Mobiles as a device of choice for Financial Markets – Interview of Mr. Jayesh Shah, MD & CEO, Prism Cybersoft
Is it correct to assume that next generation of financial services technology reforms will be led by mobile phones in India?
Yes it is true. India is the second largest mobile user country in the world after China with 77.6 connections per 100 citizens. Mobiles are now at the centre of several technical advancements in consumer facing businesses. Its usage is far ahead of any other device like laptops or desktops. Messaging and other applications are changing people’s habits. They are now continuously hooked to their mobile phones. Habits are changing and vendors need to exploit these changes in habits. A popular retail fashion portal recently closed down its website citing far more use and purchases by users of its mobile apps than its website. They also noted that customer loyalty was far higher in case of mobile app users than website users. In financial services too, every bank and financial services offering company is coming out with its own app. Customers are now getting comfortable in making purchases and moving money through their mobiles. We see a day when payments will completely shift to mobile phones. All this indicates that the mobile will the preferred channel for financial services consumption.
Why do you believe mobile will play such an important role?
Mobile industry in India has seen a revolution. Penetration is deep and it is acting as an agent of social change. With 60% of Indians less than 35 years of age, and a whole lot of them subscribing on internet on mobile, the whole concept of service delivery will change. Mobiles are ubiquitous. Android devices are now available at less that USD 100. Few days ago Google also announced its intent to launch mobile phones for USD 50. This will empower youngsters and individuals living in rural areas like never before. Like other services, financial services industry offerings will need to get aligned to deliver services on mobile phones. Youngsters don’t like to visit branches or service centers. Brokers and Financial Institutions will have to push services to them and delivery through internet will gain a lot of significance. Aadhar can now have mobile numbers updated against them. This also opens up a lot of opportunities to deliver services through mobile phones. Similarly, mobile money will also drive financial inclusion. This will give a boost to capital markets because more individuals will now open trading accounts and will also subscribe to mutual funds.
What is the role of telecom companies in increasing the penetration for financial services on mobile?
Globally, innovation on this front has happened not only by banking and financial services companies but also by mobile operators pushing for such services through the mobile phone. Normally, experience of other similar countries like India have shown that the business case for banking and financial services companies to push financial services for the un banked on mobile phone is weak. They like providing additional services to their existing client base rather than helping to acquire new ones. Adding new unbanked clients through mobile financial services is an area lucrative for telecom companies. Hence both need to come together. Telecom companies need to take up from where banks leave. Then this market will see rapid expansion. In fact this is the reason why we see so much of interest of telecom companies in setting up payment banks.
Coming to capital markets, what is happening to internet based trading using computer and laptops?
With the screen size of mobiles increasing and that of laptops decreasing, software vendors have started taking mobiles and tablets very seriously. My observation is that people are not actively using laptops and desktop computers for trading and accessing their reports now. They are more hooked on to their mobiles and are sending orders from such hand held devices. This trend is only going to increase. Mobiles truly allow people to move. A laptop or desktop ties people down to their offices or homes. There are restrictions on trading and on accessing trading sites from office. In such cases mobile phones come in handy. These days’ people open their smart phone, watch the market and enter 2-3 orders in their lunchtime. Mobiles are adding a new category of traders who otherwise didn’t have the time or wherewithal to trade. Increase in trading volumes through mobile also endorses this. In some brokerages about 10% of the trading volumes are coming from mobile phones. On one of the exchanges, trading volumes from mobile went up from INR 1932 Cr in January 2014 to INR 3742 Cr in November 2014.
What about user interface and experience?
There was a time when mobile interfaces used to be very basic and speed was an issue. Now mobile devices have very rich and colorful user interface. Most of the mobiles today allow multitasking. Earlier, people were afraid that in case they take a position in the market and are unable to square it up due to poor connectivity, they will face a loss. But now on connection side, with 3G proliferating and 4G being launched, speed of connectivity is usually not an issue. I am convinced that mobile trading is the future. It will be used more than desktops and laptops. One of the challenges that the industry will need to meet is providing this same service over 2G networks because 3G services will not be available in hinterland and rural areas.
Is back office functionality also coming on mobile?
Yes traders and investors want to access their important reports like bills, margin details and pay-in, pay-out details on their phone. The need is not for all reports and communication but for important ones. The challenge for brokerages and vendors like us is to push relevant and important parameters to their mobile for consumption and quick decision making.
How is it helping in Risk Management?
A push and messages based communication reduces risks for the broker or financial institution. Banks actively send SMS to their clients for account debits and credits. Active communication ensures that the client is in loop at every step. When traders receive information, they can take decisive steps easily and quickly. For example if a trader faces an intraday margin call, he can be reached instantly on SMS regardless of wherever he is. This can result in margins being transferred immediately. Apart from helping the broker, it brings down the risk of overall market. It also helps the trader because he can then carry forward his position without his collaterals getting impacted. Active communication certainly reduces risks.
Can mobile also be leveraged in the KYC process?
Brokerages have started exploiting mobiles in account opening and meeting KYC requirements. They now report receipt of application forms, documentation requirements, deficiencies in documentation and final account opening status via SMS. The client is thus kept in loop at every step of account opening. This visibility lends comfort to the client and improves service. It also reduces fraud to a great extent.
These days depository participants also send SMS for shares credits/ debits and also for events like corporate action, IPO credits etc which otherwise wouldn’t come into investor’s attention normally. Mobile thus helps investors to be better informed and take quick decisions. They get empowered.
Contract notes and important communications are already being sent by e-mails now. Will that change?
Messages with attachment will continue to go by emails. However, Messaging is the future in mobile communication. At least for short information updates. In a few years from now, e-mails will become out of fashion and most communication will happen through messaging. Popular messaging apps like Whatsapp and FB messenger do not allow APIs for third party use else these platforms could have been used very effectively. Big service providers could have their own chat and messaging platforms which their clients can use.
Will security be a cause of worry?
Yes certainly. In fact in a survey conducted by a US based software company, 53% of the respondents cited security as a concern in accessing financial services over mobile. Telecom companies and financial services companies are taking active steps to improve this on a daily basis.