Avoid viewing rural market as a homogenous bottom of the pyramid: Abhishek Gupta

Adgully hosted the first ever FINIXX Summit and Awards 2024 yesterday (December 13, 2024) in Mumbai. The Summit brought together industry leaders, BFSI and Fintech companies, marketers, startups, and more to explore the latest trends, challenges, and opportunities within this critical space. FINIXX aims to serve as a platform for thought leadership, collaboration, and the sharing of groundbreaking insights that will shape the future of the BFSI and Fintech industry.

A key highlight of this summit was a fireside chat on ‘Innovating Financial Inclusion: Bridging the Urban-Rural Divide’, which saw Manas Gulati, Co-founder and CEO, ARM Worldwide, in conversation with Abhishek Gupta, Chief Marketing Officer, Edelweiss Life Insurance.

Commencing the discussion, Manas Gulati cited an example of a farmer. He stated, “"Mohan, a farmer, was eligible for certain financial benefits in 2019, but couldn’t avail them due to factors like financial illiteracy and limited access to financial services in rural areas. However, by 2022, NPCI enabled numerous financial transactions in rural areas, contrasting starkly with the urban scenario. In 2019, 6.1 billion UPI transactions occurred, while this number surged to 16.8 billion by 2024, highlighting a significant divide.”

Furthering the discussion, he asked Abhishek Gupta, “What are the key disparities between urban and rural areas in terms of access to financial services and inclusion? And what do you think are the things which are hampering it from happening as well?”

Speaking about the diversity of the Indian market, Abhishek Gupta emphasized, “As you travel, the language, food, and even the taste of water change significantly. This is the essence of India. India, with its diverse regions and cultures, can be likened to at least 35 different countries. This highlights the impossibility of treating India as a single, homogenous market.”

Speaking on the penetration in the rural market, Gupta noted, “The penetration of the product itself is fairly low. So, when you are working on a product where the penetration is low, you need to start offering them, what we call as, sachets. Anybody who’s new to the category will first take their feed in, understand the product and then probably take a larger bet on that product.”

Speaking about the challenges in the rural market, he said, “Unfortunately, we often make the mistake of creating a product for a larger market and then attempting to create a ‘cheap’ version for the rural market. This approach rarely succeeds. The real challenge lies in understanding the unique needs and preferences of rural consumers. It is crucial to avoid viewing the rural market as a homogenous ‘bottom of the pyramid’. Just as in urban areas, rural consumers exhibit a wide range of needs and purchasing power, from the very basic to the highly sophisticated. We must recognize this diversity and develop products specifically tailored to the distinct needs and preferences of different segments within the rural market.”

Continuing further, Gupta said, “Secondly, the mindset of rural consumers remains largely unexposed to the products currently offered by the BFSI sector. Therefore, we need to develop products specifically tailored to their unique needs and preferences, which may not necessarily be successful in urban markets. Furthermore, most BFSI companies overlook the significant differences in distribution channels between rural and urban areas. In rural markets, distribution relies heavily on relationships and trust, unlike in urban areas. Understanding the nuances of the rural distribution channel is crucial and requires time and effort.”

Shifting the focus of the discussion to the government policies, Manas Gulati asked Gupta what the government has done over a period of time to enable these segments.

Gupta replied, “The government plays a crucial role as a catalyst, and sometimes, as a regulator, it pushes the industry towards specific goals. A prime example is the Insurance Regulatory and Development Authority of India’s (IRDAI) vision of ‘Insurance for All’ by the 100th year of India’s independence. To achieve this ambitious goal, IRDAI has designated one state or unit to each of the 24 life insurance companies operating in India, making them the lead insurers for that particular region.”

While speaking about Edelweiss Life Insurance’s state of focus, he said, “For us, that state is Chandigarh. Don’t just look at Chandigarh as an urban city. There are villages around Chandigarh that actually form a huge bulk of the population. So, our job is to ensure that we go into every village over there, promote insurance, do a lot of activities, and take care of other insurance companies. But ensuring that the awareness of insurance goes right at the first step and then once the awareness is up, try to get more and more people in the insurance.”

“Secondly, each life insurance company has been assigned a list of villages to focus on. For us, this includes approximately 100 villages. The government has set a target of insuring 10% of the population in these villages. The current year marks the beginning of this initiative, while the overarching goal remains ‘Insurance for All’ by 2047. The government is actively driving this initiative by not only pushing insurers but also by creating a standardized, low-premium product available across all companies,” Gupta added.

He further said that this standardized product, designed specifically for this consumer segment, offers a low premium with a corresponding sum assured. The intention is to introduce this consumer segment to the insurance category, with the hope that they will subsequently consider higher-value insurance products in the future.

“I must admit that without government intervention, most insurers would likely prioritize more lucrative urban markets. However, the rural market holds immense potential in terms of volume,” he affirmed.

These are edited excerpts. For the complete discussion please watch below:

https://www.youtube.com/watch?v=48hfZskro4k