Impact of the last six months of inaction

“That’s what it appeared to most people. But FreeCharge needed a few compliances, which it had not been able to get. It took six months to get that. So it looked like no work happened,” says another former employee who requested anonymity in exchange for candour.

Elevating the security

FreeCharge needed a ‘higher version’ of a Payment Card Industry Data Security Standard (PCI-DSS) compliance. This compliance is a security measure that reduces the chances of fraud and elevates security in real-time.

To simplify it, FreeCharge could save credit card details on its own wallet. Earlier, it outsourced it. This would enable the existing FreeCharge customers to buy large ticket items on Snapdeal.

Former employees The Ken spoke to explain that, at the time of the acquisition, the dream was built on a very simple proposition: FreeCharge had users, which we’re learning to transact online by topping up their phones. They could be converted into Snapdeal customers by cross-selling. Come to top up your phone, how about buying a new one? Pay your electricity bill, want to buy an AC? The cost of customer acquisition would just be the cashbacks that FreeCharge would throw-in.

“It seemed like a good idea. But it lacked depth,” says one of the employees quoted above. “The customers who topped up their prepaid phone accounts for Rs 15 or Rs 25 did not buy a mobile online,” he adds. Most of these customers didn’t use credit cards either.

“We saw a trend develop, and it showed that FreeCharge customers were not migrating to Snapdeal. The basic premise had failed,” the former employee adds.

So Snapdeal decided to mix it up.

In one of The Ken’s earlier stories, we detailed Snapdeal’s many pivots to find a good working model. One of the small pivots was trying to adopt the WeChat model of a chat engine, which would encourage customers to chat and do peer-to-peer (P2P) transactions. Freecharge christened it Social Pay.

Replicating the action all over the world

“Snapdeal had seen it work in China [WeChat]. And wanted to replicate it in India,” says one of the former employees quoted above. The theory internally was that people like to chat in India. And if they started trusting the platform, they would do bigger transactions and then they would buy on Snapdeal as well.

“One of the founders of Snapdeal had said that if it works for WeChat, why not here,” says another former employee who asked not to be named as his current company does not allow him to speak to the media. He was closely involved with the strategic planning at FreeCharge.

Former employees explain that there was significant pushback from FreeCharge against Snapdeal’s experiment but it was ignored. “WeChat was a chat application, which was very popular, and it started adding features. One of them was payments and shopping,” says one of the former employees quoted above. “FreeCharge was a top-up machine, and it had no role to play for chats. Why would someone in India stop WhatsApping and chat on FreeCharge?”

The company went on a spending spree. It decided to become the named sponsor of the Indian Premier League (IPL), a domestic cricket tournament. FreeCharge reportedly spent Rs 100 crore on a two-year deal. “FreeCharge was going to promote P2P payments and the chat during that season,” the employee quoted above says. It, however, could not generate excitement. The P2P transactions, through the chat, topped Rs 5,000 a day. Ken could not independently verify the number.

“SoftBank was very angry with Snapdeal for the ad spots and the sponsorship,” says one of the former employees quoted above who was at the meeting.