By Srinath Sridharan
Decades ago, we started off as a democratic socialist in thinking, with the aspiration to become an inclusive-capitalist market. Our financial regulations, thus, have kept the “consumer protection” aspect at the core, sometimes at the cost of actually designing or demanding products from the sectoral players instead of merely setting the boundaries.
The basics of financial inclusion is to make sure that the consumers have access to products and choice of relevant products that suit their needs. A true “market economy” will only come to be when those consumers can reject any product as not suitable or acceptable to them.
Yet, time and again, in our quest for financial inclusion, we have attempted many ways of distribution to maximise reach of financial products. We are still in the “sell” mode for financial products, rather than “solve”. Licence-hoarding and the belligerent valuation run-up of BFSI entities over the past two decades is rooted in this.
Observing the way airlines operate in an airport gives shape to an idea for the BFSI sector. At the departure terminals, there are many check-in counters, with demarcated zones for different airlines. The same counter could be used by different airlines at different times. All those counters are leased by the airport operator to the airlines. In fact, most of those counter staff could have been outsourced to an external staffing or aviation services agency, to run those operations based on each airline’s Standard Operating Procedure (SOP).
Each of the counters has its technology linkage to a specific airline, and, hence, data confidentiality and data security can also be assured, even though the global reservation system has various airlines as its members. This is the open-platform method of services.
Imagine this idea being applied to the concept of BFSI—across financial regulators. Instead of myriad products ‘sold’, consumers need financial solutions only for three reasons: borrow for a reason (lending industry, regulated by RBI), invest surplus funds (investments, regulated by SEBI) and insure their life, property, health, etc (protection, regulated by IRDA). Imagine a 3,000 sqft “multi-finance-brand” branch with multiple counters; each counter having a different finance-brand (licensed & regulated). A customer can go to the particular brand counter and fulfil her BFSI needs, depending on which category the brand belongs to: banking/NBFC/HFC/MFI/ insurance/AMC.
This sharing of physical space as well as availability of multiple financial services brands, stitched together with the digital capabilities and linked to strict regulatory supervision under one roof, can help solve many consumer problems.
The Indian e-commerce market has shown meaningful integration between physical and online adaption, as well as services delivery. This has enabled digital platforms to offer personalisation of services and products with physical-digital integration. This concept of “phygital” delivery of services has been hastened and stress-tested by Covid-era compusions.
Our financial entities have shown that they can continue their operations in the digital mode, as well as use the JAM trinity (Jan Dhan, Adhaar, Mobile) for reaching all consumer segments. If only our financial entities work with this phygital construct as their survival-act, and not as an after-thought, we can start delivering better impact and inclusion—both social & financial.
This “ phygital, multi-brand BFSI” (PM-BFSI) branch can bridge many gaps in the financial services distribution system today. If there is one such multi-finance-brand branch in each of the 19,000+ PIN codes we have in India, won’t that be a better financial inclusion attempt, apart from working for consumer convenience? Over a point in time, some of these multi-brand branches might become redundant as the adoption and usage of digital to transact increases substantially.
The financial regulators have to stitch up a framework together and work in tandem. They, along with the industry players, can bring in a common code of conduct and minimum standards for consumer-facing roles to enable better and friendlier consumer service. Then, we can have a conversation about financial inclusion and the actual socioeconomic impact as a correlated theme.
Are our financial-service regulators ready to work amongst themselves, in looking at new ideas to improve “access to finance”? Will they override their institutional biases and perceived hierarchies amongst them? Are these stakeholders ready to encourage digital finance through progressive regulations that encourage the participation as formal licensed players in the industry?
It is all in the mind, the regulators’ mind! And that of the committees that might look into these ideas and public comments, if at all, to move an idea into executable-policy and then set it into motion.
Corporate advisor & independent markets commentator. Twitter: @ssmumbai
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