The deal also signifies an increasing attempt by Flipkart to maintain an edge over rival Paytm which is also expanding its online marketplace - Paytm Mall.
In a bid to expand the user base of its payments arm PhonePe into an open payment platform, e-commerce major Flipkart has partnered with Axis Bank-owned FreeCharge.
The deal will allow over 45 million of the Freecharge’s users to utilise their wallet balance on any of PhonePe’s merchant partners.
The partnership signifies increasing synergies between Axis Bank-owned Freecharge and Flipkart-owned PhonePe.
Flipkart was rumoured to be interested in buying Freecharge even as Snapdeal sold it off as a separate subsidiary to Axis Bank last year for a reported Rs 385 crore.
Now, with the Freecharge team out of Snapdeal, the former is free to explore independent synergies with rivals of its parent firm.
The deal is also an increasing attempt by Flipkart to maintain an edge over Paytm which is also expanding its online marketplace - Paytm Mall.
“We are delighted to partner with FreeCharge and offer our customers the option of using their Freecharge wallet inside the PhonePe app. This is in line with our vision of making PhonePe India’s first truly open payments platform, where customers can use any and all payment instruments of their choice,” Hemant Gala, Head of banking products & strategic partnerships for PhonePe, said.
Flipkart’s partnership with Freecharge has far more weight for the increasing synergies it offers between the two former rivals.
While these partnerships have a clear use case for Flipkart, in order to open up its wallet to more number of users, the real beneficiary in this partnership is the Freecharge wallet user, who will now get to use his or her balance even to shop on Flipkart.
The partnership with PhonePe will give Freecharge access to over 60,000 merchants including MakeMyTrip, PVR, Cleartrip, FreshMenu, Faasos, Café Coffee Day, Apollo Pharmacy, KFC, Barista, and Spencer’s, over and above the 2 lakh merchants and shops it already has in its network.
“We are excited by this partnership which enables FreeCharge customers to shop at various offline and online partners that PhonePe has tied up with, especially at popular online shopping destinations such as Flipkart, Myntra, eBay, and Jabong,” Singh said.
Paytm is not available as a payment option on any of the Flipkart network which has exclusive cashback partnership with Axis Bank
The digital wallets space in India has seen a number of consolidation moves in recent past. Amazon acquired online payment gateway Emvantage and started its own wallet called Amazon Pay. Flipkart took over the payments app PhonePe, and Shopclues acquired Momoe in the recent years.
In 2016, Naspers-owned PayU bought Mumbai based CitrusPay for about USD 130 million.
The sudden surge in consolidation in digital wallets space has come about due to certain RBI guidelines that mandate them to carry out KYC compliance, combined with increased usage of UPI for digital transactions.There is increasing competition emerging in the space with Government of India also launching its BHIM payments app and others such as Paytm expanding theirs by offering heavy cash-backs unaffordable by smaller players.