Money on a single screen4 min read . Updated: 21 Jul 2015, 06:51 PM IST
Having a common screen where one's financial life can be viewed might not happen quickly
I find myself buying more and more on the Internet. I’m not alone—there are 39 million Indians who bought stuff worth $3.8 billion (according to Chicago-based management consultancy, A.T. Kearney’s report) via this new medium in 2014. The process is smooth and fast. Returns happen quickly and companies are usually alert to consumer complaints. But I don’t have a similar experience with my financial life online. It took me a long time to sync my accounts so that the insurance transactions and investments are now easier, yet it is still very clunky and to get an overview of my financial life I need to go to various sites and collect data that is not so easily downloadable in a similar format. And try changing a bank account and see what loops your request goes through. There are third-party sites that offer to do this for you but I’m not sure I want to link my various accounts to that of one bank or firm.
There are other people who are worrying about the same thing, it seems. In the 12th meeting of the Financial Stability and Development Council (FSDC), finance minister Arun Jaitley put his weight behind the common screen idea that will allow individuals to look at their financial lives on one screen (http://mintne.ws/1VocNsJ ). Details of financial assets such as bank accounts, stocks, insurance, mutual funds and loans will be visible at one place. There is a sub-committee of the FSDC that is working on this common interface. As a heavy user of various financial products, I’m eagerly waiting for this common screen. Here is what I hope I get.
One, the screen must be maintained by a third-party entity that is not owned by a financial firm. The digital exhaust that we generate will give the firm that manages this data an unfair advantage. For instance, a bank knows when a deposit gets a larger than usual credit and uses that information to cross-sell products. That has led to very sharp sales of third-party products—sometimes of unregulated products as in the case of art funds that were sold by a foreign bank which has now gone under. Two, I would want the entity that manages the screen to be under the jurisdiction of all the financial sector regulators since it is regulators and not firms that compete for the investor wallet and turf in India. It will be unfair if one regulator were to decide the rules of the game on how the screen looks and what information it gives out and what you can do with it.
What would I like to do on the screen? To see at a glance what I own and what I owe. In what I own, I’d like to see the asset allocation, what I invested in, what its value is today and what that return works out to be on an annual basis. I’d like to know the tax incidence that different financial products will attract. I’d want to see the deposits I hold in every bank, and in small savings products such as Public Provident Fund (PPF), stocks, mutual funds and bonds. Finally, I’d like to have a “let’s get real" button that will tell me the post-inflation and post-tax return on the various financial assets that I own.
On the debit side, I would like to know what I have borrowed, what the interest payments work out to be, what is still left, at what rate I am paying that loan back, and what the average rate in the market is currently. Credit card details should include what the annual rate of interest is and what it means on any balance outstanding that I may have.
On the protection side, I’d like to know the details of all my risk covers—home, car, medical, and life covers, to name a few—what they cost, when the annual premium is due, and what the cover amount promises.
Of course, we’ll very quickly run into the problem of bundled products such as unit-linked insurance plans (Ulips) and the traditional plans. While the Ulips will be easy to unbundle for the customer, the problem will come in the traditional plan where the benefits are bundled into a non-transparent goop. Ideally, I would want to see the sum assured and the rate of return, even on traditional plans, as separate numbers and returns as a percentage of my investment (not as the current practice of showing them as a function of the sum assured).
However, I don’t think getting this screen up and running is going to happen that quickly.
And the reason? Not all regulators and financial firms like transparency. It takes power away from them. The power to obfuscate and trap investors. These entities understand that you can’t just tinker with the front end of the financial products that a person uses without a clean-up on the back end. Which is why I do not think a common screen that is of any use to anybody will actually be put in place. No matter what the finance minister has to say.
Monika Halan works in the area of financial literacy and financial intermediation policy and is a certified financial planner. She is editor, Mint Money, Yale World Fellow 2011 and on the board of FPSB India. She can be reached at email@example.com