India's Snapdeal Launches FreeCharge Wallet To Join The Mobile Wallet Race

India's Jasper Infotech, which operates the online shopping site Snapdeal, has joined the mobile-wallet race by developing one. The company has also teamed up with FINO PayTech, which was recently awarded a license to start a payments bank in India.

About 87 million users of Snapdeal will get the FreeCharge Digital Wallet, Kunal Shah, founder of FreeCharge, which was acquired by Jasper Infotech earlier this year, told reporters in Bangalore Tuesday at a conference to announce the company's foray into mobile wallets.

India's smartphone-led Internet penetration is allowing consumers to increasingly transact online, be it buying groceries or hailing cabs or renting apartments. Companies such as SoftBank Corp.-backed Snapdeal and local rival One97 Communications, which operates another wallet and online shopping site, Paytm, are in a race to become the de facto providers of the payment backbone that is needed for these transactions.

China's Alibaba Group has invested in One97. Unlike in the U.S., credit card penetration in India is very low, and with the smartphone becoming the primary tool of Internet access for millions of Indians, mobile wallets are beginning to take off. In India, for instance, the Paytm wallet can be used to pay for Uber rides.

India is projected to become the world's biggest smartphone market behind China by 2017, overtaking the U.S., and India's Internet user base is expected to more than double by 2020, from the current 250 million.

"The ecosystem is going through a major change ... Internet speeds are going through dramatic change," Govind Rajan, chief operating officer of FreeCharge, said. "Payments infrastructure is also going through an overhaul," he said, adding that many of the practical difficulties associated with making payments electronically are being eliminated by the convenience of using mobile wallets.

In a live demonstration earlier, Snadeal and FreeCharge executives showed how a mobile phone plan could be topped up in a matter of seconds, or equally effortlessly, a purchase could be made on Snapdeal using the new wallet.

To entice more people to download the wallet, register themselves and start using it regularly, Snapdeal, in partnerships with merchants that sell goods on its site, was looking to return as much as 10 billion rupees (about $150 million) in cash-back rewards in the coming months, Rajan said. Typically, such rewards would involve discounts on future transactions each time a consumer uses the wallet.