Given the problems relating to points of inter-connect with incumbent telcos and, later, the effects of demonetisation, it is not surprising Reliance Industries (RIL) has decided to roll over the RJio free data offer till March 31. Much in the nature of a Flipkart or a Paytm, which are buying customers with deep discounts, RIL too is wooing subscribers with free data, hoping they will stay on even after they need to start paying for the services. While RIL has the financial muscle to keep the free offers going for a long time, what this could do to incumbents is another matter altogether; analysts have already trimmed earnings estimates for Bharti Airtel and Idea Cellular by anywhere between 10% and 25% for the next couple of years. No one’s talking of any big shake-out just yet—some of the smaller telcos may go out of business—because the market leaders have a big chunk of the revenue market-share, 33% for Bharti and 20%-plus for Vodafone. Idea Cellular , most analysts, say is the most vulnerable and may ultimately be sold off, but no obituaries are being written just yet.
What should be worrying the competition more than the freebies is RIL’s broader model which, it would appear, is going to be built around not just telecom and content but also around digital payments. On Thursday, chairman Mukesh Ambani announced, JioMoney would be expanded to reach millions of touch-points where Aadhaar-based micro-ATMs would be deployed. In other words, JioMoney can be more than a wallet—it can enable users to withdraw cash, a big plus. Moreover, Ambani announced JioMoney would be enlisting 10 million merchants—the JioMoney Merchant Solution. Apart from person-to–person money transfers, customers can transact with shops and restaurants and buy train or bus tickets. To be sure, incumbent telcos also have payment wallets, but none of them has talked about facilitating digital payments for customers on this scale. Bharti has, of course, launched its payments bank and may be looking to cross-sell services and products to its subscribers—that is essentially the idea of a telco being in the payments space. However, RIL appears to be planning this piece on a much larger scale, as it always does.
Experts will argue fintech is a specialised business, and a high-tech platform cannot, on its own, guarantee ease of use. That essentially is the reason stand-alone wallets exist; they argue they can survive despite UPI—Unified Payments Interface—because they are better positioned to enlist vendors than banks who are primarily in the business of giving loans. That is probably true. They would also probably be better at working with merchants through analytics to get a better understanding of the customer which would bring them more wallet-share. However, RIL’s existing retail store chain—3,442 stores across 679 cities and towns—can give it an edge. Also, RIL may not initially make money on the payments piece, it could merely serve as a loss leader. However, if it turns out payments services are helping bring in subscribers—paying ones—the gambit would have paid off.