CEOs Corner

Digitalization in Investments

Digitization has offered a new dimension to the investors for approaching real estate. Explore why digitization is the key to defining the future of investments.
August 20, 2021
3 mins read
Digitalisation in Investments

Digitization and digitalization. From a practical standpoint, both almost work in tandem when even one of them is put to practice. While digitization is the conversion of data or information into a digital medium; digitalization is the application of digital technologies in processes and workflows. How is this process significant in investments?

Currency issued and recognized by the government has replaced precious metals or any other goods that needed to be exchanged to avail any product or service. The same currency in bank accounts operates as mere numbers. With the proliferation of online payment systems and eCommerce, more and more people are confident about transacting via their smartphone or through the net-banking portal of their banks. As per the annual report of RBI, overall, the total digital transaction volume in India in 2020-21 stood at 4,371 crores, as opposed to 3,412 crores in 2019-20. Trust in the digital way is growing by the day.

A survey by KPMG provides interesting insights into just how rapidly the investments and saving scenario has changed due to the pandemic. From among 3355 respondents in the age group of 17-36, almost 50% of the younger respondents have started investing more in saving instruments. Around 49% of the respondents are comfortable transacting online, compared to 22% globally. Around 78% of respondents said that mobile app availability and smartphone store interactivity should be part of the basic offerings. What is really interesting is that there was an increase of 25% in the respondents from the silent generation(above 75 years) from Tier-I cities.

Financial institutions need to understand the value of digitalization. Traditional investment is always accompanied by heaps of paperwork, lengthy ETAs, and the need for advice from multiple financial experts. Stock trading apps are a dime a dozen and the entire process of learning has become even more simplified. Complete transparency of fund usage, charges, fees, and the like is already available for mutual funds, so why can’t that be done for every other legitimate investment option?

The number of accounts invested in index-tracking or exchange-traded funds more than doubled to 5.6 million in the year to April. Passive products now account for nearly a quarter of equity assets under management versus about 16% two years ago, data from the Association of Mutual Funds in India show. That compares to more than 50% in the U.S. The passive investing aspect is picking up big time in India’s $442 billion asset management industry. Institutional investing is expected to rise by 4% to USD 5 billion with investors looking to take advantage of lucrative property valuations, as per a report by Colliers. Investment in the Indian real estate sector stood at USD 2.9 billion during the first six months of 2021 which is more than a two-fold increase compared to the figures about a year back. Why are these numbers important? Because for the good part of the past year, people have been transacting online.

Digital signatures have been around for quite a while now. Data linkage with financial activity has been further enhanced via India Stack, to the extent that almost all KYC can be conducted online. There is always a risk of mischief when anything financial is concerned, but that is exactly why more options need to be explored by investment firms and financial institutions in order to stay ahead of the curve. Almost 44.7 lakh retail investor accounts have been added to the Indian stock market during March-April 2021, as per SBI. If investment firms do not want to miss out on chances at this ever-increasing pie, digitization and digitalization are key to defining the future of investments and client outreach.

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