Financial services

Reliance intends to enter the financial services market. To control the market, it will use the self-reinforcing DNA loop 2022

Even though the technology has yet to prove viable for other Asian telecom operators, Reliance is counting on the widespread deployment of 5G to attract high-end wireless consumers and grow its e-commerce and media businesses.

Mukesh Ambani’s Reliance Jio previous announcement stated that the company’s goal was to deliver 5G services nationwide by the end of 2023. By December 2023, according to the CEO of Reliance Industries , Jio will introduce reasonably priced 5G services and cover the whole country. .

The challenge facing the billionaire entrepreneur has changed as he targets his 428 million members with a new 5G service and tries to convert 300 million more users from feature phones to smartphones.

Reliance intends to enter the financial services market. To control the market, he will use the self-reinforcing DNA loop.

Everyone is aware that the biggest resource on this wallet platform is user data. If Google recommends your favorite restaurants or displays the product you searched for on an e-commerce website as if Zomato is worth it, that’s just data. If this data is used correctly, any business can be very profitable. Businesses can make money. This journey ends at the DNA loop, and Mukesh Ambani strives to achieve it. Although Mukesh Ambani started Reliance Jio six years ago without knowing how to sell data in a poor country or how to turn the data he had into money and commerce, it is no exaggeration to say that he now has made the right decision.

The task facing the multi-billionaire businessman has changed as he targets a new 5G service for his 428 million members and tries to convert 300 million more feature phone users to smartphones. How to market data in a poor country was the main concern when it started six years ago. Now the dilemma is what to market next to someone who is already consuming data.

Financial services are a solution. The need for credit will never go away. It is up to conventional credit scoring formulas, which often leave out a significant portion of the unbanked population, to determine if and how much they deserve it.

As shown by MercadoLibre Inc. in Argentina and Ant Group Co. in China, creditworthiness can also be determined by examining transaction data between buyers and sellers on major online platforms. The next step for Ambani is a “consumer and merchant lending business based on proprietary data analytics to complement and enhance standard credit bureau-based underwriting,” according to a press release from its flagship company Reliance Industries Ltd. .

The Bank for International Settlements refers to a self-reinforcing “DNA loop,” which stands for data, network, and activity, as the foundation of a successful fintech lending platform. People can be connected through the digital footprints they leave on social media and e-commerce platforms, which can then be used to drive borrowing activity and gather more insights into consumer behavior.

For Reliance, this loop is already in place. The company not only owns the largest telecommunications company in India, but it also runs the largest retailer, with more than 250 million transactions completed across 50 million square feet of storefront space in the last quarter. Additionally, Ambani connects users to nearby merchants so they can use the WhatsApp messaging app developed by Meta Platforms Inc. to place online orders for groceries and other necessities.

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Currently, Reliance Jio, a telecommunications company, and Reliance Retail are owned by Mukesh Ambani (offline, online). Mukesh Ambani would use a suitable wallet platform to enter the buyers and sellers lending market.

Due to the DNA loop, Ant Group has overtaken banks in China. In other words, by collecting activity, network and data-based data, valuing them properly, financing and growing the business, buyers and sellers will not be able to withdraw and conduct their business. as per usual. Fintech companies will benefit.

However, Reliance’s growing influence in consumer sectors that release data isn’t exactly igniting the stock market. Stocks peaked two years ago at nearly 30 times future earnings; today they trade at a ratio of 20. The conglomerate’s historic petrochemical and energy industries are suffering from India’s windfall tax on transportation fuels and dismal margins on refining and polymers.

It can’t be done with just a finance company, but Reliance is very strong in the data, retail and telecommunications sectors. Therefore, Mukesh Ambani can easily adopt the DNA loop method and establish a dominant position in the market. Consider someone who wants an iPhone, for example. The buyer of an iPhone will buy it if Apple gives a loan at a lower interest rate than the banks.

The lending website will continue to see more sales due to a low-interest loan given to a seller selling iPhones. On the same platform, more than 100,000 providers are active at any given time, making huge profits while lending and collecting money from millions of customers.

To focus more on the consumer sector and revive the stock, Ambani establishes Jio Financial Services Ltd. For every share held in Reliance, investors will receive one share of the new company. If the goal is also to get ahead of rival billionaire Gautam Adani, Jio Financial Services’ introduction to the public market could happen quite quickly. The goal of Adani Capital, Adani’s shadow lender, is to go public by 2024.

how ambani will use finance to tighten the dna loop - the washington post

About the DNA loop

Direct interactions between large numbers of users are the basis of the business models of large technology companies.

The users data pool is a vital by-product of their operations. The data is then used as input data for many services that use natural network effects, resulting in increased user activity. The cycle is then closed by increased user activity, which also produces additional data. This loop has been called the “DNA” loop or the “activities-network-of-data” loop.

Self-reinforcing, the DNA loop. Stronger network effects are created by more data, which in turn generates more data through increased activity. This implies that when big tech companies enter the financial services industry, they will have an advantage because of their established platforms.

Depending on the makeup of their current platform, they may or may not have a competitive advantage.

For example, large IT companies with e-commerce platforms collect information on seller and buyer activity and may combine it with data on customer finances and behavior. For consumer loans and loans to small and medium enterprises (SMEs), these can be useful inputs for credit scoring models.

Edited by Prakriti Arora