Alibaba and Ant Financial Take India’s Paytm to Top Four Global Online Payment Players

Yicai

2016-10-21

(Yicai Global) Oct. 21 -- Paytm has leapfrogged rivals to become the world’s fourth-biggest e-wallet provider after China’s Alibaba Group Holdings Ltd. and affiliate Ant Financial Services Group amassed a 40 percent stake in the USD3.4 billion Indian company.

Since partnering with Ant Financial, Paytm acquired more than 100 million new users within a year. It currently has 135 million users and a 74 percent market share in India and processes 75 million transactions every month.

Mr. Vijay Shekhar Sharma, founder and CEO of Paytm, told our Yicai Global reporter, “For the Paytm team, a visit to the headquarters of Ant Financial and Alibaba in Hangzhou is like an EMBA course.”

India, the world’s second-most populous country has a burgeoning middle class and increasingly consumer driven society. However, nearly half of the Indian population does not have a bank account, making it difficult for them to pay for goods without cash.

Even QR codes were virtually unheard-of in India in the past. “Were it not for Alipay’s experience in the Chinese market, Paytm wouldn’t have developed QR code-based online-to-offline services,” said Mr. Nitin Misra, product director and vice president at Paytm.

The most important milestone came for Paytm when Ant Financial and Alibaba Group started exporting technology capability and business experience to the company following their investment.

Previously, Mr. Sharma admits the company had struggled with the technical side of things and had not refined a system that would allow Indian consumers to buy cinema tickets and pay their utility bills with one app.

After he attended a speech by Alibaba founder Mr. Jack Ma in Hong Kong in 2011, he was amazed at the sheer scale of the e-commerce giant’ operations and shifted his focus away from domestic rivals like FlipKart and Amazon India to China.

After landing meetings with Baidu and Tencent to glean inside technological knowledge, he finally met Mr. Ma in 2014 and spoke at length about his ambitions for creating the ‘Alipay of India’. Three weeks later, Alibaba and Ant Financial invested heavily in his company.

Alibaba and Ant financial bought a 25 percent stake in Paytm last year for USD500 million. Since then they have continued to invest and upped their stake to 40 percent this year, taking their total investment to date to USD680 million, according to the Economic Times of India.

Mr. Sharma, told Yicai Global that from Jan. to July this year, the trading volume of Paytm increased 53 times, but according to his estimation, by March 2017 it will be accepted at twice the number of places that take MasterCard.

Paytm can also be used in grocery stores and for rickshaws, taxis and Uber services. Parents can even use Paytm to pay tuition fees and get a small cash-back discount.

This is Alibaba and Ant Financial’s second major investment in India after they acquired UC, an Indian web portal. Since its acquisition two years ago, UC’s market share as of August 2015 was the top ranked in India and Indonesia and realized quick growth in emerging markets like Russia, Brazil, Pakistan and Bangladesh, according to the data of US-based StatCounter, a website traffic monitoring service.

After a series of major strategic investments by Alibaba, Ctrip and Tencent in India, successful Chinese Internet companies have become a hot topic among Indian entrepreneurs, and have been included in many business proposals as benchmark cases for comparison.

The ‘Chinese model’ and ‘Chinese investment’ have become the new buzzwords in the Indian business community.

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