Sachetisation of Financial Products

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Nitya Sharma, Co-founder & CEO, Simpl, in conversation with Inc42. for their story on: Fintech In A Sachet: How Startups Are Building Bite- Products To Boost Inclusion

Q1. How can one sachetise traditional financial products for Bharat? What are the key factors to keep in mind while building such products? 

Answer: Although fintech firms in India have flourished in recent years, there is still a long way to go in terms of meeting the needs of different sub-sections of society. For instance, the financial needs of urban Indians are very different from the residents of rural and semi-urban markets. 

Therefore, it becomes vital that major fintech players customise their traditional financial products for Bharat. In order to achieve this, these firms must understand the needs of rural India and refine their offerings accordingly.

Here are a few factors that need to be considered:

(i) Importance of local Languages

Firstly, fintech firms need to understand the importance of local languages. Their products must be developed in such a manner that they connect with a wider audience. Non-fintech firms such as FMCG players/OTT platforms have already understood this factor, and it is high-time that fintech players do so too.

(ii) Cap on Lending Rates

Secondly, issues such as high lending rates continue to cripple Bharat. Rural borrowers are tired of their Sahukar charging them exorbitant interest rates. Fintech firms must ensure that their offerings appeal to the masses. This can only happen if the lending rates are kept at a reasonable level. 

(iii) Mobile-friendly offerings

Thirdly, the key offerings of fintech players must be mobile-friendly. It is important to note that Bharat still lags in terms of broadband connectivity. Most internet users are doing so using their mobile phones. Therefore, all major financial products must be accessible using mobile apps or web browsers.

(iv) Clarity on transaction limits

Fourthly, the transaction limits need to be defined according to the market in which the fintech firm is operating. For instance, the concept of Buy Now Pay Later (BNPL) is catching up around the country. This feature allows users to make purchases while allowing them to pay at a later date. However, the transaction limit under BNPL for an urban area may have to be much different compared to a rural area.

(v) Ease of use

Finally, ease of use is another factor that needs to be considered. Bharat is not ideal for product descriptions with complicated jargons and intricate structures. Fintech firms must customise their products and make them easy to understand. This will go a long way in helping them to capture the rural markets.

Question 2. What are the UI/UX considerations of building a sachetised financial product?  

A sachetised financial product must take into account the specific expectations of the target market. For instance, financial products that are being sachetised for the rural markets need to cater to their needs. Such products must have a customised UI/UX that helps them in understanding the products easily.

(i) Extremely easy to use interface

The first consideration while designing these products should be to ensure that the interface is extremely easy to use. The products must be simple and should focus on visual elements. This could prove to be a great way to increase adoption rates. Further, sachetised financial products also need to be informative. All information related to the product and its benefit should be clearly stated on the app or website. This will help the users in understanding why they should be investing in a particular product or availing a service. 

(ii) Include several calls-to-action

Additionally, the product should include several calls-to-action. This is an important aspect because the key idea behind building such products is not to increase awareness. Instead, the focus has to be on driving engagement. Visual elements such as buttons and drop-down menus could help rural users in making decisions. 

(iii) Well-labeled input controls

Finally, the input controls should be well-labelled and helpful. Labels can play an extremely important role in the case of rural markets. This is because awareness regarding the products and data points can often be quite low. If you want the users to provide specific information via input buttons, then they must be clearly labelled. Thus, if you consider all of the above UI/UX aspects while building a sachetised product, you are more likely to build a compelling final product. 

3. What regulatory changes need to happen to enable greater sachetisation by fintech companies? 

Even if the major fintech players in the Indian market wish to invest in greater sachetisation and hyper-customisation of their products, they could be deterred by the regulatory hurdles prevalent in the country. For instance, there are strict regulations related to areas such as wallets, insurance and know your customer (KYC) forms. These areas need to be reviewed by the government in particular. 

(i) Mobile Wallets

The first aspect is the mobile wallets. At present, mobile wallet usage is capped at ₹1 lakh per user. Several rural areas within the country lack access to banking infrastructure. In these cases, mobile wallets can prove to be a lifeline for the users. However, under the current regulations, fintech players cannot allow their users to use mobile wallets as per their needs. Therefore, the regulations need to be updated.

(ii) Insurance

Another key area is insurance. At the moment, fintech players such as insurance web aggregators are expected to follow strict regulations related to the products that they display on their websites or mobile apps. Although it is a good thing that they are required to make disclosures, it often results in an information overload for users. Hyper-customisation could only be possible if these regulations are eased.

(iii) BNPL

BNPL is another aspect of the fintech industry that needs clearer regulations. At present, there is a lack of clarity regarding authorisations and registration requirements. In such a scenario, BNPL players may find it difficult to customise their products according to local markets. There also needs to be more clarity regarding areas such as the classification of BNPL players as intermediaries.  

(iv) KYC

Finally, the KYC aspects of the business are also highly regulated. India needs clearer laws when it comes to areas such as e-KYC and video verifications. This becomes extremely important in locations that are not well-connected. Regulations about KYC must be eased in order to onboard users quickly and efficiently.

Q4. How can fintech companies achieve hypergrowth with sachet products?

Sachet products could help fintech companies in meeting their aggressive growth targets. This can happen due to two major factors. The first factor in play is the rise in adoption rates. If fintech firms can create sachetised products that are easy to use, mobile-friendly, and support multiple languages, then millions of Indians living in rural and semi-urban areas will be able to adopt them at a rapid pace. This development could make sure that fintech firms grow quickly.

Further, sachet products could also help the fintech firms in leveraging the power of technology. At present, various fintech firms are already using advanced technologies such as Artificial Intelligence (AI) and Machine Learning (ML). According to a survey by Forbes, nearly 64% of global fintech firms expect to adopt AI by the year 2022. Building customised products could mean that these technologies assume an even greater significance for these firms. This could mean that large swathes of user data could be utilised to understand the customer needs in a better manner, thereby driving brand loyalty.

Q5. How should fintech companies walk the tightrope of risk and tight margins with regards to sachetisation?

Fintech companies need to strike the right balance when it comes to managing product sachetisation. On the one hand, they need to manage key risks such as product risk, regulation risk, and adoption risk. On the other hand, they also need to ensure that adoption rates continue to increase and their margins remain protected. In order to balance these two aspects, fintech firms need to consider the following two solutions:

(i) Products that can be replicated in different markets

There is a need to build financial products that can be replicated in different markets. This could help fintech firms in mitigating their risks and also protect their margins. For instance, if a fintech firm develops a mobile app-based lending solution, then they should try to ensure that the app’s architecture can be easily replicated across markets. This will ensure that their investment in sachetisation does not go to waste.

(ii) Budget for investments

Secondly, fintech firms also need to set budget limits in terms of their investments. Sachetisation is a great way to expand market share, but the investment in such activities needs to be regulated by the firm. The best policy is to brainstorm before making the decision to invest and come up with budget ceilings that help them in managing their risk.