Vijay Chandok, MD & CEO, ICICI Securities in conversation with Editor, N Mahalakshmi, on the importance of technology in investing.
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00:20 Outlook Business Investment Summit 2021 is brought to you by ICICI direct.com
00:25 Welcome ladies and gentlemen to Outlook Business Investment Summit 2021.
00:29 I have with me Vijay Chanduk, Managing Director ICICI Securities.
00:33 Vijay has been with ICICI Group for over 27 years.
00:36 Prior to this current assignment, he served as Executive Director on the Board of ICICI Bank.
00:40 He's currently a member of Advisory Committee of NSC, BSC, NSDL,
00:45 and Secondary Markets Advisory Committee constituted by SEBI.
00:49 First of all, thank you so much Vijay for joining me for this discussion today.
00:53 And of course for partnering with us to really organize this investment summit,
00:59 which seems to be very, very timely given that there is so much trepidation and uncertainty in the air.
01:06 There couldn't be a time that better time to have dealt with the difficult subjects of investing during uncertainty.
01:14 So thank you for that opportunity. And thank you for joining me today.
01:18 Thank you. Always a pleasure. I think we've had a long association and we really are happy that all of you are doing well in difficult times like this.
01:29 And all of you are safe as well. So looking forward to this conversation.
01:35 Sure. So the topic for our discussion really is technology in investing.
01:41 And as you pointed out yesterday during your keynote, we have taken a huge digital leap in the past one year post pandemic.
01:53 And every single business, like you said, from energy to the way companies have moved to remote working,
02:04 everything has there has been an element of technology that has come in.
02:09 How do you see technology reshaping the world of investing?
02:13 Well, indeed, I think technology is transforming businesses and it is throwing open new opportunities and also challenging traditional existing players and company players.
02:26 So, you know, when you look at the investment world, what technology has really done for starters,
02:33 it has in a way democratized access to markets in the olden format of operating.
02:43 You know, there was so much physicality involved in simply starting off a relationship to start your investment journey.
02:50 That that itself in a way was complex, time consuming.
02:57 And in some senses, I think today the combination of regulations and technology has made it really easy and seamless for you to do it yourself and start accessing markets virtually in minutes.
03:13 So from the time you decide to start investing, you know, to start actually investing could be as little as 10-12 minutes and you're good to go.
03:22 So that's what technology has done. The second important role I have seen technology play is in a way what one could call it demystify a complex subject like investments.
03:36 So technology and research, the combination of these two have brought together teams which, you know, individuals can and investors can relate to,
03:47 but are unable to translate these trends, these teams which they can relate to, which they believe in, into what would it mean for me, for instance, to invest and making it very easily available to him to actually execute that.
04:03 So, for instance, if, you know, there are people who clearly understand the Atman Irtha agenda of India,
04:12 and people believe that, you know, there is a great business transformation and opportunities that are going to play out.
04:20 But if India is to attain its objective of becoming Atman Irtha, which companies, which stocks are going to benefit?
04:28 I think that is where the equation breaks down. Technology research combination brings it back by telling him that if you believe in this Atman Irtha agenda,
04:38 these set of stocks could be positively. Everyone believes, for instance, in the China plus one strategy.
04:46 Similarly, you put together. So I think that's the second, it's demystifying and simplifying investments.
04:53 The third, I think, still early days, but combination of machine learning, deep learning and data coming together
05:03 is beginning to start impacting customer experiences.
05:11 It's beginning to throw personalization into the otherwise, you know, do it yourself kind of an engagement.
05:17 So you're able to actually bring personalization at scale in a cost effective manner, along with robo advising,
05:27 which are again in its nascent stages to provide recommendations and holding in the process of investments.
05:36 I would still say we are in very early stages of these technologies.
05:41 But I can only imagine that going forward, apart from the changes that have already happened,
05:47 more and more of such tools will improve experiences and make processes even more easy, even more enjoyable
05:58 as you're going through an otherwise complex subject like investments.
