Indian digital payments service FreeCharge announced that it had launched a mutual fund investment service that could be accessed digitally, in a partnership brokered with Reliance Mutual Funds. Now customers of FreeCharge, a Snapdeal-owned property that started out as a mobile recharging service, can invest in a money market mutual fund with just a few taps on a smartphone, earning them interest at rates that usually exceed those offered by fixed deposits and savings accounts.
The mutual fund is likely to have immediate appeal for FreeCharge users who have historically lacked access to traditional banking services. According to the Reserve Bank of India (RBI), banks had issued 27.4 million credit cards in the country as of October 2016, meaning that only a tiny slice of India's population of roughly 1.3 billion people had one. Those without easy access to a physical bank branch but who own mobile phones have increasingly turned to mobile wallets and other payment services to pay bills, make purchases and transfer money.
Moving to mobile investment vehicles like the one offered by FreeCharge is a small step for these types of users. And FreeCharge is not the only service planning to expand its offerings to financial tech services.
In January, the RBI granted popular payment service Paytm final approval to launch a payments bank. That allowed the new service, dubbed Paytm Payments Bank, to accept deposits of up to INR 100,000 ($1,468.7) from both individuals and small businesses, and offer customers services that include loans, insurance and wealth management.
Paytm's CEO, Vijay Shekar Sharma, was clear about his designs to move into the financial tech sector at the time. "Our aim is to build a new business model in banking, focused on bringing financial services to hundreds of millions of unserved or underserved Indians," he wrote in a blog post.
Paytm is well-suited to emerge as a leader in India's nascent financial tech sector. It counts Ant Financial, an affiliate of Alibaba, as one of its investors, and is likely able to draw from the company's experience launching similar banking and investment services in China.
But digital payments services like FreeCharge and Paytm are not the only players looking to get into the potentially lucrative financial services sector. Mobile service provider Bharti Airtel, which also received a banking license from RBI, this month became the first telecom company in India to launch its own banking services. The mobile financial sector is set to get crowded this year as more entrants make a play for the as-yet-untapped market for investment and money management services in India.
—Rahul Chadha