the bank has covered 13,753 beneficiaries for ₹1,567.62 crore till date. In the era of digital banking, we were the first bank to introduce robotics in currency chest to sort and bundle currencies in order to provide quality service to the customers.

New initiatives

As a part of the centenary celebrations, the bank kickstarted multiple initiatives. Sitharaman launched a TMB ‘postal stamp’ and a specialised ‘postal card’. She also flagged off the ‘TMB Mobile DigiLobby’ vehicle, which helps customers withdraw and deposit cash and print passbooks at their doorsteps.