Axis Bank buys FreeCharge from Snapdeal for Rs385 crore
Mumbai: Axis Bank Ltd on Thursday announced the acquisition of Snapdeal-owned mobile wallet FreeCharge in a Rs385 crore all-cash deal, strengthening its position in the payments space.
The move gives Axis Bank access to FreeCharge’s 54-million-plus customers, technology, human resources and the branding advantage that comes with an early mover.
The bank did not disclose the active user base of FreeCharge but said it is happy with the number.
Axis Bank CEO Shikha Sharma said the FreeCharge acquisition aims at marrying the agility of a fintech company with the strength of a bank to provide a “uniquely distinctive” user experience.
Sharma said that typically when the bank plans a new business, it sees value creation in two to three years, and hence, this acquisition would also need to be given that much time.
“The Axis Bank-FreeCharge combination is a potent one that has the potential to make a large impact on the digital payments and banking space,” said Snapdeal co-founder Kunal Bahl on the acquisition. “It is a win-win deal that allows Snapdeal to further focus on our e-commerce business, while giving Axis some of the most agile and innovative technology capabilities in the financial space in India.”
According to Anil Joshi, co-founder of early-stage investor Unicorn India Ventures, the biggest advantage of the deal is that Axis Bank will gain access to a customer base that is largely involved in small-value transactions. Utility bill payments are a key service segment of FreeCharge.
He added that unlike many bank customers, FreeCharge users are digitally savvy and hence, if the bank is able to leverage them, it will have ample opportunities to cross-sell products.
“The cost of customer acquisition is lower on the digital platform. And if the bank is able to harness technology to cross-sell products, then the pricing of the deal does not matter,” he said.
Critics questioned the rationale of the acquisition, especially since Axis Bank already has a large presence in the digital space and the capabilities to build its own platform. The bank has integrated mobile wallet LIME, it offers Unified Payment Interface (UPI) payments via Axis Pay, and also has a better market position in point-of-sale terminals, forex and credit cards.
On the other hand, experts said that given the rapid change in the mobile wallet space and the range of product offerings to a customer, it is prudent to strategize on customer acquisition rather than spend time in building a platform.
“The acquisition shows that the bank is keen on aggressive expansion in the payments space. There is always a choice between build and buy. If you think that space is evolving too fast, you may opt for acquisition. That also gives you an edge in on-boarding customers,” said Venkatesh Hariharan, director (fintech) at iSPIRT, a think tank.
The deal is subject to regulatory approval from the Reserve Bank of India (RBI) and the indicative time frame to complete the acquisition is two months, the private sector lender said in an exchange filing.
Separately, Jairam Sridharan, chief financial officer of Axis Bank, said the Axis Bank’s FreeCharge acquisition would comply with the RBI regulation on prepaid payment instruments (PPIs), which include mobile wallets), which says one entity can have only one PPI licence. He added that accordingly, one licence would be surrendered as Axis Bank also has a similar licence.
However, Sharma said that given the distinct culture of fintech companies, Axis Bank would like to keep FreeCharge as an independent entity. But this would be again subject to regulatory approval.