Here's why consumers should take interest in understanding financial services industry

Consumers need financial products for only three reasons. They are as follows:

Easier way to simply bucket any product sold by this sector is to figure which of the LIP product it is (Lending/ Investing/Protecting ). In fact, the regulatory system is also based on similar concept.

— Lending by any bank/NBFC/HFC/MFI is regulated by RBI.

— Investment products like mutual funds are regulated by SEBI

— Protection products come under insurance sector regulator – IRDA.

In India, access to financial products as not yet been evenly distributed across our geographies or consumer segments. The gaps in those have created the dire need for ‘financial inclusion’.

The basics of financial inclusion is to make sure that the consumers have access to products and choice of relevant products that suit their need. And true “market economy” will be when those consumers can reject any product as not acceptable to them.

To be critical, the industry has been traditionally focused on developing products and selling, rather than understanding the consumer needs and solving for their issues.

Customers need simplicity of understanding what the product does for them and their product needs. You might relate to the scenario of filling pages of application forms and seeing many fine print and conditions/clauses in most of the finance products.

The question is : Can the product brochures come with a simple 1 page term sheet of terms/conditions/benefits with details including whom to call or email to for any clarification?

If airports can have multiple airline counters, why can’t BFSI industry have Multi-brand financial outlets that offer services at a branch ? If regulators can come together, this is possible as all finance firms are digital and online ! Imagine the last-mile connectivity issue that can be solved when you walk into a branch that has counters of a bank/ HFC/insurance company/mutual fund, etc – all in one !

Ability of a millennial, potentially forced to retire from full-time income-generating-activity by age 45-50 (as gig economy strengthens in the Indian job markets), to sustain on her/his accumulated savings in a low-savings-interest-rate era with increasing “services-inflation”, “food inflation” and “healthcare costs”. 

So, if you don’t understand a financial services product, ask your financial advisor or the person from the sales or distribution team before you sign on the dotted line.