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Facebook Deal, Paytm’s Biggest Headache

Facebook’s $5.7 billion investment in Reliance promises to be the biggest headache yet for Paytm. It is a SoftBank-backed pioneer in India’s digital payments market but has been losing ground to rivals with deeper pockets.

Facebook’s WhatsApp, has been working on gaining regulatory approval for payments services in India. It is gearing up for a full rollout of those services by June.

The partnership with Reliance, announced on Wednesday, will give WhatsApp an inside track on payments for Reliance’s retail unit. It aims to serve tens of millions of small shops across India. 

It will also be able to link up with Reliance’s telecoms business. The app has taken the market by storm since its launch in late 2016. WhatsApp itself has an enormous presence in India with more than 400 million users, stock trading reports.

Sources said if someone would have lost sleep as the Facebook-Reliance deal was announced, it must be Vijay Shekhar Sharma.

Compared to other major players in India’s digital payments markets, Paytm is seen as more vulnerable to attack. It is already on the backfoot amid competition from Alphabet’s Google Pay and Walmart’s PhonePe.

It has previously attracted investments from the likes of Japan’s SoftBank , China’s Alibaba and U.S.-based Berkshire Hathaway. But lacks its own wells of capital for funding, putting it at a disadvantage.

Stocks news reports it also remains unprofitable, Its parent firm has reported a loss of over $500 million in the year ended March 2019.

Launched a decade ago as a platform for mobile recharging, Paytm grew quickly. It was after ride-hailing firm Uber listed it as a quick payment option. Then its use swelled further in 2016 when a ban on high-value currency notes spurred digital payments.

Paytm’s Giant Opponent

It has branched out into services including insurance and gold sales, movie and flight ticketing, and bank deposits and remittances.

Paytm has long seen the threat posed by WhatsApp. When the messaging service launched a trial of its payment services in early 2018, Sharma accused Facebook of “cheap tricks”.

The company was also part of a lobbying campaign against U.S. firms over local data storage. It was an issue now mostly resolved but which had been an impediment to WhatsApp gaining regulatory approval. 

With Reliance behind it, WhatsApp’s path to final approval for the payment service can now be expected to be smooth.

On one hand, the market is expanding, and Paytm has seen a boost in transactions as COVID-19 pushes commerce online.

However, the Reliance-Facebook combination represents a Goliath-like opponent. Especially given Reliance’s track record in decimating rivals when it entered the telecoms market with Jio Infocomm and cut-throat pricing.

Meanwhile, stock market news reports the SoftBank-backed company  has launched ‘Recharge Saathi’ programme. It will enable individuals and small businesses to earn an additional income.



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