Snapdeal takes on Paytm with Freecharge
By 7:30pm on Tuesday, Snapdeal had delivered 25,000 orders since morning using Freecharge’s wallet-on-delivery service as India faced cash crunch due to Prime Minister Narendra Modi’s demonetisation drive.
Freecharge is Paytm’s rival, owned by Snapdeal, which offers a mobile wallet that can be used to pay bills, shop online and offline. The wallet-on-delivery is an alternative for cash, which delivery personnel use to accept digital money.
Nearly 15% of Snapdeal’s orders are placed on the wallet-on-delivery service in lanes where it is available. “We are launching it across the country …. In the next three years, 80% of e-commerce transactions will become digital ...” said Kunal Bahl, co-founder and CEO of Snapdeal.
When Snapdeal bought Freecharge more than a year ago, about 80% of its orders were on COD. In October, these were down to 50%. “Right now they are at 35-40% ...” Bahl said.
Once more cash is back in the system, some people will shift back to COD, said Bahl, but many would continue with digital payments.
The shift is apparent. Snapdeal witnessed a large number of people buying cash gift cards as the wedding season approaches – the most popular ones? being ₹1,100 and ₹2,100 cards.
Bahl further said, “A lot of guys made digital payments for the very first time in the past week.” First-time users increased by 1,388%, and two out of every five users loaded the wallet for the first time.
Freecharge’s third-party merchant acceptance grew 10 times – across online merchants such as Zomato and Swiggy, and offline in case of cabs, chemists and doctors. The wallet is the only one to sit inside a large e-commerce business, which Bahl said, made it successful. There is a high probability that people who use Freecharge will shop on Snapdeal, and vice-versa.
However, Freecharge faces stiff competition from Paytm that claims to have 150 million wallet users. “We started building the payments business just a year ago …” He said the wallet would become more popular in a month or so.
Freecharge is betting on a bunch of propositions, which no one else provides. Freecharge users don’t need an internet connection to make a payment (Snapdeal has filed a patent). All you need is a one-time password. Snapdeal gives its seller 0% commission to offer the wallet, and is running a campaign, urging them to adopt Freecharge for their offline businesses.
Bahl said the digital payments would help it build a more financially sound business, unlike one that is driven by high gross merchandise value (which doesn’t factor in discounts). “In the long term … we want to be a proud Indian company ...” he said.