SIDDHARTH MEHTA, MD and CEO of Freecharge, talks of the payment app’s transition into a full-fledged digital financial services platform, the advantage of having Axis Bank as a parent and expectations from the upcoming neo-bank launch
How have you seen the fintech space evolve through your career across CITI Bank, HDFC Bank, Axis Bank and at Freecharge since 2018? What are some of the larger trends you have noticed and what have been your learnings on the ground?
The fintech space has evolved in the last 3-5 years, but most of the scale and innovation has happened around payments, which was a core focus for the rapid growth of digital adoption. Over the next five years, while payments will continue to make big strides, most of the innovation will happen around lending for both consumers and SMBs and we will see rapid scale in this space with the availability of India stack, account aggregator services, digital KYC solutions etc. Additionally, companies will need to find the right balance between scale and risk as they get into lending.
How has having Axis Bank as a parent company helped Freecharge? What is the brand’s USP with regard to competition?
Being a part of Axis Bank has given us a competitive advantage within the fintech ecosystem. It helps us roll out our digital offerings at a much faster pace and also helps us with in-house testing. If you’re a stand-alone fintech player, it gets difficult to convince banks and NBFCs for integration and launch. With Axis Bank as our parent, we have tested so many products over the past year such as home loan, two-wheeler loan, gold loan, etc. We have also launched a digital FD product (Express FD) in partnership with Axis Bank to provide consumers a safe way to save and invest their funds; this investment option paired with mutual funds and digital gold products, provides consumers a comprehensive set of investment solutions on the Freecharge platform. The other advantage is Axis Bank’s learning, experience and expertise around risk and compliance, which delivers value in the long term and becomes our USP as well.
Around 200-250 million people actually make payments via digital modes in India. With 1.3 billion people in the country, the number can easily rise to 400-500 million over the next two years. So, there is enough scope and opportunity for all. You just need to provide a great customer experience and a great product, and we are focusing on it. We have a vast product portfolio ranging from FDs to credit cards and now the latest is the Pay Later offering and the upcoming neo-bank launch.
Also, with Axis Bank building digital capabilities and digitising most of their banking services, Freecharge acts as a catalyst in the process, helping the bank acquire more new age customers and through offerings like digital lending and neo-bank services.
Tell us more about your neo-bank launch and your foray into co-creating products for millennials. What does the landscape look like for this demographic and what is the potential you see there?
Neo-banks are the new disruptors on the block, offering convenience and personalisation. The neo-banking feature will be designed in collaboration with our users, and focus on new age customers who wish to have a simpler and hassle-free financial planning experience under one umbrella. This will allow them to co-create a unique banking experience rather than force-fitting existing solutions onto them.
We see a lot of young entrepreneurs, who wish to take control of their finances rather than just work to make money. With a digital and mobile first thinking, this segment is taking great interest in fintech products as compared to other segments, which is likely to continue in the coming years as well.
What are some of the solutions Freecharge rolled out for small and micro businesses and merchants during the COVID environment? Which products saw the fastest adoption?
For our small business partners, we rolled out remote payment collection solutions to provide contactless remote payments, thus enabling them to continue operating their businesses seamlessly. In partnership with Freecharge, a small business can today accept payments through cards, UPI and netbanking, using static and dynamic QR codes and/or customised payment links. We are actually growing more than 20% quarter on quarter, on digital payments on the small and micro business side, using payment links and QR codes. Our products like Paisa Plus, Khata and Payment Link have been designed keeping in mind the needs of small merchants. With Paisa Plus, merchants can issue their own digital shopping vouchers to customers either as a reward or as a discount coupon. All of these efforts have led to a continuous growth on the merchant side over the past couple of years.
We also recently launched our small ticket lending product for SMBs, with loans ranging from Rs 5,000 to Rs 1,00,000 to merchants digitally. We deduct a small amount from the daily payments we make to merchants for digital transactions through Freecharge, thus reducing the burden on the EMI due date. We also plan to launch a neo-banking platform for SMBs where they can access all their financial needs at one place.
How has Freecharge fared in FY20-21 in terms of growth?
In the last one year, we have taken some major steps towards our journey to transform from a pure play digital payments platform into a comprehensive digital financial services platform. Earlier, our focus was mostly on B2C customers, but now we are co-creating financial products for both B2C and B2B customers. On the merchant business, we are seeing an uptake in the remote payment solutions in the offline ecosystem and that business is growing at almost 20%+ Q-on-Q. The pandemic has nudged us to reinvent ourselves. Only recently, we rolled out various cashback and mega offers for the festive season where users get a chance to win exciting prizes on using Freecharge Pay Later services with partner brands.
How different is your strategy going to be in 2022 versus the previous year?
Our three core focus areas for consumers as well as SMBs are - payments, lending and neo-banking. Our strategy for the next 12 to 18 months will not change from what we were following last year. We plan to offer our customers and merchant partners the full spectrum of services, i.e., payments, lending, investments, savings and insurance. We will parallelly focus on scaling up the lending business led by the Freecharge Pay Later and merchant cash advance solution.
What are some of the challenges before the brand as well as the industry?
As a brand, we are re-inventing ourselves as a digital financial services platform. Establishing Freecharge as a trustworthy financial services partner for both consumers and SMBs will be one of our biggest challenges. Elsewhere, while digital payments are continuing to increase at a rapid pace both in terms of transactions and adoption, margins are getting squeezed and that has an impact on the ability to invest. Also, with digital adoption, cyber frauds have increased and this impacts customer confidence. In partnership with Axis Bank, we are continuously strengthening our systems and processes to deal with this.
What is one principle or rule that guides all your actions as a business leader?
The ability to communicate and connect with the team. It not only allows you to engage at a personal level, but also keeps you abreast of what is happening around you.
IN THE WORKSPHERE
Siddharth Mehta started his career with Hyundai Motors and then moved to join HDFC Bank in the retail assets business. After spending a year at HDFC Bank, he moved to Citi Bank and started his journey in the payments world. Since then, he has worked on a varied set of innovative solutions across cards, merchants, wallet and transit. He joined Freecharge as the chief business officer handling the payments and merchant business and a year later, was elevated to CEO of the company.
BEYOND THE WORKSPHERE
“I am generally a very homely person and like to spend time with my family and listen to soft music when I am at home. But I do like travelling and enjoy driving down for holidays whenever I get a chance,” says Siddharth Mehta.
