Financial markets are fragmented, and less than 24 per cent of the population has financial literacy. The right investment decisions can be made with the help of reliable information and tools. There is a large percentage of the population that lack literacy, which poses a great challenge. To know more about the prime challenges and opportunities of the banking sector, Srajan Agarwal of Elets News Network (ENN), had a conversation with Jitendra Dhaka, Founder, BankSathi.
1. The world of banking has faced unprecedented change over the past few years. Do you agree that data and its management have now become a significant part of financial institutions?
Yes, with the advent of UPIs and the transformation of physical currencies into digital currencies. Nowadays, more and more transactions are conducted online. As a result, it differs from traditional banking, which involves physical intervention and a lot of paperwork. As more and more users go online, the need for data and its reliance has become paramount as customers have access to dashboards provided by the banks for tracking and recording all transactions. This has created a lot of transparency in the system and made transactions easier.
Now that banks / financial institutions have access to data, they can provide customised solutions to their clients.
The right questionnaire is floated to the customers and data is gathered so that products can be recommended on the basis of demographics, age, income groups, and investment goals.
This would help the financial institutions position the product more effectively and the customers could make better decisions.
2. How does BankSathi stay abreast of India’s evolving financial landscape?
Currently, the financial markets are fragmented, and less than 24 per cent of the population has financial literacy. The right investment decisions can be made with the help of reliable information and tools. However, a large percentage of the population lacks literacy, which poses a great challenge.
Banksathi’s channel partner system by onboarding agents and financial consultants gives the right set of tools to empower the partners in the network to sell the right product to the customer. Consultants can expand the existing portfolio by offering an array of products and services without going individually to the financial institution and maintaining a multitude of different ID’s. Everything would be available to them under one umbrella and the commissions/incentives are available from a single channel.
This enables the agents/consultants in providing better services to clients and helps them in the decision-making process.
3. According to different statistics, only 24 per cent of Indians are financially educated. Why do you believe having financially knowledgeable people is important in this nation?
Financial literacy has become one of the topmost priorities, it helps to improve the quality of financial services and contributes to the economic growth of the nation.
According to a global survey, financial literacy in India has been seen as significantly poor compared to the rest of the world. However, 76 per cent of its adult population is unaware and doesn’t even understand basic financial concepts. In Asian countries, Singapore attains the highest per centage of financially literate people (59 per cent adults). In western countries like the USA, it scores 51 per cent-100 per cent. In European countries like Norway, 71 per cent of people are financially literate. In India, there is a lot of disparity between different states and the rate of literacy is extremely low in states like UP, Bihar, Rajasthan etc.
It is seen that most people are often misled by their sales or insurance agents. Financial awareness helps people to become independent and self-sufficient. It helps to understand questions and solutions explained by their financial advisor. If the people are financially literate than the level of investment will increase and it will help the development of the nation.
4. Given that you are present across much of India, what are the prime challenges and opportunities you have seen and what solutions are you working on?
There are a few challenges. The most common is the myriad of languages in India. Advisors prefer to speak and read their local language. We are working on introducing our mobile app in multiple languages so that advisors can easily access all content and videos in their preferred language. The app will be available in Hindi, Marathi, Bengali and Telugu.
We are also improving our mobile app experience by adding more features and making it more user-friendly. We want to ensure that they do not have any regrets about using our platform, we want them to be happy with their choice.
5. What are the prime challenges and opportunities for the Indian banking sector?
If we talk about the economic growth of the country, banks are the backbone of the economy. Especially in developing countries like India, the banks are the pillars and they play a crucial role in activating and sustaining economic growth.
The majority of India’s population lives in rural areas and does not have access to formal finance, which is a problem for developing countries like India.
The challenge for the banks is to ensure that customer needs are met in a cost-effective manner. The advent of technology and competition have given rise to customer expectations. Banks need to create a positive image among customers by offering attractive products and services, which include ATM facilities, internet banking, mobile banking and bill payment etc.
In order to survive in this highly competitive environment, banks need to focus on their core capabilities and enhance them further by providing innovative products and services.
Increase penetration level-
The Government of India and the Reserve Bank of India (RBI) have been making concerted efforts to increase banking penetration. To achieve this success, the government must consider out-of-the-box ideas. Rural areas aren’t really equipped with the latest technology, but this offers opportunities for innovation.
The Indian economy is growing at a rapid pace and it has a large population base that can benefit from more banking services. If banks can increase their reach in rural India then they will be able to tap into the huge potential that exists there.
It is essential that its unbanked population has access to a variety of products. Thus, there is a need to have different schemes for rural areas and urban areas. Furthermore, distinct schemes can be made on the basis of the nature of employment of people. For example, daily wage labourers can be allowed to make tiny deposits on a daily basis.
Thus, banks should offer different types of products like savings accounts, term deposits and other such facilities to suit the needs of their customers.
Banks should provide flexibility in terms of deposit rates or interest rates on loans. This will help them attract more customers as they would not be bound by some fixed rate or ceiling on interest rate or fee levels as long as they are compliant with regulatory norms.
The most important aspect of financial inclusion is financial literacy. There is a lack of awareness, especially among people, both rural and urban.
Financial literacy includes knowledge and awareness about the use of money, its importance and the types of financial products available. It is necessary for any person to fully understand his or her financial situation, to make sound decisions and make informed choices about investments, loans, insurance and savings.
In this case financial advisors play an important role in creating financial awareness and promoting financial products.
Role of Information Technology –
It is important for banks to ensure that their customers are able to access their services at all times, even in remote areas. Today, some banks are already offering services over mobile to communities that have been ‘unbanked’. In rural areas, where accessibility is a problem, financial advisors are playing a vital role to bring more people under the ambit of banking services.
In India, only 200 million people have access to bank accounts, while 811 million have a mobile phone. Mobile banking has the potential to emerge as a game changer in terms of costs, convenience, and speed of reach. Banking industry’s penetration into unbanked areas, remains sluggish. Banks must adapt to technology and upgrade their services.
6. What are the security measures you are undertaking to curb fraud and cybersecurity attacks?
We use private APIs and multi-layered security tokens. In addition, we use a full structure code base. In addition to that, we have documented coding guidelines for developers that they need to follow and the team lead checks them usually. Apart from this, we conduct VAPT tests from time to time to check our security.
We have an automated test system that was developed by us in collaboration with our developers and QA engineers. This system is used to test all our APIs before they are deployed into production environments so that there will be no issues after deployment or during the testing phase.
We also maintain a database system that stores information about users, passwords, and other details related to them so that if someone hacks into the system, they won’t be able to access other user’s information as well (for example if someone hacks into your data base then he/she won’t be able to see other users’ data).