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Increase The Accessibility Of Financial Services At The Bottom Of The Pyramid

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Increase The Accessibility Of Financial Services At The Bottom Of The Pyramid

Suvrata Acharya, Global Delivery HEAD & SVP, NIIT, 0

Suvrata has been associated with NIIT for over two decades now, prior to which he was a Research Scholar at Indian Statistical Institute.

In December 2019, world’s leading investment bank Goldman Sachs(which would normally not accept clients with less than $25 million of assets), announced that it would start serving clients even with investment as little as $500. The cost to service investment products is generally high so banks charge a higher fee to their customers. On the other hand, low cost alternative models such as roboadvisors have failed to create the desired scale due to lack of trust. There could be multiple reasons for that failure. One reason is that the customer expects the product and service should meet their primary purpose for investment. They do not opt for some thing, which is priced lower yet does not meet their purpose. Average investors looks for financial advice that suits their life’s goal at a minimum fee. They expect their banks to provide the same service. However banks so far are focusing on rich customers because of higher premium and no investment need in new infrastructure. Meanwhile platforms used by the banks currently cannot support the larger demand at the bottom of the pyramid. This is leading to an incremental shift towards modernization of platforms. The strategy to modernize IT platforms consists of two parts.

First part is to migrate to a scalable infrastructure, which can help in developing interfaces for the new customer base. Taking a big-bang approach is time consuming and requires a very high capital investment. In today’s economic environment firms do not want to take the risk of blocking their money for a longer period without a ROI. They prefer an approach that consists of incremental capital investment and continuous return. This is possible by adopting a modernization strategy based on usage based technology platforms such as cloud-based infrastructure, which does not require upfront investment in high end servers and data center. Most of the existing platforms are based on monolithic architecture which cannot be moved to cloud directly. Going for rearchitecture is time consuming and capital intensive process. Instead, a service based roadmap is preferred, based on market penetration strategy and prioritized business services that will have material impact on the customer. The normal strategy starts with developing the customer facing interfaces. The rapid proliferation of smart phone-based technologies has helped in taking the new services faster to the end customer. New Mobile service offered by banks can be rolled out faster and in
turn bring faster impact. For example, banks can provide a catalogue of financial advices with fees along with a chat bot on their mobile. This model has been effectively implemented by the low cost airlines.

Overall dynamics in the industry will change to allow new players who can play pivotal role in this shift. collaboration among tech companies and asset management firms will increase the access to niche products and premium services


Second part of the strategy is to adopt a development strategy to keep the platform nimbler. The bottom of the pyramid dominated by the newer generation of customers are more tech savvy and their choices change from time to time. This will require high degree of personalization and frequent changes in the platform. A carefully chosen platform selection that supports high degree of flexibility and automation will be ideal to this kind of customer base/market. Leading platforms like AWS and Azure are providing the features to build nimble business process. Low code technology and DevOps have become core to such development strategy. This will help the institutions to accommodate faster change cycle to retain the customers.

As the demand increases, it starts putting pressure on back office and other ecosystems. In case of financial services the complexity of core business processes makes the back office people intensive. There are myriad of applications running in back office catering to different product, process, market currency time zone etc. RPA and BPM technology have helped in bringing down the complexity partially. New platform players have brought unified platform but migration from older platform to new platform is complicated. The current ecosystem of market players are not prepared to handle the new/large scale. This brings the opportunity for newer market players who can provide intermediary services at the bottom. These players could play an integrator or aggregator role based on the geography and market they operate.

According to analysts globally there are $51 trillion of uninvested assets, lying primarily at the bottom of the pyramid. Service to this segment requires a technology centric business model. Each business process needs to be redesigned to leverage the digital and cognitive technologies. There will be a seismic shift in the industry and new ecosystem will be created to serve this market. Blockchain will play a key role in simplifying the back office processes. Artificial intelligence will bring efficiency in customer experience and risk management. Overall dynamics in the industry will change to allow new players who can play pivotal role in this shift. Collaboration among tech companies and asset management firms will increase the access to niche products and premium services.

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