06:02 Sure, if you can just expand a little bit on that thought in terms of what kind of innovation do you really see
06:09 in terms of investment products in the coming few years?
06:13 Yeah, so when you look at products around, there have been some new products that in a way have already been introduced
06:25 some time back, but it is yet to actually grow in scale.
06:31 These are products in the domain of REITs.
06:35 These are products in the domain of INVIDs, which are basically hybrid instruments,
06:40 not exactly debt, not exactly equity, but somewhere something which is a combo of both these.
06:46 I think these are some products which have the potential for scaling up,
06:51 particularly as India goes to its agenda forward.
06:55 There is already tools which have come, which have brought very imaginatively product categories together.
07:07 So you could construct portfolios, which are a combination of equities of gold,
07:17 because now that's also available in a digital financial format and other commodities are together
07:24 and fixed income as well and create a basket of interesting product, which meets a specific objective.
07:34 Particularly, one of the big needs of investors I find is retirement.
07:39 And here it's very difficult to just pick one instrument and try and find a retirement solution.
07:48 It has got to be customized to your cash flow needs and dependable cash flow needs for 15, 20, 30, 40 years.
07:55 It could be as long as that. How do you do that?
07:57 So I think innovations around product categories coming together is something that I expect again to happen going forward.
08:06 Access to overseas markets. I think that's another trend that we are beginning to see today.
08:13 It's not just Indian equities, but if investors want to invest by your Facebook share or an Apple share or Google share,
08:20 stuff that they use on a day to day basis, today it is possible.
08:25 And I can see that trend becoming more popular amongst investors.
08:29 So I guess some of them are visible, some of them are in recent stages,
08:34 and some of them are going to scale up as we move forward.
08:39 I think this is of course, apart from the traditional products of equities, mutual funds and so on and so forth.
08:46 So talking of global equities, I guess ICICI Direct already has offerings for trading in global stocks.
08:55 That apart, what kind of scope do you see for ICICI Direct to bring in innovative products that are a bet on global equities,
09:06 both in terms of stocks, funds, ETFs across the world?
09:10 So one thing that we have done, we started off by offering global equities, but restricted it really to only the US markets.
09:20 Very recently, we have now started expanding to include few other markets.
09:26 So it is now possible to invest beyond US into certain European and Asian markets.
09:31 So that's another sort of a new offering that's now available and an option that's available to investors.
09:40 The other aspect that we see is the emergence of feeder funds.
09:46 So there are many fund managers who are experts, and they are using that expertise to,
09:54 and their research proves to provide investment opportunities in US markets.
10:02 So those are things which come from time to time.
10:06 And that is something that is also now going to sort of scale up and be available as an option to investors.
10:17 In addition to that, we also find that there are many startups that have started coming and attracting very, very sort of huge valuations.
10:30 And many investors are expressing an interest to actually participate in this because by the time they normally get a chance to participate, it's too late.
10:40 So I think even there are funds which are getting put together in the marketplace, which provide an opportunity for investors to actually put money,
10:52 which in turn would be pooled in form of a fund to invest 3 IPO into these kinds of options.
11:00 But one clearly needs to keep in mind that these are high risk investments, and it has to be properly understood.
11:07 And the implications have to be properly kept in mind before making such investments.
11:13 And it should be largely restricted to only those investors who have that sophistication.
11:18 So I would think that these are the ways in which they would be new style investments.
11:25 Sure. I mean, as you rightly pointed out, there is a lot of appetite now for all these free IPO purchases and stuff like that,
11:35 because there is so much, I don't know if it's exuberance or not, but definitely there is a lot of excitement around startups.
11:41 And in the past one year, if you see that there has been a huge surge in even seed funded startups,
11:50 a whole bunch of new set of entrepreneurs, young entrepreneurs are coming up.
11:54 Do you see ICICI Direct becoming a crowdsourcing platform of sorts?
