The launch of the ‘JioFinance’ app by Jio Financial Services (JFS) is causing significant concern among fintech startups. JFS aims to integrate digital banking, UPI, bill payments, and insurance advisory into one app, along with digital lending and an investment platform.
Currently in its beta phase, JioFinance is set to become a major competitor due to Reliance’s extensive retail network and numerous SME partners. While Jio 4G was a catalyst for the growth of fintech apps like Paytm, PhonePe, and Google Pay, JioFinance now threatens to overshadow them.
How will Jio’s entry impact the startups that have shaped India’s fintech industry? We’ll explore this question after reviewing top stories from our newsroom this week, including features on two of JioFinance’s main competitors:
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Jio Adopts Paytm’s Strategy
Jio’s approach to offering products in key verticals mirrors Paytm’s strategy, including obtaining a payments bank license. The JioFinance app features digital banking centered around Jio Payments Bank, insurance broking, and secured loans against mutual funds.
“Our goal is to simplify all finance-related aspects into one platform for users across all demographics, offering lending, investment, insurance, payments, and transactions, making financial services more transparent, affordable, and intuitive,” a JFS statement said.
The payments bank account is expected to be central to the super app platform, similar to Paytm Payments Bank until February 2024 when RBI actions led to changes in Paytm’s banking partnerships for lending and payments.
Most analysts viewed the payments bank license as a significant advantage for Paytm, enabling faster transactions and lower failure rates. This same advantage will be crucial for JioFinance to stand out among current payment apps. JFS also plans to offer secured lending products like loans against mutual fund investments and home loans. Additionally, it plans to enter the mutual fund business through a joint venture with BlackRock.
During the Q4 FY24 post-earnings call, JFS managing director and CEO Hitesh Kumar Sethia stated, “In the past quarter, the [payments] bank revamped its digital savings account offerings and launched virtual debit cards, leading to a rapid increase in customer acquisition. In the coming quarters, we expect to expand our business correspondent touch points to drive further growth.”
The payments sector will be the primary funnel through which Jio Financial Services acquires users for other services. JFS’s go-to-market strategy will be crucial given the intense competition.
The Fintech Super App Landscape
Most large fintech companies have adopted the super app model, but their strategies differ. Paytm focused on acquiring digital payment users early with its wallet business before branching into other services like UPI. In contrast, Google Pay and PhonePe emphasized customer acquisition, then expanded their platforms. PhonePe recently announced its entry into the secured lending space.
BharatPe initially targeted the B2B segment and is now gradually adding B2C products. Its joint venture for the Unity Small Finance Bank is another competitive edge. CRED started by targeting the creditworthy urban population and has since expanded its product offerings, while Groww built a lead in investments before entering lending and payments. Zerodha, with the second-largest active investor base after Groww, is another formidable competitor for JFS in investments.
These companies are also seeking payment aggregator licenses to expand their digital financial services. Jio, with a PA license, will leverage this for its B2B verticals. Although the super app market is growing, owning a specific niche is essential to build on.
Jio Financial Services must answer strategic questions as it raises funds and attracts interest from institutional investors, sovereign funds, and private equity. JFS is also seeking to increase foreign investment in its equity capital to 49%. As part of a demerger from Reliance Industries in mid-2023, JFS was well-capitalized, but its new platform push will require additional funds.
JioFinance’s collaboration with BlackRock includes wealth management and broking, in addition to asset management. Funds will also be used to scale up its merchant business and compete with Paytm. JFS plans to expand its PoS and device network, and its subsidiary Jio Payment Solutions Limited will drive the merchants business, competing with Paytm, PhonePe, Google Pay, BharatPe, CRED, and others.
Significant investments will be needed for consumer-side payments. Jio’s telecom subscriber base of 470 million (47+ crore) users will likely be JFS’s first target. The Adani Group is also developing a fintech super app, posing additional competition. Adani One’s super app recorded INR 750 crore in sales in FY24, and the group may leverage ONDC for its ecommerce and payments businesses.
Given the intense competition, Sethia told analysts that JFS’s advantage lies in three areas: “The Jio brand, capital, and customer adjacency from our ecosystem.”
Will these advantages be enough for the JFS super app? Competitors like Paytm, PhonePe, Google Pay, BharatPe, and CRED have extensive fintech experience, rapidly implement new technology, and have built scalable tech stacks. These established brands are digitally-native and highly investable.
