NEWSLETTER FINANCIAL SERVICES Q3, 2015

Edition III NEWSLETTER FINANCIAL SERVICES Q3, 2015

IN THIS ISSUE EDITORIAL 03A WORD FROM THE MANAGING DIRECTOR ----------------------------------Nikhil Barshikar OPINION 04THE MUTUAL FUND INDUSTRY: A DIGITAL PERSPECTIVE ------------------------Sundeep SikkaPresident & CEO – Reliance Capital Asset Management TRENDING 06CROWD-FUNDING GOES MAINSTREAM ---------------------------------------------Vishal TulsianDirector – PT Bank Amar Indonesia WHAT’S BREWING? 08 09IMARTICUS GOES ONLINE ---------------------------------------------------------------- 10MANAGEMENT DEVELOPMENT PROGRAMMES ----------------------------------OPERATIONAL RISK MDP: SNEAK PEEK ----------------------------------------------- UNWIND11IMARTICUS GOOD READS ----------------------------------------------------------------Check thison eachpage If you want to lead a happy life, tie it to a goal, not to people or things. – Albert Einstein 2

Editorial Dear Reader, A WORD Disruptive Innovation: A word we hear very often these days, but what does it mean? The accelerating rate of technological change, the digitization of FROM OUR MD banking and e-commerce, combined with shifting consumer preferences and an evolving regulatory landscape mean that those of us in the financialNikhil Barshikar services sector need to be adept at disruptive innovation. Managing Director – Innovation in financial services is deliberate and predictable, and has the Imarticus Learning greatest impact when it employs business models that are platform based, data intensive, and capital light. Financial Technology, or FinTech, is the new buzzword, founded with the aim of disrupting incumbent financial systems and corporations that rely less on software. Global investment in FinTech more than tripled to $12 Bn in 2014 from $930 Mn in 2008. There are three primary reasons for the growth: lower technology costs, digitally and financially aware consumers, and financial institutions refocusing on innovation, after a bout of stagnation following the 2008-09 Financial Crisis. FinTech enables companies to reach a wider audience with better solutions at lower costs. MyUniverse by Aditya Birla Money, India's No.1 online money management platform to manage scattered finances through aggregation, analysis, advice and transactions, is one such example. The FinTech sector is primarily focused on consumer financing, personal financing, equity financing, mobile payment systems, banking infrastructure, and institutional investments. In this issue, we explore how disruptive innovations in FinTech are reshaping the way financial services are structured, provisioned and consumed, with a focus on digitization and crowd-funding. Spurred on by the India growth story, entry of foreign asset management companies, favorable stock markets, and aggressive marketing by mutual funds (MF), the asset management industry in India is witnessing spectacular announcegrowth. What’s more, new market participants are further increasing the market size by offering differentiated products and tapping the rural markets. Electronic platforms have achieved notable AUM growth for asset management companies in India in the past few years. Featuring online tools and virtual advice fueled by algorithms, these low-cost platforms effectively target lower-to-middle-income segments. In this issue, Sundeep Sikka, President/CEO at Reliance Capital Asset Management Ltd. offers a fascinating digital perspective on the Indian MF industry. Opportunities in tech innovations abound; so do the opportunities for investing in this sector. Until recently, financing a business, project or venture involved asking a few people for large sums of money. Crowd-funding—be it debt or equity funding—is changing the way companies raise capital by offering easy convergence of investors and borrowers on a shared internet-mediated platform. In 2015, global crowd-funding is estimated to be worth $34.4 Bn, which is more than the global VC market, pegged at $30 Bn. Why the sudden boom? It gives me immense pleasure to have Vishal Tulsian, Director at Tunaiku, a FinTech lending platform in Indonesia, offer his perspective on the phenomenon. Imarticus has gone online as well, as many of you are aware. Check out a brief summary of the online programmes that we believe are relevant to you on Page 8. We have also recently revamped our website to cater to your requirements. Please visit imarticus.org/corporate to learn more about our corporate solutions. Diwali is also the time for new beginnings and ventures. Imarticus is proud to announce the launch of our Management Development Programmes (MDP) to cater to your senior managers and high potential employees. Buoyed by the overwhelming response to our Risk Management Round Table in August earlier this year, we have chosen Operational Risk as the topic for our very first MDP on 21st-22nd January, 2016. Please refer Page 9 for more details. We look forward to your whole-hearted participation and suggestions for future workshops. Best Wishes Always, Nikhil Barshikar Founder & Managing DirectorThe best way to predict the future is to create it. – Peter Drucker 3