11:59 Because this again is emerging as a huge new area where mid-net worth individuals are interested in taking a bet on.
12:09 Very interesting question. And let me share with you, interestingly, we recently had some internal discussion on our way forward,
12:20 some of the new things that we should be doing.
12:23 And the very point that you said came out as an area for us to think about the entire startup ecosystem.
12:32 And I think as a firm, we have certainly decided to focus on that as an opportunity, both for ourselves and obviously for our customers.
12:43 To begin with, our thinking is more basic than what you just said.
12:48 We have started engaging them to enable us to access their services, which in turn will be sort of conduited to customers.
12:58 So those kinds of propositions, which otherwise they find it very difficult because they have a great proposition, but they do not have access to customers.
13:06 And I think that's something that the connection is something that we can bring on the table.
13:10 So we've started doing that in a very conscious manner.
13:13 A team has been set up for that. That's only the first point.
13:18 That's exactly the point because there are a whole lot of platform companies like AngelList and all of these, which probably don't have the customers,
13:26 but they are able to do a good job of putting this and making that connection.
13:30 But you already have a large customer base and this should be a relatively easier part to fix.
13:40 So that's right. So that's the way we are beginning to commence this journey of engaging.
13:45 But we believe that over a period of some time in the future, we will be able to open our platform directly for investors to invest.
13:56 Of course, one has to keep in mind, it is not, you know, you use the word crowd-sourcing and I will be very cautious to use that word when I'm sort of expressing this.
14:06 It is certainly got to be, you know, first of all, subject to legal and regulatory sort of site on this kind of stuff, which is still a subject that we have to go through.
14:19 But the thought is that once assuming that all of these are done properly, then restricted to a segment of customers, not like the mass retail, but a very specified segment of customers
14:34 who in turn can then engage these companies for investment participation, which is otherwise not available for such people to do this.
14:44 And then they can, as you said, allocate some part of their investment capital to such funding opportunities.
14:51 But that's not just now, that's more into the future. Our beginning is to just give them access to customers from platform to begin with, offering their services.
15:01 Sure, good to hear that. Can you give us a glimpse of what kind of innovations are there, any that you are working at right now? Anything that you're really excited about?
15:12 Absolutely. I think I'm pretty excited about the opportunity that is coming. I would say not necessarily coming, but it's probably already there.
15:21 And it's going to come out in large numbers. The young millennial Gen Z population coming into economic India, the point that I was mentioning in my keynote.
15:32 I would think every year, our assessment is that close to 1.5 million millennial, young millennials or Gen Z are going to come into economic India.
15:44 And that number is going to be continuing year after year after year for a long period of time, perhaps 10 years or so.
15:51 So it's a very large segment, which is emerging and they have a different way of engaging, transacting and commercing, if I can use that word.
16:03 And therefore, it is important for us to create a method to be relevant to them.
16:12 And towards that, I think some of the areas that is an area of intense focus for us is to personalize.
16:21 Many of these people certainly need knowledge and access to training, if I can again use that word.
16:30 And but they don't do it in the traditional way, they have a very different way of getting exposed to content.
16:36 It is social and gamified style. And therefore, you have to make that content available to them in a social and gamified sort of a format.
16:45 So I think some work is some thinking is going on around how we can use technology to give those experiences to individuals.
16:53 So personalization is going to be a big area of focus, providing social connectedness, providing through the world of investments.
17:04 Attempt to democratize knowledge sharing is another area, how we can integrate gamification as a method of instruction and learning and teaching.
17:15 And providing access to information and knowledge is a third area.
17:19 So it is actually doing the stuff using technology to do the stuff that the new age Indians do.
17:28 But and in a manner that they can relate. So that's the direction in which we are trying to marry technology and provide to customers.
17:38 And we are very, very excited about that.
17:41 Another thing is that there is a lot of activity around the fintech space that's been happening over the past few years.
