For one the category is fairly young. Be it banking, insurance, mutual funds or stock broking; there is a lack of knowledge among consumers about which product is better, cheaper, faster. Hence the need for trustmarks.Secondly, being intangible (with at best, a future promise of return on investment), you can’t touch/feel/enjoy financial products off the shelf. You can’t even show them off to your friends (Sorry Apple fans; no iLoans!). And lastly ; financial products are well regulated and financial transactions typically are recurring and relatively long term. This makes it one category where the offerer is of more significant than the offering itself.
No wonder in recent times every financial services company is rushing to create a financial services brand.
But then creating a relevant and powerful financial services brand is challenging.
Challenge 1 :India is a country of dichotomoy. We have a low human development index of 128 and yet over 1,41,000 millionairres. 1.5million Indians graduate every year and yet a 35.2% of population is illiterate. A savings rate of of 39%(growing at 20% CAGR) and equity penetration of less than 2%. There are many (often opposite) shades to India. To be truly ubiquitous; financial brands would need to address this dichotomy.
Challenge 2: The exuberance of youth :With an average age of only 26 years; we are one of the youngest countries in the world. With youth comes ambition. People today look at not what’s affordable; but what’s aspirational. Fulfilling aspirations requires financial prosperity . A promise that financial brands can help fulfill. However; in promising financial prosperity in a credible and responsible lies the challenge.
Challenge 3 : India’s Changing Mindset towards Money
• The Past ‘Socialist’ Era : Money should be saved and hence ‘Earning – Saving = Expenditure’.
• Todays ‘Consumption’ Era : Money should be used and hence ‘Earning – Expenditure = Saving’.
• The Future ‘Investment’ Era : Money should grow and hence ‘Earning – Expenditure = Investment which should create wealth
The role of financial branding would have to reflect the changing Indian need i.e from saving to creating wealth
The challenges are steep. But the end of the challenge rainbow lies a pot of opportunity.
Opprtunity 1 : Savings Boom in the Next Trillion Dollar era
In the next 7-8 years; India's GDP is set to double to over 2 trillion USD. And with a savings rate reaching 40%; savings in India will be over USD 1 Trillion . We are already in the midst of a consumption boom. The opportunity for financial brands lies in converting the huge savings into an investment boom .
Opportunity 2: The Entrepreneur at the center of India’s growth model : India’s growth is market lead (unlike China's which is state induced). If you look at history; you will see that India was one of the world’s original capitalists. Entrepreneuralism is ingrained in our culture. Given the right empowerment , knowledge and environment(sometimes even without the environment!); we have within our DNA to create wealth. The opportunity for financial brands lies in creating the right circumstances.
Opportunity 3: The Indian Capital MarketContrary to popular perception of the risks involved; if we see the returns given by the stock market over a 30 year period ; we can see that the Sensex has grown 170 times in the past 30 years. An annual return of 18 %. Capital markets ; if seen from a disciplined and long term perspective; are a powerful medium for creating wealth .
The Role of Financial Brands in Financial Inclusion
Be it colas or mobilephones; a category becomes really big when the a critical mass of consumers get included into the category. And that’s when the Cokes , Pepsi’s , Airtel's and Vodafone's move from the fringes to mainstream consumption .The real opportunity for financial brands lies in helping get consumers included into the category. The brand that does so will reap the benefits of the Indian opportunity.
Hence a key role for financial brands and financial branding is in financial inclusion. Making consumers interested and empowered in investing by showing them the way to better investing. ‘Financial Empowerment’ can lead to ‘Financial Inclusion’. And ‘Financial Empowerment’ can only happen with knowledge of financial products and how to benefit from them to create wealth.
If financial brands are able to provide the right kind of education and knowledge; Indians (with their entrepreneurial/’Do it myself’ DNA) will be able to make themselves financially included! A financial brands role is hence to clear myths about investing . Educate on the right process. And hence make Indians Financially Empowered.
A step that we at MOSL have taken in this direction is the education initiative in the form of Value Investing Forum for education on long term Value Investing in the stock markets and also a series of films on investing versus trading and the role of research. Besides education of customers and intermediaries through investment camps.
Hence to summarise the role of financial brands : Provide ‘Knowledge’ that leads to Financial 'Empowerment’ which leads to ‘Financial Inclusion’
