Wealth Management: Can BigTechs Dive Deep into Indian Pockets
According to Capgemini's World Wealth Report 2018, if BigTechs like Google, Alibaba, Amazon, Facebook and Apple plan to expand into the wealth management space, as much as USD 12 trillion could be moved under their wings
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"Technology is disrupting" – This is one statement that we often read in our headlines. But during our interaction with global thought leaders, companies' management and startups, one thing we can blindly vouch for is – it is not the technology that is disrupting anything, instead it is revolutionizing our way of living.
And if you, either as an individual or as a company, has decided to close the door to this revolution and the tech-related opportunities – well, let God alone save you from the havoc that you are welcoming in.
One such industry that is going through the technology revolution is wealth management. From artificial intelligence to robotics to even the blockchain, the industry – which was all about human touch, will be soon all about the digital platform. And the winner is more likely to be companies that can provide innovative services along with seamless customer experience.
The Indian Wealth Management Industry
According to reports, the Indian wealth management industry is of about USD 1.5 trillion. However, another interesting fact is only 8-10 per cent of India represents 45 per cent of India's wealth. While on the other hand, the industry's penetration is relatively very poor.
Prakash Gagdani, CEO, 5Paisa.com, an arm of IIFL, explains that wealth management is traditionally considered an investment option for people with high net worth.
"Ideally, it was always for people who have a lot of money and need guidance to invest and do not have time to allocate their funds in proper investments, however, if you see that is a minuscule of a percentage in terms of investors is concerned. The opportunity is huge for people who are with very small investment value because they are the ones, who are coming most of the time, first time to the market and need guidance in terms of where to invest," he added.
Solution to this problem is simple – Technology!
It makes investing less time consuming, automated and inexpensive. Srikanth Meenakshi, Co-founder and COO, FundsIndia.com says that with technology you don't need to fill long forms or stand queues for your paperwork to get started as an investor, and it is infinitely easier to stay as an investor after getting started – in terms of portfolio management and analysis.
"It also makes dissemination of information and advice easier through the availability of electronic channels and media. Combined together, a potential investor today can learn, understand, and test the waters of investing much more easily than previously. In that regards, technology has truly empowered the common man in India to put his money to better use and make it work for him," he shared.
This is why robo advisory startups are gaining popularity in the country. Indian robo advisors AUM is USD 20 million in 2018 and the numbers are expected to shoot up to USD 116 million by 2022 with CAGR of 54.4 per cent. But guess who else might be gearing up to tap into this opportunity!
Disruption or Revolution?
Buzz has it that the BigTechs are prepping up for a showdown. According to Capgemini's World Wealth Report 2018, if BigTechs like Google, Alibaba, Amazon, Facebook and Apple plan to expand into the wealth management space, as much as USD 12 trillion could be moved under their wings.
Having said that, the move would only seem logical as these companies have already started to venture into the financial technology space through payments services.
Take an instance of Google Pay (formerly Tez) – a UPI integrated payments mobile app and whereas on the other side, Amazon has also started its digital wallet Amazon Pay and partnered with various local services provider such Swiggy. While on the other side, Facebook-owned Whatsapp is awaiting RBI's nod to start their payments services in India.
But these companies might not shy away from testing their capabilities in the wealth management industry. And Alibaba is already on its way. The company has invested in Ant Financial and its wealth management arm boast of almost USD 350 million assets under management.
Considering Google or Facebook's reach in India, their progress in wealth management will explode the industry with untapped opportunities.
Even Anurag Bhatia, CEO, Minance also agrees with us, as he believes it is a good thing as it will open up wealth management to a large swath of the population for the first time and as these investors mature, they will then progress to more personalized firms – which is a win-win situation.
"It will be the sheer number of new investors coming into the industry. (We are seeing this right now in Mutual Funds). The young tech crowd will, of course, be the first to embrace it. Traditional firms will have to work to improve their services and reporting tools to compete, management fees will also have to come down. But at the end of the day, performance is what will matter," he asserted.
On other note, Gagdani, who doubts BigTechs will enter the wealth management industry, believes that if at all they do, they will create of the market for themselves.
He said, "I strongly believe that technology can bring in huge disruption in financial market and if you go by what's is happening in capital market or financial market for last few years, it's a sign that India is not just ready but will lap up to the opportunity that is provided by the fintech firms. Though the subject wealth management is niche and very few people are aware, so it will require a lot of disruption. However I think simple solutions but powered by very strong analytics, artificial intelligence will have its own market and will be accepted by retails investors across the country in a very big way."
Worth a Watch
Furthermore, if at all these players enter the wealth management market – they would directly compete with companies IIFL, Paytm, ET Money – which has already and is heavily investing in technology capabilities.
Hence, their solutions will decide whether they will create disruption and revolutionize how we invest.
"The key thing to note is investments is a different ballgame compared to other financial services, and at this point in time, the disruption these players will cause will be more a function of what value they bring rather than to their size and reach," Meenakshi pointed out.
Meanwhile, we at Entrepreneur India will keep you informed as and when BigTechs enter the wealth management segment.