Jio Financial Services Limited (JFSL), soon to be listed on the bourses, is generating a lot of investor interest because of the Reliance group’s track record of disrupting businesses that it enters late in the game. While details about its business segments are not known, it is clear that JFSL aims to leverage the synergies within the group to build a financial services model. The group’s leadership position in retail-oriented sectors such as modern retail and telecom offers an ideal foundation to scale up business. There is a web of financial services companies that will fall under the JSPL. Let’s look at the business focus of each of the units.
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Capturing the high-yielding lending business: Reliance Retail Finance is a non-banking financial company (NBFC) that supports the group’s massive retail operations in segments like grocery, consumer electronics, and fashion. While the company’s annual report states that it is engaged in investing in shares and securities and lending, its business model will largely focus on financing consumer durables via the EMI model. This will put it in direct competition with Bajaj Finance, which has created a successful business model around these short-term, low-ticket loans. There is also a huge wholesale lending opportunity especially working capital and other cash flow based short term loans to retailers and vendors.
A foot in the differentiated banking business: Reliance group was quick to take payments banking licence from the Reserve Bank of India when the doors were opened for differentiated banking licences for small finance banks and payments banks. The payment banking model doesn’t allow lending. Jio Payments Bank, with a minority equity partner, State Bank of India, the country’s largest bank, provides basic banking services such as savings accounts, deposits, money transfers, and bill payments. This is a vehicle to play the liabilities side of the banking business and also payments and distribution of third-party products.
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Capturing payments solution opportunities for merchants and individuals: Reliance Payment Solutions Limited offers digital payment services to individuals as well as small and large merchants. Its product offering includes mobile wallets, payment gateways, and point-of-sale (POS) machines. There are two popular versions of an app: JioMoney for individuals as well as merchants. The merchants get the capability of accepting digital payments, a record of transactions, offers, and the facility to get the credit tomorrow from the group’s financial services arm. Similarly, individuals can add money to their JioMoney wallet to pay utility bills, shop online, etc.
Betting on new financial infrastructure models: UPI and ONDC are good examples of democratisation of technology and creating new opportunities for entrepreneurs. Jio Information Aggregator Services’ annual report says the company is setting up its business plan for Account Aggregator (AA). Like UPI or ONDC, the AA framework is a game-changing initiative in the financial services industry. Under AA, existing bank customers are allowed to give consent for data sharing with other institutions for availing loans, investments, insurance, etc. The AA will give customers the freedom to choose the best institution in terms of service, product, and interest rates.
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Backward integration from broking to manufacturing insurance products: Reliance Retail Insurance Broking is an IRDA-licensed broker. It distributes insurance products and earns commission. But the Group has larger plans to get into the manufacturing of life as well as non-life products.