Opinion India is the third largest Internet base in the world. Despite 3rd the large base, the penetration of e-commerce is low Mutual Funds compared to markets like the United States, United Largest Industry: Kingdom or France but is growing exponentially. The Internet Base A Digital industry consensus is that growth is at an inflection point. Globally Perspective In this regard, there are two trends that are likely to play a role in shaping delivery channels for the Mutual Fund industry: Digital Untapped Technologies opportunities in smaller locations We will explore both these trends in this feature article. THE CHANGING LANDSCAPE: Various stakeholders of the Industry like Asset Management Companies (AMCs), Distributors and SEBI are focused on improving the Industry’s penetration in smaller Tier 2 and 3 locations. Increasing the investor base by spreading awareness, improving service quality, distributor reach, etc. is therefore one of the Industry’s top priorities. Coupled with this, the rapid adoption of smart-phones over the country points towards a likely scenario where mobile phones act as the primary delivery channel for the Industry. Therefore, keeping applications and websites mobile-friendly and ensuring secure transactions will be critical to growth in this space.Sundeep Sikka The role of financial advisors is likely to increase manifold, since new investors especially from smaller locations would naturally gravitate towards professionalPresident and CEO - advisors for guidance. In addition, the ratio of transactions conducted online will Reliance Capital also increase in the future. As financial awareness increases in a region, we have observed increased usage of online media to research financial products. TheAsset Management, AMC’s track record, customer service, and reach will continue to play an importantIndia’s Largest AMC role in this competitive environment. THE DIGITAL BOOM: The number of Internet-enabled mobile phones in the country is expected to increase from 10-15 million in 2010 to 300-400 million in 2015. According to PWC’s 18th Annual Global CEO Survey, the number of mobile users will grow at a CAGR of 91% from 2012 to 2016, and Indian CEOs believe mobile technologies are the strategic focus for better customer engagement. McKinsey research in personal financial services shows that 1.7Billion Asian consumers are becoming more and more comfortable with using mobile and Internet channels for Digital Banking banking services, with their use increasing on average more Consumers in than 35% in the past three years. Correspondingly, there has Asia by 2020 been a 27% drop in branch usage across Asia. About 40% of Asian mass affluent customers now prefer online or mobile banking; among those under 40 years of age, around half prefer digital banking. Digital-banking consumers number 670 million today in Asia and are expected to reach 1.7 billion by 2020, which once again reiterates the digital boom. REACHING RURAL INDIA: The meteoric growth of mobile phones in India, coupled with a plethora of mobile banking services, provides an opportunity to cover rural markets and expose a larger number of investors to the Industry. Further, SMS transactions have the potential to significantly improve convenience and speed of transactions. Technology can not only improve the investing and advising experience, it will also turn out to be a big cost saver. As SEBI Chairman, Mr. Sinha, has pointed out on several occasions, digital adoption has sped up in many industries and needs to be tapped for mutual fund penetration and growth in smaller locations.Failure is an option here. If you are not failing, you are not innovating enough. – Elon Musk 4

