A Note On Web Aggregation In India

Who are Web Aggregators?

Courtesy to the growing interest penetration in India, the use of online platforms for personal finance needs has become more apparent over past few years. This has led to the advent of dedicated websites known as ‘Web Aggregators’, offering the key information on financial products. In short, ‘the concept of web aggregator is used for online enquiry/shopping, wherein end consumers could get information and quotes on diverse financial products across service providers at one point.’ This way, consumers will be able to compare different products, targeting the same group, on one platform. The value proposition for web-aggregators is in giving customers an unbiased selection of products, enabling them to make wise-decisions.

Benefits of web aggregator

The advantages of the use of web-aggregators lies in apparent saving of time and efforts of customers, who can compare multiple quotes, charges, eligibilities, etc., at a go, even without divulging his/ her personal details. In addition to this, as many banks/NBFCs/insurers compete in neutral marketplace, everyone get a fair opportunity to lure consumers with the help of their product utilities rather than marketing. In certain cases, consumers also enjoy a negotiation power as banks are aware of the competition lying there.

Operational models

There are various operational web-aggregation models currently in use in today’s market. One of them is lead aggregators. They are working on generating leads for banks/insurers by selling users’ contact information to banks/Insurers. Once, banks/ insurers have received the leads, they will contact these users and try to sell them products, based on the inquiry made. The early players in this space have been web portals such as Web 18’s ‘MoneyControl’, Sify’s ‘Walletwatch’ and Rediff’s ‘MoneyWiz’.

Another category in models is that of financial comparison portals that go a step ahead of lead aggregators. They provide customers with an opportunity to compare multiple financial products available in the market and then apply for one, which suits their needs best. Once, customers have chosen a particular product, comparison portal sells their information to banks/insurers with the choices they have made on the portal. After this, there are high chances that customers will get a call from the respective bank and ask them to complete the transaction by further motivating them.

Also, there are other web-aggregators, which go to the extent of leveraging customers for all banking needs once approached. iTrusts, for example, sends a team of trained financial experts or consultants to meet customers personally. Here, these financial consultants note down their individual requirements and revert on bank’s/insurer’s behalf with an application form of a relevant product. The bottom line is to hold on to the customers by reducing their cost-per-acquisition.

Lead Aggregators – A complete operations cycle

However, web aggregators have a drawback of no face-to-face interaction. According to ‘Know Your Customers’ (KYC) norms of regulatory bodies such as IRDA/RBI in India, at least one face-to-face interaction is required before any financial product is sold. This means, there will always be a possible lag between web platforms and financial service providers as the entire transaction cannot be concluded online. Even after this, web aggregators are gaining momentum as customers need to provide their detailed information to banks separately in order to get customized quotes.

Let’s now come to the business part. Web-aggregators earn major chunk of their revenues through lead sales and commission income.  Besides this, advertising revenues coming from their partner banks/insurance companies on websites also contribute a major part. Also, it serves well for financial services and banks as advertising on financial portals is cheaper than other platforms. As per a recent report published by Internet and Mobile Advertising Association of India (IAMAI), online advertising revenues from Banking and Financial Services (BFSI) stood at Rs 1.41bn across India. This was largest amongst all categories, followed by travel industry, which accounted for 20 per cent of the ad revenue.

IRDA guidelines on web-aggregators

Insurance regulator IRDA has issued fresh guidelines for online insurance aggregators recently. These guidelines are aimed at bringing consistency in the display of prices and key features of insurance products by web-aggregators. IRDA, through these guidelines, defines an ambit within which web-based insurance aggregators operate, including their business model/ remuneration, along with forcing the industry to switch from a cost-per-lead model to a cost-per-sale model. Following are the key features of IRDA guidelines:

The aforesaid guidelines are short-sighted and will essentially make things difficult for web-aggregators. Firstly, it will deter new firms from the clause that aggregators have to be in business of at least three years. Secondly, it will restrict aggregators to a pre-defined single agreement format for three years, including details of fees. Thirdly, it will leave aggregators at the mercy of banks/insurers to convert their lead into sales, to get commissions which again are capped. Ideally, market forces should determine fees or commission income.

The norms could mean survival questions for aggregators who lack credibility. At the same time, it could check on the quality of information or data passed onto insurers.