Podcast 28th October 2015
The consumer has never had it so good. The internet has brought about a consumption revolution where no product can be mispriced and missold. The consumer can compare prices of products, check reviews and choose to buy a product.
Financial services/Products are still evolving on the internet. Buying of insurance online has become simplified with many comparison platforms making it easier for the consumer to compare costs and buy an insurance. Broking services are cutting down costs to attract volumes and that is benefitting the consumer. Bank fixed deposits are compared for returns making it easier for the consumer to choose the highest yielding deposit amongst banks with similar risk profiles.
Credit too has moved online with comparison sites offering the consumer the lowest cost of borrowing.
Mutual funds are still evolving on the internet. There are many online platforms that offer the consumer choice of funds but they work on commission basis and costs are not very transparent. Online advisory platforms are emerging that offer advise on the right funds to buy and here costs will be a big factor for the consumer in selection of both platform and the fund.
Hedge funds and private equity funds are yet to make a big presence online as they are largely distributed to very high net worth investors. It will be a matter of time before these funds are sold online as well and costs are bound to come down for these players as they have become increasingly commoditized in their offerings. In fact pension funds world over are taking money out of hedge funds as costs are disproportionate to returns.
In India, distribution of financial services/products is still driven by intermediaries. This keeps costs high as commissions take away a lot of revenue for the financial services firms. How long will this last as it is definitely out of sync with today’s internet times?
The regulator SEBI as well as the government are in favour of lowering costs of consuming financial services. SEBI has infact sounded out ecommerce firms such as Amazon and Flipkart to sell financial services as their reach is high and cost of distribution can be brought down substantially. The government is recommending a sharp reduction in fees paid to intermediaries to avoid misselling of financial products.
The current generation that is brought up in the age of technology will want to consume financial services and products online and will keep a keen eye out on costs. This has major implications for the financial services industry.
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