How Jio’s Entry Could Shake Up Financial Services Sector


One space which may see serious disruption is Indian fintech. An estimate by EY in August suggested that the domestic fintech industry is likely to have assets under management of $1 trillion by 2030, compared with $104.5 billion in 2021. Ambani is eyeing this opportunity.

The scheme of arrangement involves issuing one share of Jio Financial Services for every one held in Reliance Industries. The structure of the new company will also be flexible enough to partner with strategic and financial investors.

As part of its business, Jio Financial Services will acquire liquid assets to provide adequate regulatory capital to lend to consumers and merchants. It will also incubate other financial services businesses like insurance, payments, digital broking and asset management.

According to the plans detailed by Jio Financial Services, the various segments will be developed over three years, leveraging the 2 crore customers Reliance Industries has across various mobile applications.

This customer base provides an immediate cross-selling opportunity for Jio Financial Services. It may start with ‘buy now, pay later’ for its retail business to test the market, a fintech industry specialist said on the condition of anonymity.

To grow the business, Jio Financial Services would likely immediately seek financial investments, the specialist said. This could also result in the company acquiring fintech firms which have sizeable operations, but were impacted by regulatory changes in the last few months, the person quoted above said.

The Reserve Bank of India on Sept. 2 announced its guidelines for digital lending, which could potentially slow down the expansion for Indian fintech firms. The funding winter could also make some fintech firms eager to sell down to a well-capitalised competitor, the fintech specialist said.

For other weak firms, who decide to stick it out, the competition from Jio Financial Services could prove detrimental, a fintech founder said, also speaking on the condition of anonymity.

Owing to Reliance Industries’ strong balance sheet and its AAA rating, cost of funds will likely be low. Just like it did in telecom, Jio could look at reducing pricing for services across lending, insurance and asset management. For companies which are already working on razor-thin margins, the founder quoted above said that this might become a significant challenge to surmount.


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