A Career in Marketing Financial Products
Would you like to be in the business of money? Lending and accepting deposits, and creating growth and value in economy while touching and impacting people's lives?
Do you have acumen for both numbers and people management balanced in a healthy mix, and would you like a sales career where you get not only rewards, recognition but also respect from people whom you touch? Then a marketing career in financial products is the choice for you.
Financial products are products like loans, credit cards, savings accounts, fixed deposits, mutual funds and insurance.
They help people save and grow their money, safeguard their assets, or meet their financial needs at the time they need it. Financial products is a rapidly rising industry in India with many national and international players in this sector.
Marketing financial products is different from marketing other products in many ways. This is because it is a highly-regulated sector and the basic components of a financial product are basically the same for all players. This means that a Rs. 30,000 loan is the same irrespective of where it came from. Financial products differ in terms of level of interest rates, collateral needed, tenure, and fees charged. This is explained in greater detail in the following section.
Types of Financial Products Used in Retail Finance
Assets Unsecured lending is, thus, riskier than secured lending; hence, the reason that personal loans, etc., are priced at higher rate of interests than home loans. Competition also determines the rate of interest charged.
For example, in consumer durables lending in India, most goods are financed at zero percent rate of interest but only with stamp fees. While in sectors like auto loans, there used to be huge competition a few years back and so auto loans were readily available at discounted prices. As of 2007, auto loans competition is less intense than consumer durables, hence, the interest rates have risen much higher.
Loans are also classified with fixed rate of interest and floating rate of interest. Most home loans are at floating rates of interest in which interest amount / percentage changes over time with reference to benchmarks. Most personal loans tend to be of fixed rate of interest in India.
Loans are generally sold through banks, non-banking financial companies for house and personal loans. For two-wheeler and consumer durables loans, they are generally done at point of sale itself in partnership with the dealership.
The perceived ability of the loan-taker also determines the pricing or rate of interest. The safer the person is perceived (based on credit score, past track record, annual income), the more the loan amount he can be leveraged to and at a lower rate of interest. Thus, people belonging to lower income groups are availing average loans of Rs. 40,000 can have rates of interest as high as 40-60% per annum, while middle-class people with fixed incomes avail loans for more than Rs. 1 Lakh at rates of interest of 14-20%.
The target audience of the financial product for a particular product is an important factor in designing marketing messages. Thus, some banks sponsor golf tournaments since they cater to select high net-worth individuals, while some finance companies design activities like festival offers, or campaigns that have catchy slogans running on trucks or radio ads, in local languages as they cater to mass small-ticket loan-seekers. Even within same financial product, they can be called with different names to distinguish branding and end user (like gold cards, silver cards, platinum credit cards).
Receivables like loans lent to borrowers are called assets for financial firms. These assets generate income for the financial company through interest income, and fees like late fees, cheque bounce charges, and application charges.
Lending can be of two types - Secured Lending when the loan is backed by collateral like a house, a car, two-wheeler, or a consumer durable. If the lender is unable to pay up, as a measure of last resort, the lender can repossess the hypothecated underlying car, house, or consumer durable. Unsecured Lending is loans made without any collateral. These can be fixed amount like personal loans or a revolving line of credit like credit cards (called revolving because customer can borrow any amount upto a certain limit and pay flexibly).