17:48 It's really accelerated. And there are a whole bunch of ventures, all shapes and sizes getting funded and including in the it's not just payments anymore.
17:57 It's like investment advisory and whatnot. Being an incumbent in this space.
18:03 How do you really keep pace and continue to be relevant and guard yourself against players who are cropping up at the periphery?
18:12 I think you sort of nailed that question, if I can say so.
18:18 Because that's the question that we keep asking ourselves every day.
18:21 How do you keep yourself abreast of competition? And ours is a very, very cooperative body.
18:26 I used to be in banking and in banking, you have a competitor, which is slightly cheaper than you are slightly more expensive.
18:34 But in this world, it is very different. Right. So you have to be really on your toes to remain relevant.
18:42 I think our thinking has been like this. We find that most of the, you know, every investor is unique.
18:51 And it is that insight, which we have tried to use. And we have sort of micro segmented the market.
19:00 And rather than providing a one shoe fits all kind of solution. And we find most of the new age guys do that.
19:07 So take it or leave it. This is the way it is. One stop shop with yourself.
19:11 And this is the way it is. We've sort of differentiated there by providing micro segments and scale.
19:18 I think the first thing that is important is to understand that insight as to what will motivate a type of a customer.
19:25 So, for example, if you're a trader oriented customer, you would value low cost as an important attribute.
19:33 But if you're an investor, you're more important. You're probably more concerned about where do I invest?
19:38 What is the holding horizon? Is my money going to be safe, etc., etc.
19:44 As a more dominant ask, am I dealing with someone whom I can trust for four years, three years?
19:49 Is he worthy of my trust? So those things start becoming more important.
19:54 If you're a heavy duty guy, then you want both, you want pricing and as well.
19:59 So what we have done is we've identified these industry segments and clusters.
20:03 And we have actually come up with very unique propositions targeted to those needs.
20:09 Then we have used the power of technology and research and created tools so that we can translate our research into a very cool, easy to relate and understand investment ideas.
20:22 And make the customer see that and present it to them in a manner that it's very easy for them to understand what they are seeing.
20:34 And even the whole process is very simple. It's literally one swipe and you're done.
20:39 So it's about bringing that otherwise complex subject in a very easy to understand and relate to format and execute format.
20:47 So we've tried to use that as a process.
20:52 We've tried to again differentiate by providing options in investments in overseas markets, for instance.
21:00 And we are the only player who are able to offer the combination of access to markets and access to set an ability to send money.
21:08 You have to convert your routine to dollar and then remit it there. The whole experience is seamless.
21:13 In other places, the challenge is that there is one language needs to be, it's not seamless.
21:21 It is physically being rewarded, the journey gets broken.
21:24 But because of our affiliation with Isasia Bank and the product of money world that we have there, we are able to integrate and offer that seamlessly.
21:32 So there are some unique experiences one needs to identify, propositions that needs to identify.
21:39 And we are always on our toes. There is no resting on this. We'll have to keep innovating.
21:45 And like I said, I think our next journey is how we can bring our research content at scale in a personalized manner to investors and improve the business.
21:59 So there's a huge amount of thinking going on.
22:01 I was just talking to Zeroda sometime back and they were saying that they are working on something called the nudge where customers can actually,
22:13 you know, there is an application which tells you which which helps you track your trading record for the past one year to just because most traders don't really track their investments and they don't know where they go wrong and why they go wrong.
22:29 They're working on applications like that, which can make you reflect on what you're trading record is and then keep fine tuning that to better your odds of winning.
22:38 And they're a private company and money making company. And the thinking with the promoters is that even if that means the trading volume get depressed, they really are not concerned because the outcome they want is a better, better, better wins for their customers.
22:58 Now, this really hits at the core heart of how the broking business has evolved over the past many years.
23:06 For an incumbent like you, when competition like this comes up, you know, how do you really steer this business going forward?
23:16 Are we going to see some fundamental changes in the way companies are going to approach this whole business in future?
