Why "Alipay India" doesn't work: what does it mean to pay natively in India?

Why 'Paypal India' won't work

**Photo caption:** A view of a market in New Delhi. Photo courtesy of AFP.

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Recently, the well-known American investor Warren Buffett's Berkshire Hathaway sold all of its shares of Paytm, which is known as "India Alipay" payment platform, Berkshire Hathaway's loss of up to about 40%, caused widespread concern in the international community. In addition to Berkshire Hathaway, softbank group and ant group and other international capital also have divestment Paytm. investors on Paytm in India to replicate the myth of Alipay financial growth has been dashed.

Berkshire Hathaway's BH International Holdings has sold its entire stake in Paytm for Rs 13.71 billion (about $16 million), completely exiting its investment in the company. Buffett's five-year investment in Paytm lost around $40%, according to US tech media outlet TechCrunch.

Founded in 2010, Paytm quickly captured the Indian electronic payment market, and became the largest electronic payment platform in India by virtue of its unique online and offline operation mode. With India's huge population and market potential, as well as the successful experience of China's Alipay and WeChat Pay, Paytm was once known as "India's Alipay", and was highly favoured in the international capital market. 2018, Warren Buffett purchased Paytm 3% shares at a price of 260 million US dollars, which was his first direct investment in the Indian technology and innovation sector. first direct investment in the Indian technology and innovation sector. Buffett is confident about this investment and in an interview with the Economic Times of India, he said that India is undergoing positive changes and has unrivalled growth potential and he will actively take advantage of any good investment opportunities. Apart from Buffett, Paytm has also attracted the attention of international capital such as SoftBank, Anthem and Canada Pension.

However, Paytm failed to deliver the expected returns to its investors. in November 2021, Paytm was officially listed on the Bombay Stock Exchange, and on the first day, the share price fell below the issue price of around $29. The share price continued to fall, touching a low of $5.58 in 2022. Though the stock has rebounded this year, gaining more than 60%, the current share price of around $10.73 is still well below the IPO level. Paytm's major investor shareholders, including SoftBank Group and Ant Group, have reportedly been reducing their stake. In August this year, Ant Group drastically reduced its investment ratio through a debt-to-equity conversion; in November, SoftBank Group announced plans to sell $215 million worth of shares.

In just a few years, Paytm has gone from being the darling of the international capital markets to being dumped by major international investors. What is the reason behind this?

On the one hand, as an e-payment platform, Paytm lacks matching business applications to support it and lacks sufficient resilience to compete in the market. During Paytm's early development period, a large number of people in India did not have bank accounts and cash transactions dominated. The company seized the trend of the popularity of smart phones, launched online payment of utility bills and other living expenses application, and set up a large number of offline cash recharge points, for the Indian people to provide "offline recharge, online payment" convenience. After accumulating a certain number of users, its payment scope began to expand to the field of banking, insurance, e-commerce, etc. In 2016, India's Prime Minister Narendra Modi issued a "currency demonetisation" order, stopping the circulation of 500 and 1,000 rupees of high denomination notes, in order to crack down on counterfeit currency. Paytm's market share surged as a result, and it was a step in the right direction. However, despite being dubbed "India's Alipay", Paytm lacks the support of its own commerce platform like Taobao. International payment platforms such as 'Apple Pay' and 'Amazon Pay' have quickly captured its market share with matching commercial applications. As a result of this bottleneck, Paytm has to rely on huge promotional investment to maintain its market share, and has been unable to achieve profitability.

On the other hand, the Indian government's nationalistic policies and public opinion orientation have seriously affected market confidence. In the process of development, Paytm has received strong financial and technological support from Ant Group. paytm relies heavily on Ant Group in terms of basic framework, QR code technology, anti-money laundering and risk control technology. However, in recent years, the Indian government has frequently introduced policies to restrict Chinese investment, creating an unfair business environment for Chinese companies in India through malicious censorship. Under such circumstances, Chinese companies like Ant Group have been forced to reduce their investments in India, which has had a significant impact on Paytm's operations. In addition, under the influence of some ultra-nationalist public opinion in India, Paytm has been labelled by some Indian media as a "Chinese-backed company", which has hindered its marketing to a certain extent.

It is worth noting that, in addition to Paytm, some Indian technology innovation companies that had hoped to replicate the success of Chinese companies, such as Snapdeal, an e-commerce platform known as "India's Alibaba", and Ola, a shared mobility platform known as "India's DDT", are now facing various operational difficulties, making international investors anxious. Ola, a shared mobility platform that has been dubbed "India's Dropping Drop", are also facing various operational difficulties, causing anxiety among international investors.

In the past, South African newspaper group's investment in Tencent and Japan's Softbank Group's investment in Alibaba have yielded huge returns. As India's population grows and its economy develops, international investors seem to see the same potential and plan to recreate the investment myth. However, the expectations of these investors have so far not been realised due to Indian market and policy constraints. (Reported by You Ming in Islamabad)