When the second wave of the Covid pandemic hit at the beginning of April 2021, it was a rude shock for India, which was largely hobbling back to normalcy. People didn’t seem to be in a hurry to get vaccinated and travel and work started opening partially in February and March. The lockdowns in 2021 spurred the activity on the vaccination drive as well as the digitalisation of services, which had picked up speed in the second half of 2020 as companies looked at innovations to ease customer services.
In 2020, as India went into a nationwide lockdown to contain the spread of the virus, and the new reality of the pandemic set in, new ways of doing business and connecting with investors and consumers took form. Remote work quickly went from being the exception to the norm, and businesses and services shifted from the street to the screen.
McKinsey, in its October 2020 Survey, titled How COVID-19 Has Pushed Companies Over The Technology Tipping Point—And Transformed Business Forever, states, “The Covid-19 crisis has brought about years of change in the way companies in all sectors and regions do business. Companies have accelerated the digitalisation of their customer and supply-chain interactions and of their internal operations by three to four years. And the share of digital or digitally-enabled products in their portfolios accelerated by a shocking seven years.”
While the onset of the pandemic accelerated digital transformation in 2020, the subsequent shocks in 2021 brought digitalisation sharply in focus. In particular, the need for digital connectivity to replace physical interactions between investors and financial service providers got a big boost. Some of the measures that were rolled out in 2020 came to fruition in 2021.
“The Covid lockdown suddenly put a pause to all offline interaction routes and online was the only way to stay connected with investors and partners. Even though digital was already an important aspect for us, a new sense of urgency came about due to the lockdown. The adoption of digital was accelerated and re-imagined also to ensure that the investment journey for investors remains seamless. This led to innovation in investor onboarding and empowering our distribution partners with digital assets, which we had imagined would be done in the next two-three years, but it was suddenly being executed and adopted within a year’s time,” says DP Singh, executive director and chief business officer, SBI Mutual Fund.
In its previous issue, Outlook Money covered in detail how the Gen-Z and millennial generations took to investing in the stock markets during the pandemic as they remained glued to their gadgets while attending classes or working from home. This was largely on the back of increased digitalisation as various brokerage services and fund houses did away with the need of physical presence and verification, started providing online updates and solving queries and grievances virtually.
“Digitalisation in the finance sector offers huge opportunities to all stakeholders and investors are at its core. It has transformed the lives of investors in many ways. It caters to their financial needs in the comfort of their homes or offices, (helps) avoid visiting branches, long queues and writing cheques,” says Mukesh Agarwal, chief executive officer, NSE Indices.
Advanced data science and artificial intelligence (AI)-based tools have eased investing in the stock market and mutual funds like never before. “There is a significant change in the needs of customers who now prefer to do everything online. Products and services are being revamped to meet the requirements of both old customers and the new generations,” says Vamsi Krishna, head, product and marketing, Axis Securities. “In the last year, the scale of the business has increased multifold, and digital adoption has taken a quantum leap.”
Easier Know Your Customer (KYC) Process: The capital markets regulator, Securities and Exchange Board of India (Sebi), has prescribed requirements under the Prevention of Money Laundering Act, 2002, for financial institutions and financial intermediaries, including mutual funds, to know their customers.
KYC is the process used for identification of a customer whenever you open an account with a financial entity. KYC establishes an investor’s identity and address through relevant supporting documents such as a prescribed photo identity, say a PAN card, and address proof.
To invest in any mutual fund, an investor needs to be KYC-compliant. Earlier, this process was cumbersome as you had to submit physical documents to the fund house or its registrar. Also, it used to take longer. Now you can do online Aadhaar-based KYC (through a one-time password) or video KYC and start investing in a fund of your choice instantly. Mutual fund distributors have also upgraded their infrastructure for digital KYC. “We have witnessed our partners gradually easing into the use of web-and mobile-enabled assets. The distributor applications are growing as office-on-the-go solutions for our partners,” says a spokesperson of UTI MF.
Two of the exchanges, NSE and BSE, which offer digital infrastructure for mutual fund transactions through NSE NMF and BSE STAR MF, respectively, allow for digital KYC and paperless onboarding for investors. Distributors can also initiate a KYC link for their investors either through the fund house’s website or through MF registrar portals of Computer Age Management Services (CAMS) and KFin Technologies (KFintech).
