Mobile recharge, payment applications gain traction

Mobile recharge and payment applications have become popular and it may just be the beginning.

"We are not recharge players any more, but a full-blown marketplace," says  Vijay Shekhar Sharma,   Founder, Paytm. Photo: Shekhar Ghosh. "We are not recharge players any more, but a full-blown marketplace," says Vijay Shekhar Sharma, Founder, Paytm. Photo: Shekhar Ghosh.

Apoorv Sharma, 26, an employee with an IT company in Delhi, recharges his prepaid phone connection using Freecharge, an online mobile recharge service. The incentive: free coupons of Dominos and other food joints equal to the value of the recharge. There is another reason as well. "It is faster than any other site I have used to top up my phone," says Sharma. "I can store my card details and even charge the phones of my mother or my friends if they insist," he adds with a grin.

Freecharge is one of the many recharge apps and payment platforms inundating the market today. With nearly 800 million unique mobile phone subscribers, 97 per cent of them using prepaid phones, mobile recharge is emerging as a big business opportunity. "Recharge is a high frequency, high footfall product but is rarely treated as a business. It does not find mention in any e-commerce report. But we are bigger than leading e-commerce companies in terms of number of transactions," says Kunal Shah, Founder of Accelyst Solutions which runs Freecharge. The Sequoia Capital backed company works with 300-odd retailers and processes recharges worth Rs 100 crore a month.

Start-ups in the recharge business have built a massive user base and are growing at a brisk pace. For instance, Gurgaon-based RechargeItNow offers mobile phone services through net banking and credit and debit cards. It started in 2008 and now has 8.5 million registered users. "It was difficult in the first six months but 2009 onwards we have seen a 25 per cent growth month-on-month," says Sharat Jain, Co-founder and President, RechargeItNow. Other leading players - Paytm, Oxigen and Mobikwik - have also recorded exponential growth rates. Paytm, for instance, does 300,000 orders a day, a bulk of which are mobile recharge transactions.

Having scaled up to a few million mobile recharge users, these companies have used their customer base as launchpads for a host of other services, including DTH recharges, utility bill payments, online shopping, bus ticket bookings, movie bookings and ordering from fast food chains such as Dominos and Pizza Hut. For instance, Oxigen Services (India), launched in 2004 as a mobile recharge venture, now does Rs 600 crore worth of transactions per month - the biggest chunk of its business comprising money transfers (Rs 200 crore), followed by recharges (Rs 100 crore) and bill payments (Rs 30 crore).

One of the reasons for diversifying is that although the volumes in the recharge business are high, the ticket size of transactions is low and margins are poor. Margins paid by telecom companies to these operators are generally not more than two per cent of the value of the transaction and the average size of the transaction varies from Rs 30 to Rs 150.

"A standalone recharge business is tough," says Deepak Abbot, Assistant Vice President, Marketing at Paytm, which started offering online prepaid mobile recharge services three years back in 2011 with a digital wallet, an application that allows users to store money in a virtual wallet and use it for transactions. When it can be used only on a single website, it is referred to as a closed wallet. The app is called a semi-closed wallet when it can be used as a payment tool on multiple websites. Paytm now offers DTH recharge, postpaid bill and utility bill payments, movie-ticket bookings, among other services. "Every six months, we are launching a new category," says Vijay Shekhar Sharma, Founder of Paytm.

Most of these start-ups are prompting users to transact on their wallet by giving them cash refunds when they use it to transact on partner websites like BookMyShow or Fashionandyou. "We are not a recharge player anymore but a full-blown marketplace," says Sharma, who launched a marketplace on the Paytm platform in February this year. This allows listed retailers such as Zovi, Yebhi and Yepme to sell their products on Paytm. "We believe hard goods will be the biggest contributors to our top line and bottom line," he says.

Mobikwik's story is similar. It started with a closed digital wallet in 2009, mostly for prepaid mobile recharge. But ever since the company got RBI approval for a semi-closed wallet in July 2013, it has been busy acquiring merchants on the platform, in a bid to get existing users to transact more. Mobikwik now processes about 150,000 transactions a day, 40 per cent of them coming from movie and bus ticket booking, purchases on e-commerce sites, and bill payments. "The remaining 60 per cent comes from mobile recharge," says Bipin Preet Singh, CEO of Mobikwik which has a registered user base of six million.

For Singh, Airtel Money, with a subscriber base of 1.7 million as on March 31, 2014, is the biggest competitor. Launched in March 2012, Airtel Money is a digital wallet service by Bharti Airtel which offers a host of services, including remittances, recharge and bill payments. By December 2013, the total number of transactions on Airtel Money stood at more than 30 million.

However, Oxigen believes adding miscellaneous services to diversify the recharge business will not add more than 10 to 15 per cent to a company's bottom line. "As far as volumes are concerned, one has to bet more on money transfers which is four times the size of telecom market in India," says Pramod Saxena, Founder and Chairman of Oxigen. The company, which has tie-ups with sites like BookMyShow for movie tickets and Hungama for music downloads, is now reaching out to coffee and food chains.

Meanwhile, recharge and bill payments is fast becoming a crowded space and even banks and telecom operators have begun revamping their sites to offer these services to customers. But the start-ups believe they can grow faster than banks. "We can reach customers even in areas where banks don't have branches through a digital wallet," says Singh of Mobikwik.

But there appears to be plenty of headroom for all players in the market. "There are over 250 billion pay transactions per year happening in this country, not even one per cent of which is online. This makes it very, very attractive," sums up Hemant Joshi, head of Telecom Media and Technology at consulting firm Deloitte India .