Volume 15, Number 2 Article by S D Kshirsagar June, 2003
Financial Services in India: A New Perspective :
The financial services industry is being reshaped by several forces, chief among them being the customers, competition, technology and distribution. Volatile cash flows have prompted customers to seek total solutions at a one-stop-financial services-shop. The convergence in the industry is making it highly competitive. Technological advancements have influenced distribution channels, customer needs and the way in which the industry does business. Distribution has undergone a significant transformation, resulting in mobile, flexible and remote channels. These drivers of change have ensured the demise of the comfortable `interest rate spread. Economic efficiency is now the only source of value.
This article focuses on the drivers of change for the financial sector in general but non-banking financial companies in particular, and carries out a value chain analysis for the fund-based asset finance business. Based on the findings of the pilot research study, it is concluded that the value drivers are designing a financial product and procurement of funds. Efficient procurement of funds, information and communication technology and human resource development play a key role in value creation. The industry is now attempting to create value by undertaking only these `core' activities and outsourcing other activities including those of marketing, processing, financing and repossession. Marketing is outsourced through direct marketing agents, back-up operations by employing external agencies for data entry, conversion of proposals into contracts, collection of instalments and repossession of assets are being outsourced through specialised agencies. In a broader way, acquisition of customers, financing and servicing their needs represent the value chain for quite a few financial services companies.
For a financial services company to be successful, it will have to provide Triple A Service —Anytime, Anywhere and Anyhow. This framework encompasses the market, resources, organisation structure and processes. The industry will have to be proactive in taking strategic decisions in these four areas to manage the change process competently.
Reprint No 03204
