Every industry that tries to digitize its service delivery model and move it to online/mobile channels faces the challenge of getting its customers' trust. Usually, this challenge gets overcome by a combination of remedies–by solving a significant problem for the customer, by creating a compelling value proposition(read: low prices),or by creating innovative work arounds. These remedies depend on the nature of service provided - whether it is a transient, transactional service and whether it is must have service. The more transient and transactional the service is the easier it is to create trust (since it is a short-term interaction). And if it is a must-have service, customers grit their teeth and over come the trust deficit them selves.

Let us look at some examples using this frame work one of the earliest success stories in digitization in India was IRCTC and its train ticket booking service. In this case, the relationship with the customer was transactional (each booking is a separate, discrete transaction)and the service solved a significant problem for the customer (annoying queues), making it practically a must have service. So, the requirement of trust was bounded by time, and the dividend payout in terms of convenience was high. So, lack of trust was not a big obstacle for IRCTC's growth.

On the other hand, ecommerce companies had to slog harder. They were not providing a must-have service – customers almost always had the option of going offline to make the same purchase. But the relationship was indeed transactional – you make a purchase and you get the product in a few days and that completed the interaction. However, given that the service was not a necessity for the customer, the ecommerce companies have had to incentivize their customers in the form of lower prices and offer workarounds like cash on delivery to gain the trust of their customers. It is their hope at this time that they' ll be able to disabuse their customers of these habits and still keep them shopping.

Viewed through this framework, the challenge facing investment services firms offering robo advisory services show in sharp relief. First, potential customers do not view investing as a must have for themselves and secondly the service is one that is based on an engagement model – investment products such as mutual funds and ULIPs are long term products that go beyond a one time purchase. These factors make customers instinctively wary they are required to commit their trust for a long term

relationship with a digital entity and hence it is easy to either opt out of it, or seek an offline alternative.

When it comes to investment advisory services offered through digital platforms, customers fundamentally have three apprehensions:

1. Whether or not their particular life situations have been fully taken into account by the service provider (customization)

2. Whether or not the products recommended are selected based on merit or if there are hidden considerations (credibility)

3. Even if the solution is credible and customized, whether the service provider has the necessary acumen to design and provide these solutions (competency)

These 3 Cs – Customization, Credibility, and Competency – are the latent questions that drive the trust level of a customer who is evaluating a digital service provider.

The concept of robo advisory deserves to succeed in India as it holds the promise of solving the hard problem of delivering good advice to vast audience

It is imperative for the industry to solve this problem. The concept of robo advisory deserves to succeed in India for it holds the promise of solving the hard problem of delivering good advice to vast audience. While in developed nations, it solves the problem of cost, in India, where regulations have kept costs relatively low, robo advisory has the potential to solve the problem of scalability of good advice.

So, how do we address these challenges? Some of the tried and true remedies available to other firms cannot be readily deployed in this domain. These are products priced in the financial markets, so there is no 'discounting' possible. Cash on delivery or some such mechanism would neither address the core problems nor would they be regulatory viable.

At this time the industry is choosing between a two paths to address this challenge. Both these options have shortcomings but they appear to be the only viable ones today. The first is to take a partnership approach - partner with an existing medium to large player in the market and present advisory solutions through them. This essentially overcomes the issue by 'banking' on the trust capital of the larger partner. The problem with this approach is that it could hamper the growth of the robo advisory firm as a first class advisory service provider and keeps them as a technology service provider.

The second approach is the omni channel approach requiring the robo advisory firm to invest in multiple channels such as phone, video conferencing and chat apart from the digital platform. This essentially means that there is a human force behind the digital platform to create and foster trust with customers. The problem with this approach is two pronged one this limits the scalability of the offering (when your customer base grows the advisory force has to grow in proportion and two it does not solve the problem of creating trust in the minds of people who are hesitating to become customers in the first place.

The eventual solution to this challenge of engineering trust in the minds of the Indian financial services customer has to be bi-directional. The customers themselves have to shed some of their inhibitions in terms of accepting newer modes of advice. And on the other side digital platforms need to create user experiences that are specifically engineered to over come the trust gap. This is a non trivial challenge and like all such challenges it is an opportunity to innovate and create a break through product in the market.