About 15 years ago, right after the Global Financial Crisis, the Fintech ideology started taking off. Investors bet on innovators to solve financial sector consumers’ issues using technology.
However, Techfins differ from Fintechs in their business, business model, and core offerings. The Techfins have access to huge amounts of data, usually gathered from a non-financial relationship, can process and analyse those in real time, to offer financial services.(eg : Alibaba, Amazon, Apple, Facebook, Google).
Around the time when fintech picked up globally, Jio revolutionised the access to telephony and internet to India.
Recently, RIL announced plans for Jio Financial Services with the statement, “consumer and merchant lending business based on proprietary data analytics to complement and supplement the traditional credit bureau-based underwriting”.
It also indicated intent to increase its financial services offerings across payments, insurance, digital broking and asset management.
The group is India’s largest retailer across multiple consumer and product categories — a data point that would equip them with detailed real-time consumer insights. It also has integrated daily shopping with platformised service like WhatsApp. It owns the largest telecom company.
Importantly, it has some of these global platform giants, as its equity investors in its Internet play.
Furthermore, it has a payments bank already within its fold. It also has applied for the NUE licence.
Unlike a pure play fintech or an incumbent financial services brand, it would have the advantage of monetising or analysing consumer digital footprint across all its businesses, to offer predictive and proactive solutions to consumers, much before the consumers even realise their own need.
Fintechs offering innovative solutions might be acquired. Those who don’t have a differentiated offering might not survive in the long term. Top talent poaching, as well as acqui-hiring might happen.
With entry of a large brand with large capital as armoury, will the regulatory gates expand to allow for wider and speedier product expansion in BFSI for digital players ?
Consumers would benefit as existing brands will have to drastically improve their offerings, pricing, customer service to stay competitive.
Newer emerging technologies in the AI/ML space would be commercially deployed for wider range of usage in digital finance. This would need regulators to adopt newer methods to regulate and supervise the sector, in real time.
Also until AI/ML sufficiently stabilise to handle large volumes of low ticket size complaints that Indian platforms could face, volume of retail consumer grievance issues could pose a challenge to the Techfin brand, as well as the regulators.
So far, the Indian financial regulators have kept Fintechs away from banking, and handed them access to select categories of the financial services value chain.
For a banking regulator who is worried about corporate houses entering the sector, this would be a test as the brand already has its operations in one form of banking. Will this open up a playbook of sorts for the 21st century “ banking and financial services” for other Indian corporate houses?
The writer is a Corporate Advisor & Independent markets commentator