Reliance Jio takes first big step into fintech, enters PoS business

Fintech seems to be the next segment that Mukesh Ambani’s Reliance is aiming to disrupt. Payments bank was just the start. After acquiring over 200 million subscriber base, Reliance Jio is now eyeing the merchant community by entering the point-of-sale (PoS) segment. If an industry source is to be believed then the company has already launched its PoS services is six cities — Mumbai, Bangalore, Hyderabad, Chennai, Pune and Kolkata — on a pilot basis.

Merchants and retail provision stores will have to ‘deposit’ Rs 3,000 to get Reliance’s PoS device; and for all debit and credit card transactions up to Rs 2,000 in value, the merchant discount rate (MDR) would be zero. MDR is the cost paid by a merchant to a bank every time a debit/credit card is swiped for payments in their stores.

Currently, the PoS accepts Reliance’s own wallet Jio Money and National Payments Corporation of India’s BHIM and will add other wallets soon. The device comes with QR Code scanner feature. Merchants will also be able to access loan against card receivables.

For its PoS devices, Jio is partnering with Hindustan Unilever Limited for acquiring merchants. According to the person quoted above, “HUL distribution persons will be incentivized for every merchant lead.” Going through largest FMCG brand’s distribution network also indicates the ambitious reach Reliance is eyeing for its PoS devices.

Reliance’s PoS bet is in line with its big e-commerce foray, where the company plans to adopt online-to-offline approach — a model that Chinese e-commerce giant Alibaba has pioneered and been replicated by Paytm in India. At the company’s 41st Annual General Meeting, Ambani said, “We shall create this [online-to-offline new commercial platform] by integrating and synergising the power of Reliance Retail’s physical marketplace with the fabulous strengths of Jio’s digital infrastructure and services.”

Competition
Jio will compete with not just fintech companies but top banks too. Currently, banks dominate the PoS market with about 70% share. The move is also expected to impact niche VC-funded PoS players such as MSwipe, Ezetap, Pine Labs, Innoviti and PhonePe.

Commenting on this development, one of the largest independent PoS company MSwipe’s founder and CEO Manish Patel said, “Yes, Jio has launched a PoS terminal. However, the key objective seems to be more around automation of supply chain for kiranas for now and with preferred transaction processing commercials for customers of Jio Payments Bank.”

“The way I look at this is finally it appears to have dawned that merchants need a PoS rather than just a phone with an app which has been our narrative from day one, so feel vindicated. MSwipe has been battling big banks with very large balance sheets since day one, this [Reliance Jio] is one more which will help grow a largely under-penetrated market,” he added.

Market opportunity
There are nearly 300 million smartphone users, while the card holders have crossed 1,000-million mark in the country. According to the Reserve Bank of India, India had 42.68 million credit cards and 998.61 million debit cards in October 2018 as compared to 37.48 million credit cards and 861 million debit cards in March 2018. The total number of PoS terminals in the country stands at 3.4 million as compared to 3 million in March 2018. In October, the total number of PoS transactions through credit and debit cards was 554.45 million, and the total amount transacted was Rs 110,476 crore.

India’s market for PoS terminals is poised to surpass $3 billion by 2024, according to Global Market Insights, Inc. Given the growing use of credit and debit cards coupled with substantial growth in the e-commerce sector and the government’s digital payments push, the PoS terminals industry is all set to grow at over 10% CAGR over the forecast period.

“Reliance Jio could become a big player in financial services. Their first move has happened,” says a top official at a Mumbai-based private-sector bank on condition of anonymity.

As its first financial services bet, Jio launched its payments bank in partnership with India’s largest bank, State Bank of India. Also, the Jio Money wallet — apart from gaining from huge subscriber base – is also expected to gain from RBI’s wallet interoperability decision in 2019.

Email queries sent to both Reliance and HUL did not elicit response at the time of publishing this story.

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