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

Even though the technology hasn’t yet proven viable for other Asian telecom carriers, Reliance is depending on the widespread rollout of 5G to attract premium wireless consumers and grow its e-commerce and media businesses.

Reliance Jio’s previous announcement from Mukesh Ambani stated that the company’s goal is to carry out 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 have the entire nation covered.

The challenge before the billionaire entrepreneur has shifted as he targets his 428 million members with a new 5G service and tries to convert another 300 million feature-phone users to smartphones.

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

Everyone is aware that the largest resource on this wallet platform is user data. If Google advises your favorite restaurants or shows the product you searched for on an eCommerce website as though Zomato is worthwhile, it is merely data. If this data is used properly, any firm can be very profitable. Businesses can make money. This voyage ends at the DNA loop, and Mukesh Ambani is striving to make that happen. 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 not an exaggeration to say that he has now reached the right decision.

The task facing the multibillionaire businessman has shifted as he aims for a new 5G service for his 428 million members and tries to convert another 300 million feature phone users to smartphones. How to market data in a poor country was the main concern when he first started up six years ago. Now the dilemma is what to market next to someone who is already consuming data.

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

As shown by MercadoLibre Inc. in Argentina and Ant Group Co. in China, creditworthiness may also be determined by looking at the data of transactions between buyers and sellers on sizable online platforms. Next up for Ambani is a “consumer and merchant loan business based on proprietary data analytics to complement and enhance the standard credit bureau-based underwriting,” according to a news release from his 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 loans platform. People can be connected through the digital footprints they leave on social media and e-commerce platforms, which can then be used to foster borrowing activity and gather more information on consumer behavior.

For Reliance, this loop is already in place. The company not only owns the biggest telco in India, but it also manages the biggest retailer, with more than 250 million transactions made over 50 million square feet of storefront space in the most recent quarter. Additionally, Ambani links users with nearby shopkeepers so they can use the WhatsApp messaging app developed by Meta Platforms Inc. to place online orders for groceries and other necessities.

Currently, Reliance Jio, a telecom firm, and Reliance Retail are owned by Mukesh Ambani (Offline, Online). Mukesh Ambani would use a suitable wallet platform to enter the lending to buyers and sellers’ market.

Due to the DNA loop, Ant Group has outpaced banks in China. In other words, by gathering data based on activity, network, and data, properly evaluating it, financing, and growing the business, buyers and sellers won’t be able to walk out and conduct business as usual. Fintech businesses will benefit from this.

Reliance’s expanding influence in data-spreading consumer sectors, though, isn’t exactly igniting the stock market. The shares reached their peak two years ago at almost 30 times forward earnings; today, they are trading at a ratio of 20. The conglomerate’s historic petrochemicals and energy industries are suffering from a windfall Indian tax on transportation fuels and dismal refining and polymer margins too.

This cannot be done with just a finance company, but Reliance is very strong in the data, retail, and telecom sectors. Therefore, Mukesh Ambani may easily adopt the DNA loop method and establish a dominant position in the market. Consider someone who wants an iPhone, for instance. The buyer of an iPhone will purchase it if Apple provides a loan at a lower interest rate than the banks.

The lending website will continue to see more sales because of a low-interest loan given to a salesperson selling iPhones. On the same platform, 100,000+ vendors are active at all times, making enormous profits while lending and collecting money from millions of customers.

To focus more on the consumer business and revive the stock, Ambani is spinning off Jio Financial Services Ltd. For every share held in Reliance, investors will receive one share in the new company. If the goal is to also trump rival billionaire Gautam Adani, the listing of Jio Financial Services on the public market may take place pretty rapidly. The goal of Adani Capital, Adani’s shadow lender, is to go public by 2024.

About DNA loop

The direct interactions between a huge number of users are the foundation of big tech companies’ business models.

The pool of user data is a vital by-product of their operations. The data are then used as input to many services that make use of 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 referred to as the “DNA” loop or the “data-network-activities” loop.

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

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

For instance, large IT companies with e-commerce platforms gather information about the activity of vendors and buyers and can combine it with data on finances and customer behavior. For consumer loans and loans to small and medium-sized businesses (SMEs), these can be useful inputs for credit scoring models.

Edited by Prakriti Arora