Digitization of Primary Market Issuance

The rapid evolution and digital transformation in financial services has completely changed the way primary market operations take place. From digitization of systems to automation of processes, various changes brought about by technology have greatly affected the primary market issuance. Until the early 2000, the primary market operations like initial public offer, rights and bonus issues, preferential issues, etc. were conducted manually. However, with the advent of ASBA, digitization of primary market issuance methods is used.

Evolution of Primary Market Issuance

There has been a significant change in the Indian economy’s environment over the last couple of decades. Earlier, the process of applying for the primary market issuance used to take place manually which made managing the application cumbersome for the financial distributors. With digitization, everything changed!

The distributors can now give more time and dedicated service to their customers. Digitization has made the application process easier, safer and faster.

Time and again regulators seek advice from industry experts and come up with solutions. One such solution that changed the face of primary markets is ASBA. ASBA is the process developed by SEBI for applying to IPOs, Rights issues, and other similar transactions.

ASBA stands for Applications Supported by Blocked Amount. It is an application that enables an investor to block his or her application money from the bank account for a specific issue. This procedure works seamlessly for primary market issuance.

Earlier when digitization was nonexistent, it was difficult to handle the large volume of applications manually. As the primary market issues involve allotment of securities, for numerous applicants who do not get allotment against their subscriptions, the application money needs to be refunded. Such refunds used to take a very long time to get credited back into the applicant’s bank account. Several complaints were received from the investors to speed up the process to avoid funds from being sited idle. The opportunity cost for the market participants is high. It also increased the number of transactions like debiting the money from client’s account for applying in the issue and if there is no allotment or partial allotment then refund of the remaining proceeds to the investor’s account.

These increased numbers of transactions taking place, had also increased the cost of reporting and the risk of mismanagement. The instances of one person’s refund being transferred to another person’s account were often reported. The manual process was bound to human errors. But it came with a cost of discouragement amongst investors from participating in the primary market issues.

To clear out these problems, ASBA was introduced. By using the same technology, in 2016, Winsoft has developed an application called SmartASBA to assist financial distributors like Banks and Brokerage Firms.

By automating the task of processing bulk applications, SmartASBA has saved several thousand hours of the financial distributors and has removed the scope for human errors. As with ASBA, that merely blocks the amount in the account rather than transferring it, the number of transactions dramatically reduced.

With this, the process of initiating the refund has become very easy and seamless. After digitization, this process only involves unblocking the amount, without the need to enter into any redundant set of transactions.

Technologies Backing Digitization of Primary Market Products & Challenges

It was a gradual process to gain investors’ trust in technological advancement in the primary market issuance sector. The technology of ASBA and UPI played major roles in digitization.

As we discussed, ASBA is a system to block the amount in an investor’s bank account. The UPI is a system that seamlessly combines various banking features into a single mobile app. It allows users to manage multiple accounts in one place and make and receive payments using a single application.

Each platform is designed with advanced technologies, ensuring that primary market distributors can give impeccable service to their customers. This combined with SmartASBA ensures smooth flow, from onboarding to handling applications, each function is carried out error-free with Winsoft Technologies.

There are several challenges faced by the participants related to the primary market issuance. Some of these are as follows:

• Unpolished Process  Several times, the investors do not receive the UPI mandate and the process of the application fails. Since multiple technologies and platforms are being used, sometimes they do not work in sync and disrupt the process.
• Complexity Many investors find it confusing to jumble between the applications. From bank or broker’s platform to UPI application to approve the mandate. This process could be made a little more synced in the coming future.

The primary markets are currently embracing new changes, in which adapting to digital trends and technology while also innovating with new business models and products/services is taking place.

The Bottomline

Today, technology and digital transformation in financial services is becoming an essential part of the entire financial market ecosystem. Keeping this in mind, Winsoft Technologies offers an array of advanced solutions via products and services to enhance financial processes. If you are looking for a solution to make things easier then search no more. To know more about our innovative solutions & services connect  with us today!