India aspires to be a developed economy by 2047, and to make this vision a reality, one of the most pivotal things would be financial inclusion, which ensures all citizens have access to wealth-creation opportunities. The vision document “The Mutual Fund’s Route to Viksit Bharat @2047” provides a clear framework and highlights key areas where innovation is necessary for continuous growth. Over the years, the mutual fund industry has shown immense potential and has been one of the pioneers in adopting technological evolution. 

Be it the early 2000s KYC adoption for investor onboarding, the 2013s digital transformation that democratised access to investment options, or the very recent integration of advanced AI and GenAI solutions to enhance both investor experience and operational efficiency.

Despite these innovations being a turning point, mutual funds’ reach still remains limited geographically–it is largely urban-centric. So, how do we navigate this? What are some of the challenges the industry faces? 

Well, there are multiple layers to it, like:

• Awareness deficiency and financial literacy.
• Complex products and processes.
• Fear or stigma is attached to market-linked investments.
• Language barriers and lack of personalisation.
• Limited connectivity to the rural population.

We believe GenAI can cut through these layers and be that catalyst for change.

Here are some areas that can bring a paradigm shift and financial inclusivity.
1. Making use of AI agents to cultivate financial literacy. They can work as readily available tutors who can provide answers to questions about mutual funds, SIPs, investments, risks, etc., in the investors’ local language. With the massive reach of the internet and mobile phones, imagine an AI assistant interacting with a resident in a small town of Odisha, assuring them with the right information and making financial education less intimidating.

AI can be a great help in simplifying information, making it more concise, contextual and less intimidating for any investor. To feel inclusive, one must understand the fundamentals of investment and financial planning, which can be achieved with AI-powered assistants communicating effectively in the regional language.

2. Next, AI can streamline the accessibility and onboarding process, especially in Tier 2, Tier 3 and rural areas. By accessibility and onboarding, we mean AI-enabled KYC, like document verification, liveness detection, and facial recognition, which can reduce physical visits and extensive paperwork, especially for someone in faraway locations. 

Language is another barrier that GenAI can work with ease. Vernacular approaches can create a more inclusive experience for non-English speakers.  It can also guide them in their language through the application process (if done digitally), minimising rejection and establishing ease. Innovative measures like these will improve mutual fund accessibility for the elderly as well as the rural population with limited literacy or digital experience.

3. Although personalisation is not a new concept, with AI, it can be scaled. Traditionally, mutual fund offerings have followed a one-size-fits-all concept, but GenAI opens the opportunity to enable hyper-personalisation. Wherein, you can analyse the vast set of data like income, spending patterns, life goals, job change, family planning, risk appetite, etc. and create a tailored offering or product recommendation for customers. 

AI can also be used to get market insights in a simplified way for investors to understand market movements better. It can analyse the amount of financial news, social media, and market data available to generate snippets to share with investors occasionally.

4. Trust is vital to investment, and it can be achieved through transparency. So, how can AI be used to implement it? GenAI has the capability to answer the Whys? Its algorithms can identify and learn patterns continuously, resulting in real-time fraud detection, risk profiling, suspicious transaction alerts, flagging unauthorised activities and many such events. It has a strong use case for AI, which mutual fund companies can benefit from. These capabilities will not only strengthen their work frame but will also build a culture of trust, which the investors will value. 

5. Another very essential area where AI can be highly effective is the optimisation of distribution channel effectiveness. When we say optimisation, it means activities, like identifying high-potential investors, segmenting them and providing them with the most relevant engagement and solution. Behavioural pattern identification is another area where it can be of help, for instance, when an investor is hesitant, confused or triggered, it can send an instant nudge to connect with a human advisor.

Our digital enablement platform, SalesPanda, is specifically designed to empower distribution channels through digital solutions, and now with GenAI. As AI continues to advance and becomes an integral part of growth strategies, we believe several areas hold significant potential. These include creating vernacular content for effective communication and developing an AI assistant to help distributors sell more effectively, answer queries, and search for documents.

