FreeCharge deal signals consolidation in digital wallets space

Priyanka Pani Mumbai | Updated on January 11, 2018


Many small players have started pivoting towards UPI, say experts

When FreeCharge, a mobile wallet company, was acquired in 2015 by then leading e-commerce player Snapdeal, it was touted as one of the “best” deals as the wallet game had just begun.

Two years later, FreeCharge has been sold again, but this time, at a steep markdown at a mere $60 million to Axis Bank, indicating what could be the beginning of consolidation of payment wallets in the country.

According to analysts, there would be multiple smaller deals worth $30-70 million, going forward.

Tej Kapoor, Partner at Chinese VC firm Fosun Kinzon Capital, said: “In most of the markets where wallets have taken off, including China, only one or two wallet companies have been able to scale massively. Others exist, but it has been difficult for them to get acceptability outside their own ecosystem. India will follow a similar trend.” According to a data collated by start-up research firm Tracxn, there are 74 wallet brands in the country and this doesn’t include the wallets that have been created in-house by various banks, such as HDFC Bank and ICICI Bank.

Digital push

The Indian market has witnessed a huge spurt in number of players coming into the system after Delhi-based Paytm got funding from China’s Alibaba through Ant Financial. The Centre’s push of digital transaction has also given a much-needed boost to the sector.

But half-a-dozen wallet firms have already been acquired in the past 18-24 months. This includes ZipCash that was acquired by Ola Cabs, Momoe acquired by ShopClues, and Emvantage by Amazon. Flipkart acquired PhonePe and IndiaNext acquired YpayCash.

Amrish Rau, CEO of payments gateway PayU, said there is no need for so many players. “Consolidation is inevitable,” he said, adding that consumers are looking for faster ways to make payments.

“The consumer experience on contact-less cards and UPI has been improving. Besides, they are not keen to move and store money in wallets, and hence the business model looks bleak.” Rau also firmly believes that wallets will soon be dead. Rau, who founded one of the country’s earliest wallet, Citrus Pay, sold it to Nasper’s PayU last year.

ItzCash, a wallet player, which got acquired by US-based Ebix, will invest close to $100 million for acquisitions in the Indian market.

Many of the small wallet players have already started pivoting towards UPI, and many are slowly integrating their wallets into newer models. For example, Paytm has already integrated the use of its wallet into its payments bank, said Vikram Gupta, founder venture capital firm IvyCap Ventures.

“At present, almost every e-commerce player and bank have their own wallet, and it is a huge cost for them to run this business in-house. Smaller players are already talking to bigger players for possible buyouts,” Gupta said, adding that those present will have to pivot soon or find an alternative segment in the rural market. He added that with the government encouraging customers to use UPI and BHIM app, the future of smaller players is uncertain.

Published on July 28, 2017

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