Reliance Jio is in the process of implementing its earlier announcement of entering the fintech sector with its PoS machines for making payments at merchant establishments. To start with, the initiative will cover payments through Jio Money, the digital wallet floated by the company and the NPCI’s BHIM app. It may be expanded later to cover other forms of payments too, like credit and debit cards. But they may still be some distance away.
Reliance Jio is enlisting retailers by offering their PoS machines against a deposit of Rs 3,000. The carrot being extended to the merchants is a waiver of the transaction fee up to individual transactions not exceeding Rs 2,000. This fee, called Merchant Discount Rate, is the fee that financial institutions charge from the merchants for handling the transactions. The payments swiped through the day are credited each day into the account of the merchant by 12 midnight that day itself.
Reliance has already floated a payments bank and it may ultimately link all these threads at the appropriate time to emerge as a key player in the segment.
The route adopted by Reliance Jio to add to the merchant establishments that will buy its PoS machines is also unique. It has tied up the FMCG major Hindustan Uniliver (HUL) through its vast distribution network. The company is incentivizing the distributors’ salesmen if they succeed in converting the retail outlets in their territory to accept to keep the Reliance Jio PoS machines.
The whole operation is right now on a pilot scale in the cities of Mumbai, Bengaluru, Hyderabad, Chennai, Pune and Kolkata.
In the Indian context, the banks have been enjoying the lion’s share of the PoS transactions with 70% of them being done through credit and debit cards issued by them. The card-holding population has crossed the 1 billion mark, a formidable number and much higher to the 300 million smartphone users. Among the phone users too, how many prefer to use the app- based payment modes to settle payments at retail kiosks, is to be taken into account.
The one major attraction for the merchant establishments, particularly the smaller ones, in using the Reliance Jio PoS machines is the waiver of the Merchant Discount Rate (MDR) for transactions up to Rs 2,000. The other offer of extending credit or loans against receivables is being made available by the banks as well.
But with the kind of disruptive polices the Reliance Group adopts in most of its businesses, one has to watch with interest how this venture into the fintech space works out for the company.