Now that we have explored some of the possible use cases of AI, we cannot ignore the aspect that there will be challenges. So, how do we navigate through this?

A) Data privacy and security become one of the major blocks when it comes to AI implementation. Since the mutual fund industry has a substantial amount of personal financial data, robust privacy frameworks are non-negotiable. Hence, to effectively use AI, stringent security protocols and data security become crucial for ethical practices and maintaining investor trust.

B) AI is not free from bias. If they are not designed and monitored carefully, they can trigger a lot of biases due to the training data, leading to unfair or inequitable recommendations. As it is also rapidly evolving, another important challenge is keeping up the pace with regulations; hence, an agile framework will help encourage technological advancements while ensuring investor protection and market integrity.

C) For AI to grow and be adopted, some level of digital literacy must be there, and along with it, access to stable internet infrastructure. By bridging this gap, mutual fund companies can improve adoption and growth in remote areas.

D) Another concern can be the replacement of human expertise. AI should be viewed as an augmentation tool, not a replacement for humans. For example, investment choices are not small decisions; people need understanding, guidance and empathy, which can be handled well with humans. Hence, human interactions are valuable. A hybrid model where AI handles routine tasks and provides data-driven insights, allowing advisors to focus more on human relationships, will be a more effective and sustainable approach. 

E) Lastly, regulatory compliance will be another crucial area to navigate. The road to GenAI advancement will be highly driven by how financial institutions balance innovation and regulatory compliance. It will set the pace for sustainable growth, operational excellence, superior customer experience and last-mile reach. Although there is momentum, stringent regulatory and cybersecurity requirements around data localisation and GenAI endpoints within India, either on-premise or via India-based cloud providers, will be mandatory.

Efforts required to make the ‘Viksit Bharat 2047’ vision a reality

It will be a collaborative effort from all the stakeholders. The mutual fund industry, tech innovators, policymakers, and financial experts must implement AI in their strategic vision. It can work as a stimulus, where mutual funds will not just be an elite-use product, but rather a mass tool for wealth creation.

1.A focused R&D (research and development) investment for AI research and development that fits the nuances of the Indian Financial landscape. It will help bring out the core areas where AI will be highly useful and effective, and it will help showcase the constructive changes required in the industry to overcome barriers.

2. Upskilling the workforce in AI, data, and other financial technology. Cultivating talent will help ease the process of implementation, management and adapting to the changes happening within the mutual fund sector. Last-mile connectivity cannot be achieved if distributors and advisors aren’t digitally and AI-enabled first. Local partnerships and digital tools can be a big differentiating factor in reaching out to the underserved, remote population. They can clarify the confusion regarding mutual funds, assist distributors and encourage participation.

3. Tech providers and fintech companies should work on building more inclusive platforms that cater to multilingual options, are AI-powered, and can help people with varied digital skills. They can also work on product innovation that can cater for those with a not-very-regular income. While all of these capabilities are enhanced, it should also be ensured that it is a digital ecosystem that is seamless and in synergy.

AI has the potential to redefine the mutual fund industry’s approach towards inclusion. Be it scalable personalisation, better engagement, product innovation, privacy or security, AI addresses these core issues. The vision for 2047 is an ambitious one, but with the right blend of technology, human touch and collaboration, it can be attained. 

The vision addresses a greater cause that can transform lives and unlock the potential of India’s demographic diversity. By strategically deploying GenAI to strengthen financial literacy, trust, affordability, accessibility and hyper-personalisation, the mutual fund industry will significantly transcend its current penetration in the country. 

At SalesPanda, we have been committed to enabling the partner networks of the financial services and insurance industry through digital enablement. And, as this GenAI transformation slowly blends in different facets of our businesses, we are gradually evolving our product into an AI-enabled digital transformation journey. 

Note: Key themes and recommendations are inspired by the industry vision paper on mutual funds and financial inclusion, along with current best practices in the Indian financial sector.