The Snapdeal-owned company, which facilitates over one million transactions a day, also aims to increase the number to seven million daily transactions by end of March 2017.
"The density of PoS (debit/credit card swiping machines) in India is very low in India compared to countries like the US. However, the number of smartphones in India is huge and can play an important role in driving digital payments uptake in the country," FreeCharge Chief Operating Officer Govind Rajan told PTI.
FreeCharge has over 30 million registered users in India.
"In the next 18 months, we aim to bring five million merchants like kirana shop owners on to our platform," he said adding the company will offer benefits like free peer-to-peer money transfer that is offered to consumers as well.
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The company has also rolled out a 'Chat and Pay' feature for consumers and merchants, which will enable users to send a message with their payments and request for payment.
"Chat and Pay is an engaging and secure way of enabling social payments, also known as Person-to-person (P2P) payment. This interface also serves to connect merchants and consumers to chat, shop and pay person-to-merchant (P2M)," Rajan said.
"We want to make it easier for new merchants to come on board without making any significant investment, which is often a deterrent for small merchants. Our ambition is to create a Payment OS for a Digital India," he said.
Using the chat and pay feature, customers will also be able to discover nearby stores, place orders, exchange views and product images with merchants and pay on chat once the order is delivered.