23:24 Absolutely. I think you highlighted a very key insight. You're in this business, not for a transaction. You're in this business for life.
23:34 You're dealing with a customer's money and your role is to facilitate that investment to enable the customer realizes dream.
23:47 So I think of it as you're in the business of facilitating customers aspiration, customers dream, and it's a very big responsibility.
23:54 And I think that is a philosophy and that is a culture and that is a attribute that we have ingrained very, very early on in our method of engaging and dealing.
24:06 And it has to be reinforced again and again. And interestingly, on the point that you said about some of these risky elements that come in, and how you alert customers.
24:20 Our approach in the past has been actually that we pre-select such risky instruments and take it out of our platform.
24:29 So it never comes onto our platform. That's the approach that we have been taking. So in a way, we've been sort of following this from inception.
24:37 However, with the changes that have happened in technology, what we started doing now is we offer these instruments in the platform.
24:45 And today's customer wants choice. He says he wants to be empowered to take a call. That's the way he demands.
24:52 So we've launched something called, so we've introduced them. So first from a situation where it was never there on the platform, we've actually introduced it.
24:59 And we have introduced a concept called iAlert. And that alert actually pops up when a customer tries to buy or transact in that particular security
25:13 and highlights some of the issues. It could be a penny stock, it could be something which is at a high price by the principal shareholders and so on.
25:22 There are a number of rules that have been laid out, some six, seven rules, and they just pop out, whichever is the risk.
25:28 So we've started doing that. We've actually launched many more payoff analyzers. People know that, okay, what is the risk reward equation of a certain strategy?
25:37 And it's an idea of analyzer for a certain strategy. A number of such tools have been launched by us in the recent past to facilitate safe investment by investors.
25:52 And I think going forward, one of the areas that we want to focus on is to get a P&L kind of a sense of every investor so that we are able to alert him that,
26:05 how much money you've been making, what strategies you need to change. It's like showing a mirror, that this is actually your performance over time,
26:14 your strategy, maybe you want to change it, maybe you want to continue with it, and so on and so forth.
26:18 So I think it's a very important responsibility of the industry to ensure that you keep the trust of investors, because this is a business of the life.
26:30 Just one last question. Five years hence, how do you see ICICI direct in terms of the complexion and character of the company?
26:40 Would it look very different from what it is today? Or do you see incremental changes?
26:45 No, I think the big shift that we would see in ICICI is that our vision that we have articulated of becoming an entity, which services a financial services requirement of an individual,
27:10 a retail individual, a retail Indian, as he goes through his life stage, we find that an individual is different when he's in his 20s,
27:20 his aspirations and needs evolve when he enters a different age bracket. And it keeps moving with time, there are times when he wants to do some very basic investment,
27:32 as he becomes wealthier, his risk appetite increases, there is more demand for more complex investment options.
27:41 There are times when he wants to protect his life, where he wants to protect his assets, he wants to protect his health.
27:47 Similarly, there are times when he wants to borrow, buy a house, buy a car, whatever, improve his lifestyle, for his needs.
27:59 So all these borrowing requirements that come up in this life, all these protection requirements, and the entire gamut of investment options,
28:11 from basic to more complex is something that we have started identifying systematically as a need set and started filling up the gaps that are there.
28:22 And what is most critical and most important is that it is to be delivered to him in a digital, personalized digital format.
28:33 So an ICICI direct for Mahalakshmi should look very different from an ICICI direct for Vijay Chandra.
28:41 So that you are dealing with your ICICI direct, and it's a one place for you, for your go to place for everything that you would need,
28:52 right from your investments, right up to your borrowing, and with an open architecture.
28:58 So it could be a kind of a place like an Amazon store, so to speak, of everything that, of every brand that is there.
29:08 So that's the direction in which we want to go. We still have a long way.
29:12 All the best. Thank you so much for taking the time out today.
29:16 Thank you so much. Pleasure always talking to you and all the best. Take care.
29:21 Thank you.
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