See: Bank on Corporate Fintech Play
On Friday, Kamath was appointed as an independent director on the board of Reliance Industries and also became the non-executive chairman of the subsidiary that will house the financial operations of the group.
After a slow start, a new Jio juggernaut is clearly about to roll out.
Historically, even in the USA, central banks have been wary of large corporate groups getting into credit and lending. Walmart was struggling. But data as we know it is the new oil and intelligent technology, the new gasoline that has blurred business lines and operating contours of companies. While Elon Musk struggles to monetize data, the Chinese have shown the world the extent to which analytics contained within companies can be mined and then profitably monetized. The influence an Alibaba or Tencent wielded because of it instilled such a fear of God even in the country’s Communist Party that they came after these consumer technology giants to destroy what they feared was becoming an alternative power center in their otherwise nanny state.
We are still far from there. So when mega conglomerates like RIL, Adani or Tata enter the financial services catalyzing data from their existing telecom or retail empires, or both, it becomes a far more bankable option. RIL’s telecom consumers alone digested around 30 billion gigabits of data in just 3 months, giving them the ammunition to compete with banks, shadow lenders like Bajaj Finance or fintech upstarts. After IL&FS blowout, with increased scrutiny by the Reserve Bank of India, it is good to have data-centric lending done in a regulated manner, under close supervision than slimy offshore crooks who prey on the vulnerable.
Back in 2016, the world woke up in shock when news broke of tormented Chinese female students being forced to bare everything, including their identification cards, to shady and scurrilous internet loan sharks seeking nudity as collateral in their more-crown-for-porn scheme — in exchange against higher student loan payments.
Unemployment and inflation in Africa’s largest economy in Nigeria have also driven the desperate to similarly faceless finance companies that thrive on toxic messages mass-disbursed to friends, family and even colleagues of payday loan defaulters, with photos attached from their social media pages and phone book .
Such predators also lurk in India. Several have alleged links to Chinese entities piggybacking on the licenses of dormant home-grown NBFCs, sucking borrowers dry through extortion, while the government, regulators and major app stores like Google — which in August said it kicked out more than 2,000 such platforms. apps from the Play Store in 2022 alone – rushing to capture billions of such transactions.
While scary on one level, we all know that data—analyzed, diced—can hold a mirror to your life like few others. From personal likes to dislikes, hobbies, passions and plans. From shopping trends to stability, financial, mental and everything in between, phone and trading data plays predictability very well. And consequently, in a country where telecom penetration is higher than banking, the data collected will be far bigger and deeper, thus coinciding with the larger Digital India narrative. Such additional data will also provide far more insight into the bottom of our pyramid, which remains largely unbanked, giving them access to cheap credit as companies will better leverage this intelligence and digital footprints to offer tailored financial offerings – loans, insurance, etc. .- for a long-term and profitable commitment.
As Mohan Jayaraman of consultants Bain and Co told me, the socio-economic “lift” will be far significant given our income growth, as many of these people may soon enter the mass market or then look to upgrade to the affluent mass segment. Currently, this group has income that is unpredictable and lumpy, thus posing a higher risk to traditional lenders. But by getting them into the ecosystem, being an end-to-end enabler, is a wise strategy. If executed well, it will also bring millions into the fold of a larger financial sector framework.
Bloomberg columnist Andy Mukerjee has also argued with a balance sheet size of $200 billion, players like Reliance can also leverage “the cost of capital advantage it gets from being rated a notch higher than the Indian government” and subsidize their fintech via other businesses.
Jio disrupted telecom with free voice calls, what is stopping them from disrupting the B2B point of sale (PoS) market by not charging merchants for MDR? Take out the distributor and start offering cheaper working capital loans to kirana owners to manage their inventory, Merchant POS also offers other value added features like GST compliant bills and acts as a good value proposition to the merchants over the traditional players.
For people like us (PLUs) there are digital wallets, financial products, wealth solutions. Approach NBFCs, banks and offer them their analytics and earn a fee or go into lending yourself. Securitize this loan portfolio from time to time and churn the capital effectively. The sky is the limit.
But at the same time, privacy rules must be in place when we jump into this new paradigm. Black Swan events, technology disruptions, upgrading core telecom and retail businesses can also set many back, needing digital or neo-banks and fintech initiatives. But if Singtel and Grab can work together or GoJek -Tokopedia join forces to boost digital banking ambitions and Bank Jago has such a valuation premium, why can’t Ambani be one or an Adani target to be an ant group?