Opinion With the advent of universal Know Your Customer (KYC), mutual funds can be extended to rural customers by partnering with financially inclusive“ TECHNOLOGY CAN companies and banks. Payment banks can play a useful role by distributing NOT ONLY IMPROVE mutual funds to the rural customers, who can then transact using Payment THE INVESTING bank-enabled accounts. AND ADVISING EXPERIENCE, IT Furthermore, with an increase in smart phone WILL ALSO TURN penetration, diminishing handset prices and OUT TO BE A BIG widespread internet connectivity, the mobile ”COST SAVER. phone completely supplements the financial inclusion growth, where an end user, despite being a first time user, will be able to transact in mutual funds through his/her phone. FINANCIAL SERVICES & SOCIAL MEDIA: India’s financial services industry has been a front-runner in several digital marketing initiatives. However, the adoption of social media has been fairly sluggish. A lot of mutual fund players are still in their nascent stages in terms of engaging social media strategy and implementation. However, given the challenges and the consumer thought barriers that the mutual fund industry currently faces, social media provides a ready-to-implement platform wherein brands can actively converse with their consumers, thereby establishing a deeper level of engagement. AMCs need to rapidly increase the universe of interested investors since a part of the target audience group is in the range of 25 -35 year olds who are actively present on social media platforms. The target audience mentioned is more financially-aware, researches on his/her own, and has a lot of curiosity & unanswered questions. This is where the AMCs could step in. Social media provides the AMCs with a massive open forum to listen to and converse directly with their consumers which is becoming increasingly importance as the mutual fund industry grows. CASE STUDY: In line with the growth of ecommerce and the Government’s push for “Digital India”, Reliance Mutual Fund, as an organization, has stepped up to the need of the hour. Reliance Mutual, an early mover in the online space for mutual fund transactions, has revamped its website last year to provide a completely new experience to its users. Along with the website, Reliance Mutual has its mobile application catering to Android, iOS and Windows mobile users. The mutual fund industry is moving towards paperless investing. Reliance Mutual Fund has introduced an electronic KYC (e-KYC) service which enable first-time investors to become KYC compliant in real time and invest in their desired scheme. Another composition which is very user-friendly is “Simply Save”, wherein the customer can invest in a company with the ease of just a click of the mouse. Reliance Mutual Fund also offers an SMS-based transaction feature, wherein the customer can now invest in mutual fund schemes by just sending an SMS. Other features which give users a seamless online experience include Web chat, Video Chat, Social Login, Quick Checkout feature, PAN-based transaction feature and enhanced payment gateways. CONCLUSION With respect to the MF industry, there is a good mix of immediate opportunities and challenges in the digital space. The most encouraging take- away is that there is great potential to improve the mutual fund experience for all stakeholders involved.It is not good enough that we do our best; sometimes we must do what is required. – Winston Churchill 5

Trending There is a lot of focus these days on crowd- funding and it is an increasingly popular option Crowd-Funding for both entrepreneurs and investors. But it is not a Goes new concept. Back in 1885, the base of the Statue of Liberty was built through crowd-funding. Mainstream As the Statue of Liberty was shipped from France, efforts to raise funds for its pedestal stalled. But Vishal Tulsian thanks to a newspaper campaign and the small donations of hundreds of residents, the base was Director, PT Bank eventually erected. Amar Indonesia; Director, FinTech Crowd funding goes In today’s world, the Internet makes it much lending platform in way back! easier and faster to connect entrepreneurs Indonesia: Tunaiku having a big idea with people who buy into the idea and are willing to put their money where their mouths are. WHAT’S IN IT FOR ME? Collaboration on the web is an area of exponential growth. Crowd-funding, or collaborative funding via the web, is one of the standouts for growth in this evolving collaborative economy. In other words, crowd-funding is an alternative financing channel where large numbers of people contribute towards funding a project, debt, or donation. In return, investors can get: • Equity shares, which is called equity crowd-funding • Interest, which is called debt crowd-funding popularized by P2P lending • Free products, which is called rewards crowd-funding. For example, a game developing company gives free access to games instead of giving away company shares • Nothing in monetary terms, which is called charity crowd-funding. PROLIFIC MULTI-FOLD GROWTH: $34.4 The recent phenomenon of crowd-funding based on Billion the Internet started around 2003 when ArtistShare had a successful launch of rewards-based crowd-funding. (2015) Since then, the industry has grown exponentially to become the global phenomenon it is today. In 2015, $1 global crowd-funding is estimated to be worth $34.4 Trillion Bn, which is more than the global venture capital market, pegged at $30 Bn. More importantly, it is (2025) forecasted to reach $1 trillion by 2025, according to MyPrivateBanker. Global Crowd Funding CAN I GET CROWD-FUNDED? Projects or sectors that would qualify for crowd-funding might seem niche. However, if we look at the data, there are around 21,000 active projects and spread across various sectors, which suggests that the scope of crowd-funding is all encompassing. Source: The Crowd-funding Center 6 Another interesting fact is that there are around 442 crowd-funding campaigns launched on a daily basis and are getting a funding of $60,000 per hour, according to The Crowd-funding Center. Interestingly, not all these 442 campaigns are launched in the US, though the US has the largest share. In total, there are 162 active countries. Out of 20,699 active projects, 11,505 projects are based in the US, 2,205 in the UK, and 1,137 in Canada. India is ranked # 9 with 183 active projects. There’s nothing like a dream to create the future. – Victor Hugo

