PayTM, India's largest mobile payment and commerce platform, is known as India's Alipay. Launched in 2010 with a license approved by the Reserve Bank of India (RBI), it was the first payment bank established in India.
Paytm has also partnered with leading ** shoppers such as Flipkart, Snapdeal, and Amazon, with Paytm Wallet becoming India's largest mobile payment platform, with an annual transaction volume of more than US$29 billion (about RMB 1,858.) as of 201855.2 billion yuan).
On September 29, 2015, Alibaba and PayTM, India's largest mobile payment and commerce platform, issued a joint statement announcing that Alibaba Group and its financial subsidiary Ant Financial will inject funds into PayTM. Ali called it a "strategic" investment.
In February 2015, Ant Financial, a subsidiary of Alibaba, acquired a 25% stake in Paytm's parent company, One97 Communications. People familiar with the matter said at the time that the deal was worth more than $500 million.
In June 2015, Alibaba will invest about $600 million directly in PayTM, bringing the total stake held by Alibaba and Ant Financial in PayTM to 40%, raising Paytm's valuation to $4 billion.
On May 2, 2017, SoftBank invested approximately $1.4 billion in India's one97 communications at a valuation of approximately $7 billion.
In November 2021, Paytm completed its IPO in India with a market capitalization of over $20 billion, making it the largest IPO in India's history. The listing of Paytm has also attracted many well-known investors from around the world, including Warren Buffett, a well-known investment company, SoftBank, etc., and Alibaba has become the largest single shareholder of Paytm.
Paytm was founded in 2010 and developed slowly in the early stage, but after that, with the support of the major shareholder Ali in terms of technology and manpower, and the help of the "Digital India" project launched by Modi**, Paytm only took one and a half years to grow the number of users from 22 million to 13.5 billion households.
The opportunity for Paytm's business to take off began in November 2016. At that time, Modi issued an executive order to combat the circulation of false currencies for terrorist activities, abolishing the old rupee banknotes on the market and replacing them with new ones.
India's executive order to change the currency has proven to create a rare opportunity for the use and promotion of mobile payments. According to the data, the implementation of demonetisation orders has led to the exclusion of nearly 86% of India's cash from the market, bringing business opportunities for mobile payments in India.
Within a few hours of the demonetisation order, the Paytm platform absorbed nearly 14 million RMB. At the same time, restaurants, shopping malls, convenience stores and other industries have begun to use Paytm as a means of payment, and the turnover of PayTm platform has skyrocketed in an instant, expanding dozens of times.
The end result is that demonetization has accelerated India's shift from cash to mobile payments, while also creating unprecedented opportunities and room for e-payment companies.
However, surprisingly, in November 2021, Paytm suffered a share price** on the day of its listing, which caused a series of questions and concerns in the market. Some analysts believe that PayTM's valuation is too high and the profit outlook is worrisome, while others believe that the peak period of the development of the entire mobile payment industry has passed, and it is currently facing the pressure of involution and intensified competition.
The market's doubts and concerns eventually led to the continued share price of Paytm, which was initially set at 184 from the listing7 RMB** to 55 today7 yuan, a decrease of nearly 70%. After a one-year "market wait-and-see period", they did not get the harvest as scheduled, and disappointed investors chose to sell ** and leave the market.
According to the data, Alibaba also held Paytm6 last year26% of the shares, which sold 31%, and then in February, Ali completely cleared the sale and completely left India**. During this period, Ali cashed out a total of nearly 2 billion yuan through multiple **, and on November 24, 2023, Warren Buffett's Berkshire Hathaway also cashed out about 137 through block tradingINR 100 million (1.)US$64.7 billion) of the company, which holds all the shares of Paytm in India. After holding the position for 5 years, Warren Buffett's loss exceeded 31%, and it seems that the stock god also has a time to "go to the wheat city".
Data shows that in 2018, Berkshire invested about 2$600 million, acquiring a 3% stake in the financial services startup at a valuation of about $10 billion, at a cost of about 1,279 per share at the exchange rate at the timeRs 7. The weighted average of this time was 877 per shareRs 29, based on this rate, Buffett lost 31% per share.
Why has India's mobile payment Paytm flourished and declined in just a few years, from a moment of glory to decline, and what is the reason for this?The author believes that the reasons for the rapid decline of Paytm after its short period of glory are mainly due to the following factors:
First, the market is different, and the marketing model cannot be replicated
Paytm is modeled after Alipay's development model in China: focus on traffic first, and then think about profit. However, while India's population is the same size as China's, the market is very different. Paytm's attempt to replicate Alipay's successful marketing model in China obviously doesn't work.
1. India's market environment and PaytM's operation path are different from those in China.
In China, the promotion of mobile payment is the first to take precedence in e-commerce payment scenarios such as **, and payment tools such as Alipay have emerged. The operation mode of Paytm is to take the payment tool to find the payment scene, which is equivalent to "creating a ** for Alipay".
Paytm also tried e-commerce and food delivery, but these two businesses were blocked in India and eventually had to return to the financial business.
2. According to the promotion model of China Mobile Pay, it is necessary to obtain substantial discounts, cashbacks and promotions of traffic in the early stage, which means extremely high customer acquisition costs, which is the success of Alipay back then. PayTM, however, is reluctant to pay such a large cost.
According to PayTM's operational logic of having payment tools first and then creating payment scenarios, it obviously does not work in the Indian market.
Second, although the size of the Indian market and population are similar to those of China, there are great differences between the two countries in many aspects such as policies, markets and infrastructure, so it is not so simple to simply copy the successful "China model" of Alipay.
The Indian market is different from the Chinese market, which implements a free market economy in Western countries and has its own unique cultural background. In particular, since the 90s of the 20th century, India has implemented the "Four Modernizations New Economic Policy" oriented by liberalization, marketization, globalization and privatization.
So, even though Paytm is one of the local payment giants, it still faces stiff competition. Paytm's market share is shrinking due to the challenge of its competitors. In this case, the future of Paytm is worrisome, and there is no hope of returning. As a result, Alibaba decided to sell its stake in Paytm and turn to Southeast Asia and European expansion.
In addition, Ali's departure from the Indian market is also related to the policy change in India. In recent years, India** has tightened its regulation of the internet and e-commerce market, some of which may affect Paytm's business development. In particular, it will expose multinational giants such as Ali to some unnecessary risks. Because of this, Ali has reduced its investment and business in India.
Third, the penetration rate of mobile phones is low and the consumption power is poor
Although India's economy has grown rapidly in recent years, it is now the fifth largest economy in the world. However, the gap between the rich and the poor in India is very large, more than 60% are poor, and the penetration rate of smartphones is only 17%, so to promote mobile payment, the hardware conditions are not available first.
Since the poor make up the majority of the population, those who live in poverty, struggle to make ends meet every day, and are busy making ends meet, have no intention of shopping online.
In conclusion, the failure of India's mobile payment Paytm proves that no business model can be adapted to the domestic market through simple copying. No matter how good the business model is, it must be transformed so that it can be integrated into the local economic development and promote economic development. Otherwise, no matter how advanced the development model is, it will eventually fail due to "adaptation to the soil and water".