New Delhi: India’s largest cab hailing service Ola on Friday announced its entry into the mobile payments business with the launch of a dedicated mobile app—a move that will put it in direct competition with Alibaba Group-backed Paytm and Snapdeal-owned FreeCharge.

The app, Ola Money, will allow users to recharge their mobile phones and send money to friends and family, said the company, which plans to expand services to payment of utility bills and add more partners on the platform, including e-commerce firms and food-ordering sites.

Ola, owned by ANI Technologies Pvt. Ltd, is the latest in a string of Internet companies that have launched mobile payment apps, seeking to grab a share of the nascent but fast-growing payments market. Increasing penetration of smartphones has spurred the rapid expansion of online transactions and payment solutions.

Snapdeal, run by Jasper Infotech Pvt. Ltd, acquired mobile recharge and wallet firm FreeCharge in a $450 million deal in April, pushing its own valuation to about $5 billion. Snapdeal was valued at roughly $2 billion when it raised $627 million from Japan’s SoftBank in November 2014.

Vijay Shekhar Sharma, founder of Paytm, the market leader in digital payments, in August won in-principle approval from the central bank to set up a payments bank which would offer basic saving, deposit, payment and remittance services, significantly increasing the value of owning a digital wallet.

India’s largest e-commerce firm Flipkart Ltd bought payments services start-up FX Mart Pvt. Ltd in August to add payment services on its platform; and during the past six months, Ola, together with co-founder Bhavish Aggarwal, acquired a minority stake in ZipCash Card Services Pvt. Ltd, a company with a wallet licence from the Reserve Bank of India. Ola is offering its new app in association with ZipCash.

In June, Ola invested close to 3.2 crore for a 3.4% stake in Zipcash and Aggarwal bought a 2.56% stake by investing 1.2 crore in March, Mint reported on 10 October. Ola, which is looking to apply for its own wallet licence, has held talks with ZipCash for a potential acquisition.

Founded in 2007, ZipCash offers mobile vouchers, bill payments, mobile top-ups and direct-to-home (DTH) television recharge services and has partnerships with the likes of eBay and BookMyShow, among others. Mumbai-based ZipCash has been struggling to expand.

“The launch of the Ola Money app is a big step towards simplifying payments for users across a wide range of products and services they use everyday," said Aggarwal, who is also CEO of Ola, which he founded in January 2011 with fellow Indian Institute of Technology Bombay alumnus Ankit Bhati.

“Ola Money has seen tremendous acceptance over the last three months, since the time we opened it up for third-party merchants." He added: “We continue to add more merchants and build many more use cases with Ola Money, making it a seamless experience for users. With the app enabling users to do a lot more, including mobile recharges and money transfers, we are excited about the possibilities that Ola Money brings for the millions who are beginning to prefer an easy-to-use mobile payment solution."

Ola’s move to venture into the mobile payments space comes at a time when US-based rival Uber Technologies Inc. is catching up with the local cab aggregator. Ola bought smaller rival TaxiForSure in a $200 million deal in March to increase its lead over Uber, and now claims to have an 80% market share.

“Uber is disrupting Ola in India and the company is diversifying in order to justify its current valuation and secure future valuations," said an industry analyst on condition of anonymity.

Over the past year, Ola has ventured into a food delivery service—Ola Café—and launched an independent grocery-ordering app called Ola Store, seeking to match the strategy Uber is adopting elsewhere in the world. Uber is already delivering groceries, food and e-commerce products in the US.

Experts see Ola’s diversification as both a distraction and a strategy to remain relevant. The company seems to be losing focus on its core business, but the diversification is also a tactic to gain larger marketshare and retain the loyalty of its customers, analysts say.

“A wallet that is acceptable at multiple places helps in securing the customers. Also with the whole story about digital India, 4G and smartphone penetration there is a big opportunity in the payments space which is yet to see clear leaders," said Sanjeev Krishan, transaction services and private equity practice leader at consulting firm PricewaterhouseCoopers India.

How much a cab aggregator can succeed in payments is a “wait and watch game", he said.

“Uber is doing what they are good at and have let a specialist like Paytm handle payments," he said.

Ola’s Aggarwal seems to have his sights set on the entire mobile commerce ecosystem in India. “We are a mobile-first company and we are focused on building and nurturing the mobile ecosystem of the future, where a billion people are going to be online, through their phones," said Aggarwal.

The mobile payments app is not a customer-acquisition strategy alone, said Rushil Goel, head of Ola Money, which currently has a 50-strong team that Ola plans to expand aggressively.

“We are going after the entire payments segment," Goel said.

About half of Ola users are already paying for their rides using Ola Money, according to the company. In August, the company opened Ola Money for payments to third-party merchants including budget hotel aggregators OYO Rooms and Zo Rooms, music streaming portal Saavn, online eyewear retailer Lenskart and food ordering app TinyOwl, among others.

Over the past year, Ola has become one of India’s fastest-growing start-ups. Poor transport infrastructure and a shift in consumer habits towards convenience and on-demand services have fuelled a boom in demand for cab services such as Ola and Uber. Ola is in advanced talks to raise $500 million at a valuation of $5 billion from existing investors which include SoftBank, Tiger Global Management and Sequoia Capital, Mint reported on 21 May.

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