Digital banking—When paperless is the new buzzword in finance
With the number of smartphone users in India expected to increase to 450 million by 2022, every financial institution is convinced that online delivery of services is the way forward.brand stories Updated: Dec 06, 2017 12:00 IST
BankBazaar’s mission is to help you find the right financial product, and deliver it to you paperlessly on your mobile phone in five minutes. In 2017, we got closer to paperless access to finance, with support from our financial institution partners, the regulators including RBI, IRDA, and SEBI, and of course the push from Government of India. At the #ChampionsOfChange event organised by NITI Aayog, I got an incredible opportunity to have a sit-down dinner with the Prime Minister of India and to ask for support for paperless, presenceless and cashless access to financial products to leapfrog India’s productivity.
This quarter (Oct-Dec’17), we’re expecting 75 million visitors to BankBazaar.com. If someone had told me a few years ago that 75 million visitors would come to BankBazaar every quarter to access loans, credit cards, and mutual funds I would have scoffed at them and asked what they were drinking. This November, we’ve seen our best-ever number of 23 million visitors per month, which is a 2X+ jump over the 11.5 million visitors in the same month a year ago. No wonder, every financial institution is excited about paperless delivery of financial products. The economy is growing at 6.3%, retail credit is growing at 20%, but digital demand is growing at 100%+ which is a tsunami of consumer demand sweeping through India.
In the first half of 2017, BankBazaar Insurance also launched paperless two-wheeler insurance, and we zoomed to the #1 position in India for the widely popular Free Credit Score Product. Gone are the days you needed to fill in forms and courier a cheque to get your credit score. Now, in three minutes, without a single piece of paper, and for free, you get not only your credit score on BankBazaar but also a neat six-point dashboard on how to improve your credit score – for example, by repaying your EMIs and credit card dues in full and on time.
All of this, we’ve managed to do paperless as far as possible, and per permissible regulations—a near 100% online experience, end-to-end. Our customer can log on to BankBazaar.com, compare and shortlist his product, buy it, and receive it—all with his smartphone, without as much as getting up from his couch. In our paperless vision, we see customers buying loans, cards, mutual funds, and other financial products, without having to submit a single piece of paper. We’ve already made tremendous progress on the back of regulatory reforms: several of our products are now available paperlessly. Today, 60% of our credit card and personal loan customers are getting paperless offers, and all of the mutual funds on BankBazaar and insurance on BankBazaar Insurance are paperless. With further regulatory reform and adoption by financial institution partners, we hope 100% of our products will be paperless by the end of this financial year.
With this mobile-focused approach (75% of our consumers access BankBazaar via their mobile phone), we have grown 2X+ in the last year to reach 75 million visits this quarter and we are targeting a century – 100 million visitors the next quarter. But how far have we come as a business? Revenues grew by 129% between October 2016 and October 2017, while our total expenses grew only 27% in the same period. Our total consumer transactions per month including loans, cards, mutual funds, and other financial products grew a whopping 102% and our revenue per transaction increased by 14% in said period. As on December 1, 2017, BankBazaar had a site rank of 167 on Alexa, which is 500 places ahead of other financial services marketplace competition. In addition to reliable Alexa comparison, data from Comscore shows us 500% larger than the closest competitor in terms of visits per month.
Most importantly, we are doubling in size without increasing our cost base, since the business is anchored on a scalable paperless technology platform that drives repeat customer engagement. This means we reduced our cost per transaction by 17% and improved our positive unit economics (revenue per transaction minus marketing and tele-assist costs). This has only been possible due to our paperless vision and our organic scalability. The new products in our portfolio including paperless mutual funds continue to grow phenomenally as we aim to offer a one-stop shop for Indian consumers for all their financial access needs.
As a digital business, BankBazaar sells only through digital channels. I am seeing two dangerous temptations in the industry all stakeholders need to beware of.
First: in order to bolster the GMV, there is the temptation to pass through offline agent sales as digital sales. Think of it as simply paying existing offline agents to pass through their offline sales via a digital company’s account. It might look that the company’s GMV is increasing. But what value is being added to the country’s productivity by passing offline sales as digital business? It’s a tempting shortcut to more GMV. This offline sales business also has a slim margin of 10% as the offline agent is smart and won’t do this pass through work for lesser payout. Compare this with a paperless model which has 80% margins, provided the customer acquisition is organic. It is also scalable 10X as consumer internet demand skyrockets in India.
Second: there is a temptation to revert to the age-old model of the outbound call center of many thousand sales agents who call consumers, pushing them to buy financial products. This model has been around for decades and it also has a slim margin of 10% due to the costs: you’re making millions of phone calls, paying salaries of thousands of callers, and in the end you have a low conversion rate. There is also significant compliance risk if there any mis-selling on out bound sales calls. Once again, the GMV growth via this model might look good if one pumps in money, but do we really need a call center business or do we need to build a next-gen paperless model that brings value to the customer in the long-term?
There is nothing wrong in an offline sales or call centre business model but it’s important that such a model is evaluated as an offline sales or call centre business model, and not positioned as a hi-tech digital business model.
So BankBazaar will stick steadfastly to our vision of paperless access to finance to every Indian. Since January 2014, when Sequoia Capital funded us in Series B, we’ve grown 23x in terms of visitors per month to November 2017 when Experian funded us in our hugely successful Series D. Experian joined a stellar investor group that includes Amazon, the world’s largest e-commerce business, which led the US$60 million Series C investment in BankBazaar.
Taking a step back and observing the larger landscape, we see internet penetration in India doubling by 2020, while the number of smartphone users is expected to increase to 450 million by 2022. Every leader in every financial institution is convinced that paperless delivery via the mobile phone is the future of consumer access to financial products. So we will push forward full steam with all our resources and innovation to ensure 100% paperless and presence-less access to all financial products on the mobile phone. We still have much to do. We’ve only just begun to democratise finance in India.
By Adhil Shetty, CEO, BankBazaar.com