Porters 5 Forces-e-Wallet Industry (India) & Impact on Reliance Jio

BARGAINING POWER OF BUYERS THREAT OF NEW ENTRANTS

1. Low Barriers to entry, favourable Govt
1. Large customer base.
policies.
2. Price sensitive
2. Economies of scale leading to high
3. Low uniqueness of offering /
turnover needing to Break Even and
Substitutable INDUSTRY RIVALRY make profit
4. No cost of substitution.
3. High Gestation period for profitability
1. Large number of competitors 4. Brand preference a key driver for
2. Low Diversity between competition adoption and high offline
3. High industry growth advertisement leading to an expensive
4. High Barriers to Exit proposition
5. Switching cost is low for customers
6. Undifferentiated offering
THREAT OF SUBSTITUTES

1. Substitutes available (Cash, Cards,

Direct to bank-UPI)
BARGAINING POWER OF SUPPLIERS
2. New substitutes emerging – buy now
pay later, IOT ( direct to bank), crypto Overall Jio Well suited to
3. Low barrier of exit to clients and 1. Increasing number of Suppliers
win 2. Technology suppliers becoming more
clients may wish to switch to new
products common place
 Strengths
 Existing customer base and experience in this business.
 Strong brand value and recall especially for brands like Paytm.
 Most of them offer additional value added services including
investments etc.
 Payments Bank license for Paytm to offer additional services.
• Backed by Reliance- Strong Brand & Recall value
• Existing customer base ( including 424 million
telecom customers)
• Extensive dealer and distribution network
Competitors-
Paytm, Mobiwik,
Oxygen
Opportunities
 High customer adoption (Between Oct 2020 & Oct 2021 YOY
growth continues to be impressive at 34% - transaction count
& 58% transaction value)
 Favorable Government policies to drive digital adoption.
 Create market places and eco system around multiple
offerings – Paytm Mall is an example.
 Opportunities to cross sell or provide value added services to
existing set of customers [ already offering services like
mutual fund investments, buy now pay later, money transfer
etc.
Weakness
 Pressure to generate profits especially for companies which
have gone for public issue like PayTM; hence may not be able
to support aggressive competitive pricing.
 New entrants can learn from experiences of these companies
and launch enhanced products.
 Predominantly fintech payment companies and competitive
environment Vs Diversified business in case of certain other
companies like Reliance
Threats
 Highly competitive market with many new players entering
including Reliance Jio.
 Digital payments evolving and form factor continues to evolve;
potential to move from mobile wallet to other payment
mechanisms like buy now pay later, other forms of direct debit
to bank etc.
 Fraud & Anti money laundering related risks
 Customer service critical and quite easy for customer to switch
to competitor products
 Risk of exodus of experienced staff to new entities which can
provider better benefits. [For e.g. Reliance may be able to
provide higher salaries to attract talents from existing players].
 Strengths Weakness
 Backed by Reliance - Strong Brand Presence and Recall value.
 Success of the initiative may not have significant impact on
 Existing customer base ( including 424 million telecom
Groups performance hence continued management focus
customers)
required.
 Extensive dealer and distribution network
 Customer service and resolution is a key factor which is
 In-depth understanding of Indian market, customers and
different from other lines of business hence requires
regulations
appropriate attention
 Ability to support competitive pricing strategy to capture
 Regulated product requiring enhanced compliance &
market share quickly. • Backed by Reliance- Strong Brand & Recall value Jio can launch & compete:
governance
 • Existing
Leverage existing partnerships customer
& business base( including
initiatives ( including 424 million
telecom
Payments bank, license application customers)
for Umbrella entity etc.) to
• Extensive
establish presence across payments dealer
value chain.and distribution network  Strong Brand
 Cash rich Parent
 Large customer & dealer,
& store network
Reliance Jio Money  Focus on value added
Opportunities Threats products
 High customer adoption (Between Oct 2020 & Oct 2021 YOY  Highly competitive market with established players like
 Existing & Planned
growth continues to be impressive at 34% - transaction count & Paytm, Google pay, PhonePe. businesses can
58% transaction value)  Standalone wallet business may not be profitable as margins compliment to provide
 Favorable Government policies to drive digital adoption. are low
 Ability to attract high quality talents to build best in class differentiated value added
 Digital payments evolving and form factor continues to
products evolve; potential to move from mobile wallet to other products
 Parent Company cash rich and ability to support investments in payment mechanisms like Direct to Bank (UPI for eg),buy
cutting edge technologies to build value added products to now pay later, IOT etc.
clients  Fraud & Anti money laundering related risks
 Leverage data available across platforms and partnerships to  Customer service critical and quite easy for customer to
maximize business and efficiency. switch to competitor products
Annexure
Annexure -1

Porters 5 forces and

Impact on Reliance
Jio
Annexure 2- Some useful information…

• YOY Growth of 34% in transaction count [364 Million – 489 Million] & 58% in terms of transaction value [ 137 Billion – 217 Billion]
• In Comparison key alternate payment mechanisms recorded lower growth for same period:
• Lower growth rate for credit card transactions [ 25%] and volumes [ 56%] for same period.
• Negative growth rate for debit card transactions [-2%] and volume [11%] for same period
• However significant growth in alternate payment mechanism like UPI [ Growth of 104% in transaction count and around 100% in volume]
• Wallet transactions ( transaction count) account to only about 7% of overall digital payments thereby indicating higher opportunity to grow; UPI contributes to around
64% of overall digital payments ( transaction count) during same period.
• Total number of wallets as of Oct 2021 was 2289 million with a growth rate of 23% over Oct 2020; for the same period growth rate in credit cards was 12% [66 million as
on Oct 2021] and 7% for debit cards [ 934 million as of Oct 2021]

Source : RBI (Payment System Indicators). Comparison between transaction count and volumes as of Oct 2021 and Oct 2020

• Reliance Jio is one of the market leaders in telecom with around 424 million wireless subscribers as of Sep 2021 and market share of 36%. Strong presence in rural areas as
well with 184 million subscribers. (Source: TRAI)
• Reliance Group has significant presence across the country including 12711 stores across 700 cities. [Source Reliance Retail website]
• In addition to this they have a very strong dealer and distributor network for other businesses as well.
• Reliance Joi holds Payments Bank license from RBI and has partnered with SBI.
• Reliance Group has strong partnership with companies including SBI, Google, Facebook, Uber, Sodexho etc. providing them access to large amount of customers and data;
thereby providing an opportunity to harness the data effectively.
• Some of the business Reliance Group is working on includes application for New Umbrella Entity license, account aggregator license, partnership with Google to launch
affordable phones, partnership with kirana stores (JioMart platform).
• Once above initiatives are live Reliance would enjoy the unique advantage of presence across the value chain in payments eco system.