Today, the word 'technology' is more synonymous with convenience and comfort rather than fear or dread. Various user-friendly applications of technology have become so ubiquitous that it is difficult to imagine life without the various gizmos that surround us. It has spread its tentacles into the arena of investments and other aspects of personal finance too. This has a few advantages:
Information for one and all: Today, merely having access to information (of the legal kind) is no longer considered an edge. Today we are swamped with data and information of all hues, which is available in every medium possible (print, electronic, mass media, and so on). Besides, regulatory improvements have led to a quantum leap in disclosures leading to better quality of data too. This has certainly levelled the playing field for investors.
Easier transactions: When was the last time you waited in a line to withdraw cash at a bank or at your electricity company's office to pay your latest bill ? Today, whether it is utility bill payments, stock-trading, banking or payment of insurance premia, we first think of the online option. Improved internet speeds and better rendering of websites on various mobile devices such as tablets and smartphones have encouraged an increasing number of companies to offer this option.
Lesser role for intermediaries: Apart from better information flow, users are helped by the fact that many product manufacturers, such as mutual funds, can reach out directly to their end-users through the internet. While this has fostered a feeling of insecurity among intermediaries, well-informed consumers are jubilant. Even the income tax department has made it mandatory to file returns online, for certain categories. Their easy-to-use interface has released many ordinary taxpayers from the clutches of 'tax-filing' agents who, for too long, were masquerading as 'tax consultants'.
Crumbling costs: While technology has enabled product providers to reach out to many more prospects, it has also enabled them to lower their cost of operations. These savings have often been passed on to consumers. Besides, the availability of good-quality off-the-shelf technology solutions has resulted in lower entry barriers. This has also reduced the pricing power of the providers, and further benefited consumers.
New product categories: A decade ago, nobody would have ever dreamt that an insurance plan could be offered online. However, today, online term plans are the fastest growing product category for insurance companies. Also, money can be switched from a bank savings account offering 4 per cent p.a. to the same bank's fixed deposit offering 8 per cent p.a. in a jiffy, with a mere click of a mouse button. Even a stodgy product like the Public Provident Fund (PPF) can be subscribed to, online. No more dealing with officious bank clerks anymore, nor having to worry about a misplaced comma or full-stop on the application form.
While most of us would agree that these advantages are great, there is a flip side to it too. Some disadvantages of being addicted to technology are:
Loss of personal touch: In the days gone by, one could sort out any offline transaction related problem over a cup of tea with the neighbourhood bank manager. Today, to resolve any issue pertaining to online transactions we have to either navigate our way through a series of seemingly interminable Interactive Voice Response (IVR) instructions or deal with call centre personnel operating from some remote corner of the country / the world. In other words, technology is wonderful as long as you do not encounter any glitch.
Security issues: Nowadays all companies reassure us that they have robust security systems for their transactional portals. However, there is another kind of threat which they can do little to avert: Today our life is governed by myriad passwords. As remembering all of them is not easy, many of us tend to note it down somewhere. This can pose a threat if it falls into wrong hands.
Data loss: Data may also be lost or compromised due to fraud which takes place at the service provider's end. Hence, it is prudent to maintain some physical record of the details of one's financial assets
More is not always better: It is moot whether the recent information explosion has actually given birth to a more evolved consumer, whether it be in the realm of insurance, investments or banking. In fact, the profusion of data has shortened the time horizons of many investors. Many attempt to monetise every shred of data that comes along, led more by impulse than reason. This results in increasing trading costs and often, even sacrificing their peace of mind. The other extreme of too much data is that we can also freeze into inaction when we come across diverse pieces of seemingly irreconcilable news.
Fat-fingered errors: It is likely that users may commit errors in entering data while transferring funds or placing orders on online broking platforms. Sometimes these errors are difficult to reverse, leading to great angst.
On balance, while it is true that technology has made our life easier, at the end of the day, it is up to us to ensure that we are its masters and not its slaves.