PhonePe, the payments arm of Flipkart, is now moving to become a ‘payments container’. It now has a partnership with FreeCharge where it will now allow its users to link their existing wallet to the PhonePe app. This will allow its 45 million users to spend their balance at all online and offline merchants which accept PhonePe.

In order to pay via FreeCharge on PhonePe, customers can link FreeCharge from ‘My Account>Other Wallets’ section. FreeCharge will show up on the customers’ and merchants’ app at the PhonePe payment path.

Note that this isn’t the first time the Flipkart-owned company has partnered with another wallet company. Late last year, it partnered with JioMoney where users could link their wallet balances and they could spend money at PhonePe merchants.

Why is FreeCharge doing this?

Remember that PhonePe too has a wallet licence from the Reserve Bank of India (RBI) along with JioMoney and FreeCharge. As such it seems strange that the companies would want to partner with each other. But a quote in the statement from FreeCharge CEO Sangram Singh points at their rationale.

“We are excited by this partnership which enables FreeCharge customers to shop at various offline and online partners that PhonePe has tied up with, especially at popular online shopping destinations such as Flipkart, Myntra, eBay, and Jabong,” Singh said.

Note when FreeCharge was owned by Snapdeal, the wallet could not be used at rival e-commerce services such as Flipkart and Amazon. Snapdeal CEO Kunal Bahl wanted to fashion FreeCharge something similar to eBay and PayPal and Taoboa and Alipay. The purchases on the e-commerce site would be funneled via FreeCharge and increase usage.

But this does not hold true anymore and it seems that most wallet companies are now scrambling to consolidate their merchant acquiring businesses. PhonePe currently has around 60,000 online and offline merchants while FreeCharge has over 2 lakh merchants (as of July 2017). This deal will add the number of merchants that the wallet will be accepted in.

Earlier this month, PayU decided to shut down its wallet service and focus on its merchant gateway services and its deferred payments product LazyPay. Wallet services are being hit following the new onerous guidelines by the RBI and the increased usage of UPI for digital transactions.