Trending MAJOR PLAYERS IN THIS SEGMENT: While there may be more than 500 crowd-funding websites today, not all are created equal. Which begs the question: which crowd-funding site is best for you? Let’s look at some of the most popular crowd-funding options on the web today. Equity Crowd-funding: • Global: Circleup,RockThePost, MicroVentures, AngelList, FundersClub, Crowdcube, Seedmatch.de, Companisto, Wiseed.com, Investiere.ch • India: 1crowd, LetsVenture Debt Crowd-funding: • Global: LendingClub, Prosper, FundingCircle, Zopa, Ratesetter, Auxmoney • India: Faircent, LendenClub, iLend, Dhanax, CapitalFloat Donation Crowd-funding: • Global: Rockethub, Crowdrise, GoFundMe Real Estate Crowd-funding: • Global: FundRise, Prodigy Network, RealCrowd, iFunding“ MANY EXISTING INCREASED EFFICIENCIES, NOT JUST LOWER COST: PLAYERS WILL BE FORCED TO It may be useful to evaluate the reasons why this form of financing is CHANGE THEIR increasingly popular. Convenience enabled by the Internet is possibly the BUSINESS MODELS number one reason. Some argue that it removes the middlemen who are WHILE MANY charging large fees, primarily the banks / financial institutions. However, I PROACTIVE ONES disagree with this assessment. If crowd-funding is a success only due to lower WILL RIDE THE fees, then it won’t take too long for existing players to reduce their fees, ”WAVE. leverage new technologies and their existing set-up. In addition, banks already command trust when it comes to depositing one’s hard earned savings. I believe that crowd-funding is a success because it brings in a level of efficiency and sophistication not seen before. For example, a start up with a small team of ten people and an excellent product approaches a crowd-funding site for equity funding. To fulfill the requirements of the crowd-funding platform, they are subjected to hundreds of questions and often differing viewpoints by potential investors. This forces the company to sharpen all aspects of its business plan, marketing plan, strategy and sales pitch. Any company that has gone through this arduous process will attest to the fact that it has made them better prepared to face the market challenges. The same company approaching a traditional financing channel would only encounter a limited number of investors or venture capitalists and would not be subjected to multiple viewpoints that crowd-funding provides. Now let us take an example of debt crowd-funding. Many quote that the spread by banks between deposit rates and lending rates, which range from 4% to 8%, is very high and is the reason for crowd-funding platforms to be in the business. This may be the reason for the crowd-funding industry to spring up, but again, would this be a continuing reason for it to be successful in the future? I don’t think so as banks will soon catch up. Here, too, I believe that crowd-funding brings a higher degree of credit scoring efficiency that we have not seen before. WHAT DOES THE FUTURE HOLD? This phenomenon of crowd-funding is a natural progression towards market efficiency, and is no doubt a force to be reckoned with. We will see many new types of players entering in the financial sector that we have not seen before. Many existing players will be forced to change their business models while many proactive ones will ride the wave. Many niche sub-sectors will emerge (such as real estate crowd-funding). Regulations will play a key role in shaping the speed of adoption in different countries. Countries such as the UK are leading the way in this regard and are more likely to set the guiding tone for regulating this industry.There are no wrong turns, only unexpected paths. – Mark Nepo 7

ONLINE AT IMARTICUSImarticus Learning offers short-term, online programmes thatprovide your employees with a thorough understanding ofproducts, processes and operations as applicable to thefinancial services industry.These programmes provide you with valuable training optionsto add to your calendar for diverse training requirements, suchas supplementing your classroom trainings, onboarding newemployees or as periodic ready refreshers. KEY FEATURESComplementary Offerings HIGHLIGHTS Certification Preparation Free webinars by Delivery Prepare your employees imminent Industry to clear prestigious experts on topics of  Self paced videos national and current Interest  Live instructor-led virtual international certifications by NISM, Free introductory Classes CISI, IIBA etc modules of our online  Case study programmes methodology  Accessible on multiple platformsProgram PROGRAM OFFERINGS Claim to Fame Coverage India’s first Online Programme on  The Financial Landscape Capital Markets  Equity, Fixed Income and Derivatives  Capital Markets Operations  Risk and Compliance  Introduction to Risk Management India’s first Online and Capital Allocation Programme on Risk  Market Risk Management  Credit Risk  Operational Risk Individual Mentorship by Industry Expert on  Business Analysis Roles & Live Business Analysis Responsibilities Project  Enterprise Analysis  Requirement Gathering & Analysis  Solution Development and TestingThose who cannot change their minds cannot change anything - George Bernard Shaw 8

