Alibaba’s status as an online shopping haven is hardly in dispute, and its moves to do likewise in the mobile payments sector have been substantial to say the least.
Alibaba has recently been seen in talks with Apple Pay to augment the Alipay system, and that’s just the tip of the iceberg. In fact, Alibaba has made a new move to make waves in mobile payments by picking up a major chunk of One97 Communications, which is the parent company of Paytm, the biggest mobile payments venture in India.
Reports suggest that Alibaba is prepared to drop better than half a billion dollars on the transaction-$550 million, at last report—which will give the company a major stake in the Indian mobile payments technology market as a whole.
Should the deal successfully conclude—it’s currently in the “advanced talks” portion of things, according to reports, so a successful conclusion is likely—Alibaba will walk away with somewhere between a 30 and 40 percent stake in the company. That’s not quite a majority holding—One97 likely wasn’t interested in forking over that kind of control—but it would definitely be a big stick in any of One97’s operations.
One97 has a surprisingly varied ownership pool, however, as SAP Ventures, SAIF Partners, and Intel Capital all hold pieces of the company.
That’s not all that’s diverse about the company; its Paytm service can be spent at places like BookMyShow for theater tickets, as well as Uber for its taxi service, and Paytm reportedly plans to put Alibaba’s investment to work expanding those services outward, giving users more places to spend money and the like.
This is an interesting notion as Alibaba reportedly has no plans to expand into India, yet indirectly already has thanks to this move to take a third to almost half of its parent company.
It’s an interesting sort of stealth expansion, which makes some sense given the relations between Chinese and Indians of late.
A Pew Research Center study from spring 2014 shows that 31 percent of Indians have a favorable response to Chinese, and 30 percent of Chinese have a likewise response toward Indians. A Chinese company opening up shop in India, therefore, might suffer a competitive disadvantage as a portion of the market likely wouldn’t want to deal with a Chinese company.
But if a Chinese company buys a major portion of an Indian company, any bias that might have been felt would likely be lessened if even felt at all; Indians are likely happy to deal with an Indian company, particularly if the choice is between a Chinese and Indian firm.
It’s a good move for Alibaba, allowing it to expand without visibly expanding. Naturally, it will be some time before we see how well it really works out—assuming the deal goes through in the first place—but it may be a first step toward a major success.