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Bengaluru: E-commerce marketplace Snapdeal, run by Jasper Infotech Pvt. Ltd, said on Tuesday that it will launch a mobile wallet through its recharge and utility payments unit FreeCharge.

FreeCharge, which does not own an open mobile wallet licence, has tied up with Yes Bank Ltd to launch its wallet. It said it had received in-principle approval from the Reserve Bank of India (RBI) for a semi-closed wallet and may launch its own wallet over time.

As online retail becomes a mainstream channel of commerce in India backed by explosive growth of smartphones, large Internet businesses are buying payments start-ups and launching their own payment solutions to grab a slice of the nascent but fast-growing payments market.

Over the past few months, other large e-commerce firms have also made significant moves in the payments space. Last month, Flipkart Ltd bought payments services start-up FX Mart Pvt. Ltd, which holds a prepaid wallet licence, so as to add a payment service on its platform and on that of its unit Myntra. Cab-hailing service Ola, run by ANI Technologies Pvt. Ltd, said on 24 August that its digital wallet Ola Money will be available for making payments on other e-commerce platforms. Ola runs the wallet in association with payments start-up ZipCash Card Services Pvt. Ltd.

Paytm, a part of One97 Communications Ltd, which is the market leader in digital payments, potentially got a break last month when its founder Vijay Shekhar Sharma became one of the 11 recipients of in-principle approval for a payment bank licence issued by RBI. The licence will allow recipients to provide basic savings, deposits, payment and remittance services to shoppers, significantly increasing the utility value of owning a digital wallet.

Apart from online retailers, there are specialist mobile wallet and payments companies. Flush with funds, start-ups such as Mobikwik, PayU, Citrus Pay and others are battling each other to dominate digital payments.

Mobile wallets are smart phone applications in which consumers can preload money and use it to pay utility bills, book tickets and transfer money. They can also be used to make instant e-payments while shopping, in physical stores or at e-stores.

On Tuesday, Snapdeal said it will spend 1,000 crore towards cash-back offers and other discounts in a move to attract consumers to start using the FreeCharge Digital Wallet.

FreeCharge chief executive officer Kunal Shah said the company wants to encourage Indians to move away from cash to cashless payments. FreeCharge’s wallet aims to help people pay for day-to-day things such as electricity bills and groceries so as to habituate shoppers to making digital payments.

“We are nowhere close to claiming that cashless payments are happening (in numbers) in the country; transactions are still happening in cash. You have to give right kind of motivations and use methods that are more seamless in nature. Ours is a separate app. Payments have to be invisible and addressing payments is a function of many things," Shah said.

On its part, Snapdeal is betting on a large network of merchant partners and its technology platform to be key differentiators in a market where there are already-established mobile wallet firms such as Paytm, PayU and Mobikwik. Even traditional banks such as State Bank of India (SBI), HDFC Bank Ltd and ICICI Bank Ltd have jumped on to the mobile wallet opportunity to cater to young Indians who prefer to shop on their phones.

SBI launched its m-wallet SBI Buddy in August, directly competing with PayZapp of HDFC Bak and Pocket of ICICI Bank.

FreeCharge’s wallet, just like Paytm’s, will be available for third-party merchants.

The company has also tied up with FINO, a payments bank licensee, to build scale and reach users in under-served markets.

FreeCharge claims to do 200 million transactions annually. Snapdeal and FreeCharge together have about 8.2 million unique daily users, 15 million stored cards and a combined gross merchandise value of over $4 billion, the company said at a conference on Tuesday.

The two companies have integrated the registered users on their platforms, taking the combined number to 87 million. The integration will allow Snapdeal customers to use a FreeCharge wallet.

In June, Mint reported that Snapdeal wants to create the largest utilities payments marketplace in India. The company expects FreeCharge to pan out into a holistic utility product driving the utilities market, a $100 billion opportunity, online.

In April, Snapdeal acquired FreeCharge in a $450 million deal.

“Consumer needs are constantly evolving and we feel it is the right time to launch a trusted and feature-rich digital wallet service. At Snapdeal, we are building an ecosystem that powers billions of digital commerce transactions. With the launch of the FreeCharge Digital Wallet, we will now play an even more intrinsic role in our customers’ lives," said Kunal Bahl, chief executive and co-founder, Snapdeal.

With increasing use of mobile phones to shop online, payment companies and e-tailers are betting big on digital wallets offering consumers a convenient and comparatively faster way to pay as well as reduce their dependence on cash.

Digital or virtual wallets act as a holder of cash and can be used to purchase goods and services online. These can be loaded with cash through a telecom firm, mobile payment provider or a bank. Digital wallets can be closed, semi-closed or open. Closed wallets allow consumers to purchase goods and services from only one seller. Semi-closed wallets allow shopping at multiple merchants in a marketplace. Open wallets can be used across marketplaces.

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