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Friday, 19 May 2017 | MYT 4:00 PM

Japan's SoftBank invests US$1.4bil in Paytm

Paytm runs India's biggest digital payments system with more than 220 million users. — Reuters

Paytm runs India's biggest digital payments system with more than 220 million users. — Reuters

MUMBAI: Japan's SoftBank Group has invested US$1.4bil (RM6.05bil) in the parent of Paytm, giving the digital payments start-up a boost as it looks to expand its user base and maintain its market lead in Asia's third-largest economy. 

A source familiar with the matter said SoftBank had bought US$1bil (RM4.32bil) of new shares in Paytm parent One97 Communications, equivalent to a 14.2% stake, and a further US$400mil (RM1.7bil) of existing shares. SoftBank and Paytm declined to give details.

Solar-to-telecoms conglomerate SoftBank will also get a board seat in Paytm, the Indian firm said in a statement.

Paytm, which runs India's biggest digital payments system with more than 220 million users, said it planned to spend 100bil rupees (RM6.49bil) over the next three to five years to expand its services.

For SoftBank, the bet is part of its growing commitment to India's e-commerce sector, where it has already invested about US$2bil (RM8.66bil), mainly in minority stakes. China's Alibaba, which counts SoftBank as its biggest investor, already has a stake in Paytm.

SoftBank is also pushing to engineer a merger between Snapdeal, India's number three e-commerce player and one of the Japanese group's biggest investments in India to date, and market leader Flipkart.

"We are committed to transforming the lives of hundreds of millions of Indian consumers and merchants by providing them digital access to a broad array of financial services, including mobile payments," said Masayoshi Son, SoftBank's chairman and CEO in a statement.

Paytm founder Vijay Shekhar Sharma owned nearly 21% of One97, while Alibaba held a 40% stake, according to latest regulatory documents accessed by business research platform Paper.vc.

Digital payments in India got a big lift last year after India's shock move to remove higher-value currency from circulation boosted the attractiveness of non-cash alternatives.

Analysts said SoftBank was seeking to emulate in India its strategy in China, where Alibaba runs its own digital payments provider Alipay.

"SoftBank is essentially trying to build an Alipay kind of platform with Paytm," said Satish Meena, senior forecast analyst at Forrester Research.

In addition to seeking to solidify its lead in digital payments, Paytm, founded in 2010, is aiming to launch a payments bank, an institution that can take deposits and remittances but cannot lend.

Payment banks are seen as a growing opportunity in a country with plenty of smartphones but with millions of Indians who lack formal access to banking services.  Reuters

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