A Mumbai-based startup is trying to make paying phone bills a profitable exercise for telecom consumers.
Each time a customer uses Freecharge.in to pay a phone bill, or buys a prepaid talk time card, the startup offers discount coupons of the same value from fast food outlets, shopping websites or movie theatres. This also works for recharges on DTH, data card subscriptions—and it’s looking to add more bill payments.
Kunal Shah, a philosophy graduate and an MBA dropout, who started the website five years ago, says this business model helps brands such as KFC, McDonalds, Café Coffee Day or PVR Cinemas acquire customers, bypassing traditional media and advertising methods.
“We tried to build a greed model on top of a need-based expenditure that consumers have to incur every month,” he told Quartz.
While numerous telecom companies have online portals where users can pay bills or buy talk time, most customers still prefer brick-and-mortar phone recharge shops, mostly because these stores are hassle-free and ubiquitous.
Discounts, on the other hand, have a proven track record of driving online shopping in India, but telecom operators don’t have a large enough margin to offer heavy discounts. Shah’s firm bridges the gap.
“Instead of our own discounts (from telecos) we thought we could rope in discounts of other companies to encourage that change in behaviour for customers,” he explained.
But to ensure that customers value the coupon and don’t just throw it away, the startup charges the user between Re 1 and Rs 19 for a coupon. On spending Re 1 extra while paying your mobile bill, for instance, users are offered a plate of fries or chicken wings at a local fast food restaurant. “We need to create a motivation to change customer behavior,” Shah said.
The startup currently offers coupons from 400 retailers, aimed at customers between 18-28 years and 70% of its transactions happen on mobile devices. The app has over a million downloads on the Google Play app store. Shah refuses to share more details, only divulging that the startup sees multiple lakh transactions a day and is growing at about 400% year-on-year.
“Many of our clients have seen an impact and have continued partnering with us for the last four years,” he added.
The revenue model is straightforward. The brands pay Freecharge based on the number of coupons redeemed, or the number of coupons distributed. Telecom companies give them the same margin that any other recharge shop gets and customers pay in the form of a notional fee for the coupons.
The company says it takes less than 10 seconds to buy a recharge on their app. “We have created the fastest recharge experience,” said Alok Goel, CEO of the startup. Goel was previously the chief operating officer of redBus.in, a startup that was acquired for Rs 800 crore ($132.7 million) last year.
Accelyst Solutions, the company that set up Freecharge, raised Rs 200 crore ($33 million) last week from existing investor Sequoia Capital, Belgium-based investment firm Sofina and Russian Internet and technology investor ru-Net. Sequoia had previously invested Rs 20 crore ($3 million) in the startup.
“Other companies have tried to implement a model similar to ours but it works for us because we aren’t a mobile recharge company offering coupons,” said Shah. “We are a marketing company that allows you to recharge online.”