Armed with Freecharge, Snapdeal rolls up sleeves to take on Paytm in India market

Delhi-based Snapdeal has signaled its ambition to build a services platform to stand out in a crowding online marketplace sector.

Armed with Freecharge, Snapdeal rolls up sleeves to take on Paytm in India market

NEW DELHI: Two of India’s biggest consumer internet companies, Snapdeal and Paytm, are set for a face-off as they gear up to capture a slice of the country’s Rs 7.4-lakh crore bill payments market.

While Paytm was among the first domestic internet companies to offer digital bill and utility payment services, Snapdeal, the country’s largest online marketplace, is making a concerted effort to catch up through its $450 million (Rs 2,900 crore) acquisition in April of mobile recharge firm Freecharge.

Delhi-based Snapdeal has signaled its ambition to build a services platform to stand out in a crowding online marketplace sector, with digital payments emerging as a crucial front because of its huge untapped potential. Reserve Bank of India estimates that fewer than 1% of the 30 billion bill and utility payments handled every year – at an estimated value of at least Rs 7.4 lakh crore – are done electronically.

“We’re focusing on the consumer story here,” said Kunal Shah, founder and chief executive of Freecharge. “Audacious goals have never scared us.”

While banks dominate the market for electronic payments relating to phone, internet, water, gas and electricity bills and even insurance premiums, among other things, Snapdeal and Paytm have built up a war-chest to back their services businesses, being among the most heavily backed domestic consumer internet companies.

While Snapdeal counts Japanese investor SoftBank, eBay and BlackRock among its backers, Paytm has received a $575-million capital commitment from Ant Financial, the Jack Ma-controlled affiliate of the Chinese ecommerce giant Alibaba Group.

“It’s a high-volume and hightransaction business,” said Shankar Nath, senior vice-president at Paytm, on the lure of the electronic bill and utility payments sector. “Payments are upfront, and there is no cash-on-delivery involved.”

Both Paytm and Freecharge are currently known more for their mobile and direct-to-home (DTH) recharge platforms. Paytm handles about 50 million mobile and DTH recharge transactions a month, and according to Nath, 7-8% of its customers have begun to pay their bills online. “It’s mind-boggling the way people are taking to digital payments,” he said.

Freecharge, according to CEO Shah, has at least 25 million customers for mobile and DTH recharge. He declined to disclose the exact number of customers paying their bills online, but admitted the bill payments service is a massive opportunity to gain customers. “This is a huge opportunity to cross-pollinate customers. Get utilities on board, and provide a complete set of services,” Shah said.

With policy makers in the process of setting up a universal protocol for digital bill payments, Bharat Bill Payments System, industry insiders say the time is ripe for private firms to scale their offerings.

“The banks have dominated so far, with 80% of the electronic transactions going through them, but we’re focusing on the consumer experience, and that’s where the private players have to innovate,” said Jitendra Gupta, cofounder of Citrus Pay, which recently launched Citrus Cube for online bill payments.

The Mumbai-based company and Gurgaon-based Oxigen Services India are also competing to scale up in the digital payments market.

“There is enough and more space for everyone to co-exist,” said Gupta. “This segment will attract new players. But the market has to be created, and people have to be made aware.”

Original Source: Economic Times

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