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NEW DELHI/MUMBAI: Facebook‘s $5.7 billion investment in Reliance promises to be the biggest headache yet for Paytm, a SoftBank-backed pioneer in India’s digital payments market but which has been losing ground to rivals with deeper pockets.
Facebook’s WhatsApp, which has been working on gaining regulatory approval for payments services in India, is gearing up for a full rollout of those services by June, according to a source familiar with the matter.
The partnership with Reliance, announced on Wednesday, will give WhatsApp an inside track on payments for Reliance’s retail unit, which aims to serve tens of millions of small shops across India. It will also be able to link up with Reliance’s telecoms business, which has taken the market by storm since its launch in late 2016, and WhatsApp itself has an enormous presence in India with more than 400 million users.
“If someone would have lost sleep as the Facebook-Reliance deal was announced, it must be Vijay Shekhar Sharma,” said a second source, referring to Paytm’s founder.
The source, who has close ties to both Reliance and Paytm, declined to be identified to protect business interests.
Compared to other major players in India’s digital payments markets, Paytm is seen as more vulnerable to attack, already on the backfoot amid competition from Alphabet’s Google Pay and Walmart‘s PhonePe.
While having previously attracted investments from the likes of Japan’s SoftBank, China’s Alibaba and U.S.-based Berkshire Hathaway, it lacks its own wells of capital for funding, putting it at a disadvantage.
Paytm also remains unprofitable, with its parent firm reporting a loss of over $500 million in the year ended March 2019.
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