Paperless Onboarding: Most mutual fund and stock broking companies have made their customer onboarding process paperless. “We have moved our customer onboarding to a 100 per cent paperless KYC process with e-Sign and AI tools that do the liveliness check in order to prevent fraud. This AI tool helps us identify the real person doing the KYC. We have also launched our new flagship mobile app, Axis Direct RING, which has advanced tools built on data science to help the customers screen stocks and identify investing opportunities,” says Krishna. Axis Securities also launched the Robotic Process Automation (RPA) for frontline executives for customer service requirements. Under RPA, software robots perform a wide range of defined actions such as understanding what’s on the screen, navigating the systems, and identifying and extracting data. Many other broking houses have also launched similar features to on-board their investors. This has reduced the turnaround time of investor onboarding drastically.
MF Central: Two mutual fund registrars, CAMS and KFintech, jointly launched MF Central in September 2021.
MF Central offers digital access to investors of the entire mutual fund industry, under one roof. Earlier, if you had invested in two schemes served by two different registrars and wanted some information or had some service-related issues, you had to visit the two different registrars separately. With MF Central, you have access to all the information about schemes you have invested in at one place, irrespective of the registrar servicing the fund house.
On top of that, you do not need to create any account. You just need to enter your PAN and registered mobile number to get all the details. As per CAMS data, the platform witnessed over 75,000 registrations in the first month of launch in September.
“Our digital properties, CAMS website and myCAMS (the app for investors) clocked new highs in investor usage. We further expanded the digital suite for investors with the launch of MF Central, the unified portal to service investors across all mutual funds,” says Anuj Kumar, managing director, CAMS.
According to the registrar, myCAMS app has been adding 1 lakh new investors every month and crossed 1 crore logins in September 2021. Besides, the website saw 21 lakh visitors every month in the last two quarters.
eNACH Mandates Simplify SIP: Gone are the days when you used to give signed forms of National Automated Clearing House (NACH) to your broker for the registration of systematic investment plans (SIPs) and had to wait for the details to be registered with your bank for a week or two.
Under eNACH, there is no need to fill out a form, and other logistics and human interaction is also limited. It takes just a few hours in the backend for the process to be completed and activated. You can activate this either by logging in to your internet banking or through a debit card.
WhatsApp for Business Services: Fund houses have launched WhatsApp-based services for both investors and distributors. This helps investors get updates on their investments, net asset value (NAV) of the fund, account information and account statement on a
Changing The Lives Of Investors
The digitalisation leaps made by the mutual fund industry and brokerage houses are empowering customers to make informed decisions. “Not only the new generation but also existing customers are preferring digital modes,” says Krishna of Axis Securities.
Investing in the stock market is all about accessing real-time data. Thanks to solutions like AI and machine learning, all this can be at the fingertips of investors whenever they want it. “Investors would be able to screen all the scrips that are being traded, form an opinion, identify the opportunities, predict the probability of profit, calculate the risk to reward ratio, and do many more things in a split second. With such AI-powered tools, investors will also be empowered to not only identify the opportunities but also assess when to exit the markets,” says Krishna.
Fund houses and brokerage houses are using social media platforms such as Twitter, Telegram, Facebook and others to promote products and services. Most of them are using these channels to educate investors.
The Road Ahead
The removal of friction in processes and creation of a smoother interface for investors is definitely a good start and a sign of further digitalisation in the future. “Both our investors and distributor partners are responding very well to our digital initiatives. Going by value, approximately 93 per cent of our business comes through digital channels. The majority of our launches have resulted in enhanced customer services along with new business acquisition and increased business,” says the UTI spokesperson.
“Digitalisation coupled with fintech is going to be the game changer and will disrupt things like never before. In the next three-five years, we will see a big impact. As far as mutual funds are concerned, digitalisation coupled with low-cost products such as new indices-based exchange-traded funds (ETFs) will change the market dynamics,” says Waqar Naqvi, market veteran and former CEO of Taurus Mutual Fund.
However, some key issues remain unaddressed, and the experience needs to be smoothened further. For instance, you can do new KYC online, but if a change is required, you will still have to resort to a physical application form.
Moreover, the government has been pushing for Central KYC for all financial products, but it is yet to see the light of the day.
As technology and technology-led products seep into the lives of investors, there is multi-fold growth in investments. The swelling assets under management of mutual funds and the unprecedented number of investors signing up for demat accounts is indicative of the rising adoption of digitalisation. The numbers need to be channelised now to get the best results.