Tag: mobile banking

Mobile wallet startup gets a financial boost from Alibaba

Paytm has received investment funds from the commerce giant, solidifying its position in India.

Alibaba Group Holding Ltd. has recently announced that it has made an investment into the company behind the Paytm mobile wallet in India, a startup called One97 Communications.

The Chinese online shopping giant revealed this news in a press release issued at the close of September.

The company has chosen to invest in the mobile wallet and online shopping site, sending Alibaba even further into the world of mobile payments. In India, this will also help the company to enhance its competitive position when compared to its rival, Snapdeal. One of its affiliates, Ant Financial Services Group, also made an investment into Paytm, back in February. It will also be joining into this most recent round of investments, said the press release on the matter. The funds will be used by Paytm in order to be able to boost its business and to place a focus on its technology, marketing and talent.

The specific terms of the agreement with regards to the mobile wallet investment have not yet been released.

Mobile Wallet Receives Financial BoostThat said, it is known that Alibaba and Ant Financial have made an investment of $680 million in order to boost their stake in the company from having been 25 percent to become a much larger 40 percent. Back in June, Reuters released a report that indicated that this type of investment could be worth more than $600 million, so the figures do align with what experts had been predicting.

According to the Alibaba Group CEO, Daniel Zhang, “India is an important emerging market with strong e-commerce potential.” He also added that “This investment will further expand Alibaba Group’s global footprint to India’s thriving mobile commerce market.”

This is an important market for Alibaba, which has been watching a slowing in the growth that it has been experiencing in its home country of China. As India is the fastest growing large economy on the planet, it appears to be the next logical step for a company the size of Alibaba. It is a move that is being made by a number of companies in the smartphone sphere, as mobile wallets, payment, and commerce rise in India.

Mobile payments will soon be 200 times bigger than they are now

A recent study has forecasted that within a span of 7 years from now, the industry will reach $3 trillion.

The Bank of America Merrill Lynch has now released a report in which it has stated that in a period of 7 year, mobile payments will have grown by 200 times their previous size and will be worth more than $3 trillion.

If this prediction is correct, then wallet and banking apps, retailers, and telecoms are about to benefit greatly.

The report indicated that those who are most likely to benefit from this growth of mobile payments are: banking, telecom, IT, and mobile wallet firms. The report stated that “In India, we consider mobile payments to be both an opportunity (for banks, telcos and new players) and threat (due to dis-intermediation, more to the traditional banks). We estimate the value of mobile banking, estimated at just USD16 billion today to rise 200x in 7 years to more than USD 3,000 billion.”

It is also expected that mobile payments will make up 10 percent of the total transactions in that country.

Mobile Payments to GrowThis is quite the increase, considering that for the 2015 financial year, smartphone payments made up only 0.1 percent of the total. The report stated that this will be a considerable opportunity for many companies involved in that industry to better their “competitive positioning.” Equally, the report noted that it would mean that there would suddenly be considerable competition making its way into the space that had previously been held by public sector banks.

As the payments technology evolves, it is expected that the use of paper cash will have dropped to under 2 percent. The report predicted that the range of alternative methods of payment will lead to a gradual decrease in the use of cash throughout the economy, and that electronic payments will help to ease the lending rates and will encourage growth over time.

It pointed out that among the primary drivers behind the growth of the use of alternative transactions will be in the improvements of mobile payments through greater smartphone penetration. That penetration in India is expected to double in the country’s young population over the next three years. As 60 percent of the population is younger than 35 years old, this represents a massive shift in digital technology use.