India is currently benefiting enormously from China’s uncertainty in the fintech sector when it comes to financing.
(Photo: Reuters)
Dusseldorf It has been eleven years since Vijay Shekhar Sharma founded a company in Noida, India, whose platform enabled prepaid cell phones to be topped up. Sharma, then 32 years old, had been an entrepreneur with his company One97 for a decade. But its most recent foundation turned out to be the most lucrative: Paytm transformed into a digital payment platform that will make history in November with the largest IPO in the history of India.
The Indian fintech will then be worth the equivalent of more than 20 billion dollars. The IPO not only illustrates the boom in digital payment platforms worldwide – just look at Nubank from Brazil. It also shows the euphoria in the Indian start-up world – and in the fintech world in particular, which has a few exciting country-specific reasons.
In 2016, a daring money experiment by the government of Narendra Modi made headlines around the world: Surprisingly, the use of the largest banknotes was stopped. Demonetization weighed on the economy, but it gave digital payment providers a huge business boost. A year later, Paytm Softbank and Berkshire Hathaway entered a larger financing round.
Another boost for the country’s fintechs: India developed a common interface for the 250 banks and payment providers in the country with 1.4 billion people. International investors see this “Unified Payments Interface” as one of the strengths of Indian fintechs.
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India is currently experiencing a start-up boom that is a remarkable turning point in the country’s economic history, says Sanjeev Sanyal, economic advisor at the Indian Ministry of Finance. This year, more unicorns – that is, start-ups with a valuation of at least one billion dollars – emerged in India than in China, with a gross domestic product around five times as high. Foreign direct investment is increasing due to investments in the tech sector.
The more uncertain the situation in China, the more promising Indian fintechs appear
India is currently benefiting enormously from China’s uncertainty in the fintech sector when it comes to financing. Exactly a year ago, the mega IPO of the Chinese payment provider Ant had to be stopped almost overnight because the regulatory authorities intervened. It could have been the world’s largest IPO. To date, Ant has not made a fresh attempt at listing.
Ant’s withdrawal from the IPO was the beginning of a wave of regulation among Chinese Internet companies that unsettled investors and made them look more intensively for alternative growth markets in Asia.
The more uncertain the situation in China, the more promising the Indian fintech market appears to international investors. Promising, but competition with players like Phonebe, but also Googlepay and Amazonpay, remains tough. Even if there are problems such as over-indebted households and phishing as well as the discussion of what can and cannot be done with fintech data. And even if Paytm not only makes history, but also quite high losses, and that, according to the company, for a long time to come.
The historic Paytm IPO, the approval of which billionaire Sharma celebrated with a Bollywood dance, is also good news for the Hangzhou-based Ant Group, which was stopped so abruptly in its stock exchange plans. Ant has been the largest shareholder since its partnership with Paytm in 2015 and will make good money with the listing of the Indian stake.
More: China alternatives sense their chance – especially India