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Unwind GOOD READS DISRUPT YOURSELF: PUTTING THE POWER OF DISRUPTIVE INNOVATION TO WORK Whitney Johnson Johnson, a Merrill Lynch equity analyst turned entrepreneur, shows how and why to upend a career in this practical, concise book. Savvy and often counter-intuitive, this book offers the tools, mind-set guidance, and rationale for avoiding complacency and embracing a new career path. Consider this your playbook for personal and professional innovation. Are you ready to jump?THE ART OF DISTRESSED M&A: BUYING, SELLING, ANDFINANCING TROUBLED AND INSOLVENT COMPANIESH. Peter Nesvold and Jeffrey AnapolskyOpportunities abound in “bankruptcy beauties”―both in good timesand bad. The Art of Distressed M&A provides the informationneeded to manage the unique complexities of buying, selling, andfinancing troubled companies. The book also highlights practicalexamples using recent bankruptcy cases following the BankruptcyAbuse Prevention and Consumer Protection Act of 2005 and is thefirst publication of its kind since the Dodd–Frank Act of 2010. THE GLOBAL MINOTAUR Yanis Varoufakis In this remarkable and provocative book, Yanis Varoufakis, former finance minister of Greece, explodes the myth that ineffective regulation of banks, greed and globalization were at the heart of both the Eurozone crisis and the global economic crisis. Rather, he makes the case that they are mere symptoms of a much deeper malaise, traceable to the Great Crash of 1929, then on through to the 1970s: the time when a Global Minotaur was born.GOOD TO GREAT: WHY SOME COMPANIES MAKE THE LEAP...AND OTHERS DON'TJim CollinsGood to Great introduces readers to the concept of an enduringgreat company, one that sustains tremendous growth for at least 15years from the so called \"turning point\". Published in 2001, the bookoffers a well-reasoned road map to excellence for any organizationand gives a great opportunity to analyze how much endurancethere is in a great enduring company. THE BOOK OF AWAKENING: HAVING THE LIFE YOU WANT BY 11 BEING PRESENT IN THE LIFE YOU HAVE Mark Nepo A daily guide for authentic living in hard times, The Book of Awakening is a beautiful and poetic book to keep your head high, your heart open and your feet on the ground. A year's supply of wise and shining thoughts to be taken, one a day, like vitamins for the soul. Highly recommended by Oprah Winfrey and one of her Ultimate Favourite Things. No mud, no lotus. – Thich Nhat Hanh

CORPORATE SOLUTIONSImarticus Learning is formed to bridge the gap between Academia and the industry. Thefirm provides a range of Corporate Solutions designed to assist firms in meeting their skillsetrequirements.Headquartered in Mumbai, Imarticus has delivery capabilities across India with dedicatedcentres at Mumbai, Bangalore, Chennai, and satellite centres at Pune and Jaipur. HIGHLIGHTS AGILE HIRING Ready PlacementsTraining and content delivery at No Costcapability, across the areas ofInvestment Banking, Finance & SOURCING TOTreasury, Capital Markets Operations, PLACEMENTBusiness Analytics, Technology and 2-3 monthConsulting. programmes targeted towardsPreferred sourcing and corporate onboardingtraining delivery partner for leadingGlobal Banks, Consulting, KPO, TEMPINGTechnology and Analytics firms. 6-9 month resource staffing inRange of customized delivery Investment Bankingmethods such as instructor led Operationstraining, e-learning, workshops andseminars for optimal training CORPORATEeffectiveness. TRAINING 2-10 day programmes for employee skill developmentCONTACT US 12We have recently revampedour website to cater better toyour requirements. Please visitus at:www.imarticus.org/corporateEMAIL: [email protected] Don’t cry because it’s over; smile because it happened. – Dr. Seuss