🤔 Ambani Set to Disrupt the Finance Space?
After disrupting the telecom sector, Reliance is all set to transform another space: the finance sector. Here's how.
Mukesh Ambani, the disruptor of industries and the bringer of cheap prices is now entering the financial services space in full force.Â
Yes, while we were eagerly waiting for Reliance's Campa Cola and 5G launch this Diwali, it has given us something else to look forward to: Jio Financial Services (JFS).Â
JFS will be formed after demerging RIL's current financial services business from the core company.Â
But why is a demerger needed?Â
🔢 RIL's Foray with Finance
Let's start with the basics: a demerger is when a company separates an arm to make it a full-fledged company.Â
Kind of like when you move out of your house and have to be a fully-functioning adult on your own.Â
RIL's current financial services business, (mainly under Reliance Strategic Investments Ltd) will be merged with Reliance Retail Finance, to create a new separate company: JFS.
RSIL is a non-banking financial company. So, merging these two separate arms will consolidate all of RIL's financial operations in one company.
This will be more efficient and easier to manage.
So, this demerged company can reach newer heights and scale up fast when run independently.Â
Hence, Jio Financial Services has been created and the company is also soon going to list on the stock exchange.Â
Also, RIL has been trying to get a small finance bank license for its Jio Payments Bank. Maybe a separate entity focused on finance could help it get this license faster.Â
But why is Ambani interested in the finance space?
Well, who isn't? Everyone from startups to Tata, Bajaj and Adani are in this space. So, why shouldn't Ambani also get a piece of this pie?Â
So, the plan is to enter the business of digital lending, insurance, asset management, digital broking and basically everything finance.Â
Reliance already has most of the regulatory licenses needed for these businesses and also has an account aggregator license.Â
But wait, with so many players already in the market, won't it be tough for Ambani to make a mark in the space?Â
👀 The Competition Landscape
Despite so many lenders in this space, 50.7 million MSMEs have no access to formal credit.Â
Despite so many insurers, only 1 in 10 Indians have a non-life insurance policy.Â
Despite so many brokers in India, only 10% Indians invest in equities.
So, this space is ripe for disruption.Â
Just like how Ambani delivered the internet to every home in the country, he could take financial services to every corner as well.Â
And as for the competition: India had 14 telecom operators before Jio entered. Now there are only two left apart from Jio!Â
So, it's the competitors who should be wary because Jio could use its brand name to raise money for cheap and disburse cheaper loan and insurance products.Â
Reliance's entry into this space comes at an interesting time.Â
Right now, the assets of his brother's failed finance venture are up for sales. Tata, Adani and many more are in the race to buy these assets, but Ambani could give them all tough competition to get back the family jewels.Â
So, this battle could get interesting and we'll be eating popcorn and sipping Campa Cola as we wait for the winner to emerge.Â
But for now, there is no set deadline as to when the demerger will be completed and when the new company will list on the stock exchange.
So, all we can do is wait and watch and hope that Jio Financial services makes financial services cheaper and accessible for us.
âš¡In a line: Jio Financial Services could be a huge curse for fintechs and a huge blessing for customers.
💡Quick question: Can JFS have the same impact on the fintech space which Jio had on the telecom space?
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