Everyone is aware of the kind of challenges that the pandemic has brought to the fore. Some of the challenges include the overnight work-from-home culture that we had to adapt to, online classes, much more, along with the added pressure of staying safe from getting infected. The only silver lining that the pandemic has brought about is digital adoption. Digital transformation has moved on from being just a proof-of-concept to actually getting applied. Even the most uninitiated people are using their smartphones to pay their bills, to do online shopping, and whatnot. So while we are on that topic of digital payments, who better to talk to than Siddharth Mehta, MD and CEO of Freecharge. Mehta spoke to Dataquest about how digital adoption has impacted Freecharge and what more we can expect from the company in the upcoming year.
DQ: A rise in digital payments has been witnessed in the past two years due to COVID. How has this trend worked out for Freecharge?
Siddharth Mehta: It’s an interesting question. Let me talk about Freecharge in two ways. We run two businesses – the consumer business and the merchant business. Firstly, talking about the consumer business, the pandemic has changed things for the company and digital payment adoption has gone up. An interesting thing that we have seen is that earlier people were doing two transactions per month digitally, but now we are seeing people do more than three transactions per month through the digital mode.
People are getting more engaged and horizontal in their use. They are using more categories to make payments digitally. Pre-paid was always the largest category. But now digital transactions for payment of electricity bills, Fastag, gas bills, and so on are growing faster than prepaid. So the traditional payments, which earlier used to be offline, have started moving online and more transactions are happening per user.
On the merchant side, we have seen an interesting trend. We all know that the small- and micro-enterprises were not very keen on adopting digital payments. However, COVID has brought a lot of change on this front. We have launched remote payment solutions during COVID and a lot of people are now adopting them. We are actually growing more than 20% quarter on quarter now on digital payments on the small and micro business side using payment links and QR codes.
So on both sides, there has been interesting migration and change in consumer behavior. And we believe it’s not going to be a short-term change. People have realized the benefits of digital payments. And they will continue to utilize them for their benefit.
DQ: When talking about digital payment solutions, there are so many players in the market. What is the competitive advantage that Freecharge has to offer?
Siddharth Mehta: The digital payments market is huge. When you look at the consumer side, my assumption is around 200 million people actually making payments via digital modes in India. Considering the size of our country, with 1.3 billion people, I think the number can easily rise to 400-500 million over the next two years. So, there is enough scope and opportunity for all of us to survive in this space. You don’t need to be competitive. You just need to provide a great customer experience and a great product for the consumers, which is what we are focusing on.
The digital ecosystem is evolving in India. Financial services are now going online far faster. Within the digital ecosystem, the competitive advantage that we have is basically that we are part of our parent which is Axis Bank. We have a large Original Manufacturer of Products (OEM) which is our parent. This helps us to roll out digital products at a far faster pace and do testing at a good speed. For example, last year we tested home loan products, two-wheeler loan products, and gold loan products. In such a scenario if we were a stand-alone entity, we would have to convince banks or NBFCs for the integration and launch making it almost next to impossible to launch so many products within a year.
Additionally, we also launched an express FD product for consumers. So there are a number of products we tested and also products that we are going to launch this year. That is the biggest advantage and also our differentiator in the market – that we are a subsidiary of Axis Bank which is the third-largest private sector bank in India and we are using all their digital capabilities to offer financial services digitally to customers.
DQ: Everybody is craving normalcy once again and people are looking forward to traditional experiences. So do you think this will have any impact at all on digital payment solution providers?
Siddharth Mehta: Frankly, I don’t see any impact happening on digital payments. As mentioned earlier people have understood the value of digital and it’s not just payments but the digital services ecosystem or financial services is also growing at a -fast pace. People have realized the value of digital and the seamlessness that it brings into the ecosystem with no or limited paperwork, everything can happen digitally. You don’t need to go anywhere, It’s an onthe go ecosystem. So I don’t think there is going to be any impact. The digital financial ecosystem is going to grow both on the consumer side and the merchant side in India over the next five years.
DQ: Freecharge is coming up with a new Neo Banking solution. Could you tell us a little bit about that?
Siddharth Mehta: I think Neo Banking is a great trend that’s happening globally and in India, we have started seeing some people coming in. Neo Banking in India is largely about providing an interface to users. Banking services are owned by banks -They are our core support systems and they are the core technology service providers for us and the product providers, while we will at the front end provide curated products and experiences to users on the platform. So the Freecharge Neo Bank will be coming up very soon.
Here, consumers will be able to open and manage their bank account, invest, and do gold management with it. It will also give the consumer the status of their financial health. We have created a proprietary financial score that will tell the consumer how they are scoring on their financial score basis investments, insurance, savings, and spending. So it is going to be a full-service ecosystem where one will be able to open an account, understand one’s financial health and means to improve it so as to invest towards their goals. So for example, if your emergency fund is an FD/RD and if you are open to risk then through Mutual Funds, gold, and trading, which we will soon be launching on the platform, you will be able to invest for your goals and manage them.
Additionally, what Freecharge will bring on to the platform, which will be unique compared to the market, is that we already have a card product. So we can issue credit cards to people. We have just launched a Buy Now Pay Later related product which will help people or customers make small ticket payments without any hassles and pay later. Also, we will have the lending side ready when we launch a Neo Bank so all in all a start to end and complete digital financial service will be offered.
DQ: Apart from that, are there any B2B or B2C solutions that the company is trying to come up with over the next year?
Siddharth Mehta: On B2C, Buy Now Pay Later has been the first product this year. The Neo Bank is coming up. And then we will be launching some products around small ticket lending over the next few months from the consumer perspective.
We will also have EMI products and cash loans which will be on a small ticket basis. On the B2B side, between us and the merchant, we will be launching lending products basis his transaction history. This should go live somewhere around this month from a test perspective where we will give loans starting from Rs 3000 up to Rs 1 Lac to the merchant for a tenure between 6 and 9 months or 3 and 9 months. This will be on a daily EMI basis. So they don’t need to wait until the end of the month to pay the whole EMI. This is another unique thing for the merchant because then the whole load doesn’t come at the end of the month.
DQ: Is there anything that you would like to add in conclusion?
Siddharth Mehta: Just to sum it up from a Freecharge perspective, the company as you look at it is in its 3.0 version today. We will become a full-fledged financial services platform this year and going forward. And you will see us doing a lot of stuff in the financial services space for both merchants and consumers. As I said for the merchants the first product which we are launching is lending. We already have launched a digital card account for the merchants. We will soon be launching a product where the merchant can manage their card account on Freecharge, so they don’t need a banking app or a third-party app to do it. They can manage their accounts on Freecharge. And eventually, we will launch Neo Bank for the merchants which will again have options like – open your account, manage your account, invest for your future and your child’s future. So that’s what we are looking at currently.