Finansnyheder

US and China investors battle over Indian digital payments boom

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India’s booming digital payments sector has become a battleground between Chinese and American investors, but the market is likely to consolidate as a few winners emerge, according to Nandan Nilekani, co-founder of Indian tech giant Infosys and head of a government drive to boost online transactions.

Investors from China and the US have poured money into the nascent industry, with Alibaba-backed Paytm going up against Walmart-owned PhonePe, and Google, Amazon and WhatsApp all in various stages of rolling out their own platforms. Other start-ups including Truecaller, Razorpay and BharatPe are also competing for a slice.

US and Chinese investors have doubled down on India’s fast-growing technology sector after being largely unable to enter each other’s markets, a stalemate that has intensified due to the trade war between Washington and Beijing.

Analysts and executives expect a clear set of winners to emerge as the digital payments market matures, following a pattern set in ecommerce, ride-sharing and food delivery where a couple of companies drove out other competitors.

“India is actually the ground zero of competition,” Mr Nilekani said. “In the long term, when you get to a stable state, you will have three or four players.”

India beat China as the top market in Asia for venture capital-backed fintech funding in the first quarter of 2019, according to market research group CB Insights. Chinese investors injected $3.5bn into Indian tech in 2018, according to data provider Tracxn, and participated in almost double the number of funding rounds from a year earlier.

The stakes for investors are high: with 450m-odd mobile internet users, India already has twice as many as the US, and PwC expects this number to grow to 667m by 2022.

“India is the only large country where you have American companies . . . and you have the Chinese companies,” Mr Nilekani said. “That’s why you’re seeing so much activity.”

Mr Nilekani helped pioneer India’s first tech revolution with Infosys in the 1980s, before joining the government to craft the country’s mammoth biometric identity Aadhaar scheme.

He has since turned his attention to breaking the country’s dependence on cash, chairing a central bank committee that in May set an ambitious target of increasing digital payments per head from 22 a year now to 220 by 2022, and tripling the number of users.

Americans, by comparison, conducted almost 500 transactions per head in 2017, Brazilians 150 and Indonesians 34. In India the figure was 11, according to his committee’s report.

Nandan Nilekani, co-founder of Indian tech giant Infosys. ‘India is actually the ground zero of competition,’ Mr Nilekani said. ‘In the long term, when you get to a stable state, you will have three or four players.’ © @Jyothy Karat,2018.All rights re

To help meet its target, India’s central bank has scrapped transaction fees on certain payments and requires public-sector banks to invest more to promote digital transactions.

While cash levels in India remain stubbornly high, the prospect of millions of new smartphone users switching to digital transactions has enticed foreign investors.

Alibaba has established itself as a key force in Indian digital payments, snapping up almost half of Paytm in a series of investments since 2015. Walmart acquired PhonePe last year when it forked out $16bn for parent company Flipkart.

That mirrors a broader US-China race for market share in India that has remade the country’s economy. China’s Tencent has invested in companies including ride-sharing platform Ola, Uber’s main competitor in India, while Tencent and Alibaba have bet on food delivery platforms Swiggy and Zomato, respectively. Amazon and Walmart have pumped billions of dollars into bolstering their local ecommerce operations.

For Chinese investors, India presents an opportunity to escape their own comparatively saturated tech scene, said Neha Singh, co-founder of Tracxn.

For US companies shut out of China, India’s size and relative openness makes it the next logical choice. “Everyone is coming to that market, and trying to see if they can become big,” she said. “That is a very interesting sort of fight.”



Via Financial Times

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