Looking at the Reliance playbook, be it in telecoms or retail, it is obvious that Jio Financial will try to take the services to the masses, multiple industry insiders said. With the group’s wide reach and its deep pocket, its full-fledged entry could disrupt the market where many of its rivals would be fledgling fintech players.
“The obvious attempt would be to go after the consumer lending opportunity, leverage the Jio user base and the presence of large format retail stores to create a strong distribution channel,” said a senior executive at a major venture capital firm with a large exposure to the Indian fintech sector.
“They can track the data, use it for underwriting and create attractive offers for consumers, they can play a role in financial inclusion,” said the founder of another major lending startup. “With the Jio app, they can showcase offers to their users and incentivise them to transact through the app.”
While consumer lending can be one part of the business, Reliance has a strong presence in the business-to-business commerce space too, through Reliance Market. Reliance Market started back in 2011 has around 4 million members who are served through 52 stores.
Impact on fintech startups
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If Jio gets the execution right, there will be a major competitor for fintech startups. Indian fintech founders have carved out a niche for themselves in consumer lending and they fear that Jio might try to grab a large chunk of that.“Knowing them I think they will mostly go after the mass market. Most of the startups are focusing on the middle-income layer consumers, which should keep them safe, but yes there is a big challenge coming up,” said the founder of a consumer lending app.
None of the fintech founders and investors who ET spoke to went on record given Jio itself has not made its business plans public. They are in a wait-and-watch mode, but nervousness is quite palpable in the sector.
“My suggestion to my portfolio companies has been not to overreact and focus on execution. There is enough room for all sizes of players to exist; they should focus on sectors where they have an advantage,” said an early-stage investor who focuses on the fintech sector.
Innovation, most investors believe, will keep the startups ahead. They need to keep focusing on their bottom lines and create innovative products to keep the business running strongly, they say.
“The focus for fintechs for now is to start monetising their own base and stabilising their own ships,” said another early stage fintech investor. “They cannot afford to be bothered by Reliance right now.”
Reliance and fintech
This is not the first time the oil-to-telecom group is looking to dabble in financial services.
In 2015, Jio got a payment bank licence. In 2019, the company launched a payment terminal business, deploying point-of-sales terminals at merchant outlets.
In January 2020, it launched UPI payments on the MyJio app. And in the middle of all this, it made plans to integrate closer with WhatsApp Payments to offer digital transactions to offline retailers. But so far, its involvement in the sector has been quite limited.
“For large corporations, they are not as nimble on tech as fintechs, so as of now we have not seen major disruptions in payments from Jio,” said a senior banker with a private sector lender. “But they have a strong intent to get this going.”
On UPI for instance, Jio Payments Bank reported only 1.4 million transactions in June this year compared with 8.8 million transactions by Airtel Payments Bank. For Jio Payments Bank, this number was around 0.8 million two years back, suggesting slow growth in comparison with the sector standards.
The financial services sector is heavily regulated in India, so for large corporations, entering this space has not been very easy, said one of the venture investors cited earlier. Even the Tatas have struggled with their super app strategy around Neu, he said, adding: “So overall it will be interesting to see how Jio plays it differently.”