About 15 years ago, right after the global financial crisis, the Fintech ideology started to take off. Investors are betting on innovators to solve financial sector consumers’ problems using technology.
However, Techfins differ from Fintechs in their operations, business model and core offerings. Techfins has access to huge amounts of data, usually collected from a non-financial relationship, can process and analyze them in real time, to provide financial services. (eg: Alibaba, Amazon, Apple, Facebook, Google).
Around the time fintech was taking off globally, Jio revolutionized access to telephony and the internet in 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 agency based underwriting”.
It also indicated intent to grow its financial services across payments, insurance, digital brokerage and asset management.
The group is India’s largest retailer across multiple consumer and product categories – a data point that will equip them with detailed real-time consumer insights. It has also integrated daily shopping with cross-platform services like WhatsApp. It owns the largest telecom company.
Importantly, it has some of these global platform giants as its equity investors in its internet game.
Furthermore, it has a payments bank already within its fold. It has also applied for the NUE licence.
Unlike a pure fintech fintech or an existing financial services brand, it will have the advantage of monetizing or analyzing consumers’ digital footprints across all its businesses, to provide predictive and proactive solutions to consumers, much before consumers at all realizes its own need.
Fintechs that offer innovative solutions can be acquired. Those that do not have a differentiated offering may not survive in the long term. Top talent poaching as well as acquisitions can happen.
With the entry of a big brand with big capital as armory, will the regulatory gates widen to allow wider and faster product expansion in BFSI for digital players?
Consumers will benefit from existing brands having to drastically improve offerings, prices and customer service to stay competitive.
Newer emerging technologies in the AI/ML area will be deployed commercially for a wider range of applications in digital finance. This will require regulators to adopt newer methods to regulate and monitor the sector, in real time.
Also, until AI/ML stabilizes sufficiently to handle large volumes of low ticket size complaints that Indian platforms may face, the volume of consumer complaint issues may pose a challenge to the Techfin brand as well as the regulators.
So far, the Indian financial regulators have kept Fintechs out of banking, allowing them access to select categories of the financial services value chain.
For a banking regulator concerned about corporate houses entering the sector, this will be a test as the brand already operates in one form of banking. Will this open up a sort of 21st century “banking and financial services” playbook for other Indian corporate houses?
The author is a business consultant and independent market commentator