Can Paypal’s Rumored Investment in Freecharge Trigger The Final Battle of eWallet Dominance


Freecharge Wallet Chat and Pay feature-001

Last week, rumors floated in about a possible investment of $200 million by Paypal in none other than Freecharge, a mobile wallet fast challenging the dominance of Paytm and MobiKwik in India’s eWallet market.

However, what makes this news more interesting is the fact that Softbank, which has vital stakes in both Paytm and Jasper Infotech, the company which owns Snapdeal and Freecharge, will now share a common ground with global leader of digital payments: Paypal.

This means that Softbank and Paypal is all set to join forces, which means that Alipay (Alibaba’s digital payment platform), Paypal, Paytm and Freecharge, will collectively dominate Asian and Indian digital transactions.

While on the other hand would be Apple Pay, Tenpay and Google’s own payment platforms, all three of which are mobile-centric digital payments services.

Not only Asian, but global market of digital payments can witness a massive change with the announcement of Paypal’s investment in Freecharge.

Paypal’s Handshake With Softbank Gang of eWallets?

As per various unconfirmed reports, it was revealed that Paypal has agreed to invest $200 million (Rs 1300 crore) in Freecharge, a relatively new mobile wallet service owned by Jasper Infotech.

Reportedly, Paypal will acquire 25% stake in Freecharge after this deal comes through and the negotiations will start from 1st week of January. Infact, talks between Freecharge and Paypal had been going on since August, 2016.

If we believe the reports, then Paypal was initially interested to acquire majority stake of 51% in Freecharge, but Softbank, which has majority stake in Snapdeal stopped Paypal’s aggressive move. Softbank, as we learnt, is not keen on diluting their majority stake in Jasper Infotech, which is the parent company of both Snapdeal and Freecharge.

A person familiar with deal has revealed that while Goldman Sachs is leading the talks for Paypal, Deutsche Bank along with Jasper Infotech founder Kunal Bahl and Snapdeal’s head of M&A Abhishek Kumar are controlling the talks on behalf of Freecharge.

Once this investment of $200 million by Paypal is completed, they will join the Softbank Gang of eWallets, which, as of now, includes: Paytm, Freecharge and Alipay (although Freecharge and Paytm are competing in the open market, and Alipay by Alibaba is the dominant player in China).

What Does This Mean For Global Market of Digital Payments?

With 192 million active accounts, and quarterly revenues of $2.6 billion in Q3 of 2016, Paypal is no doubt the global leader of digital payments. In 2015, Paypal successfully processed $282 billion of digital payments, out which they generated profits of $9.24 billion.

However, Paypal is slightly off-the-curve when it comes to mobile payments.

Out of $282 billion of payments volume via 4.9 billion transactions, almost 23% happened on mobile, which means $66 billion of mobile volume (happened via 1.4 billion transactions).

Thus, as of now, 28% of all transactions and 23% of the transactions on Paypal are mobile-centric.

Comparably, Apple Pay’s total transactions grew more than 500% during last quarter of 2016, and in 2015, they processed $10 billion, almost 100% of which was mobile-centric.

In the US, Paypal is fighting a gruesome battle against Apple Pay, and in China, they are fighting the dominance of Alipay (43.9% market share) and Tenpay (16.95% market share).

And in India, Paypal is pitched against the likes of Paytm, Freecharge and MobiKwik, which are mobile-centric digital payments platform.

Hence, it makes perfect sense for Paypal to join forces with Softbank backed eWallets, before a company like Tenpay actually infiltrates the Indian terrain, and creates a formidable partnership with Freecharge. Such a scenario will leave Paypal gasping for space and market share, and will send negative signals to their shareholders.

As of now, both Paypal and Jasper Infotech has denied any such investments or deals. We will keep you updated as more details come in…

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