India’s third largest private bank, Axis Bank Ltd has acquired digital payment platform FreeCharge for a whooping sum of Rs 385 crore in an all-cash deal. Axis bank will be the first bank to have a mobile transaction platform at front end too. You will know the facts behind this deal in the coming paragraphs.
Let me tell you about the financial details
Amazon and Times Internet Ltd. were the other contenders to buy Freecharge.Axis bank won this deal for a cash consideration of Rs 385 crore.It will acquire 100 percent equity capital of the company.
Shikha Sharma, CEO, Axis bank quoted, “The acquisition was a strategic fit. The platform is a good quality one and we felt the value we paid was good.” Acquiring FreeCharge will allow us to ‘top up’ our services, said Jairam Sridharan, chief financial officer at Axis Bank. The acquisition will help the bank double its customer base, he added. As per axis bank, FreeCharge has 5 crore customers while Axis Bank has 4 crore customers.
This deal will have to get Reserve Bank of India (RBI) clearance. As per RBI guidelines, one entity cannot possess more than one pre-paid instrument license. So freecharge will remain independent and will merge with axis bank at a later stage. The freecharge employees will report to axis bank.
You should know what’s up behind the screen
The government is now pushing towards digital payment. The digital wallets are prepaid instruments recorded transactions of Rs 2410 crore in June 2017 as per the data from RBI website. Freecharge will provide the pre-paid technology, the customers, brand and will help to simplify the payment process for axis bank. Axis Bank wants to enter the retail payment space with FreeCharge.
“Payments are core to our franchise. The more customers do payments with us; their stickiness with us is much higher than customers who don’t do payments with us. In that context, FreeCharge becomes compelling. It is imperative for us to make payments simple.”
Rajiv Anand, Executive Director, Axis Bank
You will be reading business analysts’ views listed below.
According to a sector analyst, Axis Bank has Axis Pay besides the UPI platform. Freecharge will integrate with UPI.This will heighten the tech image of the bank. Also, FreeCharge has tied up with other players for discounts which will yield dividends for Axis bank.
The card payment is getting obsolete not just in India but also worldwide. The government is encouraging digital payments.The UPI and the BHIM app boost the digital sector. The card payments space will get shaken up and more banks will now be forced to look at similar acquisitions like Axis bank.
Digital products cannot survive alone and consolidation is the only path ahead. Even Paytm had to turn into a bank to be successful.
“Yet, India is far behind in comparison to even some countries in Africa in the mobile and digital payments space. Banks are constrained by their own structure and regulation and not able to focus on tech innovations. It makes sense to incubate start-ups in the fin-tech space or acquire them. I think we will see more of this trend in the future,” said Devangshu Dutta, chief executive of Third Eyesight, a consulting firm,