Last July, at a SoftBank conference in Tokyo, CEO Masayoshi Son brought on stage Vijay Shekhar Sharma, the founder of Indian startup Paytm. Son described Paytm as the “uncontested No. 1” payment service in India. SoftBank had invested $1.4 billion in the startup, helping to fuel India’s mobile payment boom a few years ago.
But by the time Son singled out Sharma for praise, Paytm had already begun to lose its tight grip on India’s $65 billion mobile payments market. Over the past two years, rival Google’s payment service grew rapidly in the country after the Indian government launched an open-source payment system that made it easier for the U.S. giant to compete in the market. In December, the number of Paytm users who made at least one payment during the month declined to less than 40 million, from about 45 million a year earlier, according to people with knowledge of the figures.
The company, which recently raised money at a $16 billion valuation, is the latest large private tech company to struggle to live up to expectations. Drawing money from SoftBank, Alibaba’s Ant Financial and Warren Buffett’s Berkshire Hathaway, Paytm initially embodied the promise of India’s tech boom. While Chinese companies dominate China’s massive online market, India, the world’s second most populous nation, is a huge battleground—not only for domestic competitors such as Paytm, but for global tech giants like Google, Facebook and Amazon.
Paytm’s fate poses another major challenge for SoftBank. The near-collapse of WeWork, one of the company’s biggest investments, has damaged the reputation of the world’s biggest tech investor. Other SoftBank investments, including Indian hotel operator Oyo, dog-walking startup Wag and car-sharing service Getaround, have run into problems. The stakes of Paytm’s future also are high for its biggest strategic investor, Ant Financial.
Representatives for SoftBank and Ant Financial declined to comment on Paytm’s prospects.
“We are confident that we are on an accelerated path to profitability,” Paytm President Madhur Deora said in an interview with The Information.
Like many other unprofitable tech unicorns backed by SoftBank’s $100 billion Vision Fund, Paytm faces a dilemma: To grow its users and market share, it will have to keep spending heavily. But Paytm, whose net loss more than doubled to about $550 million in the year through March 2019, also needs to prove to investors that it has a path to profitability.
Growth lately has stalled. From September through December, Paytm’s monthly active users have remained mostly flat, the people with knowledge of the figures said. And competition could get even more intense. Facebook’s WhatsApp, the most popular messaging app in India with more than 400 million monthly active users, is preparing to launch a payment service this year, pending approval from the country’s central bank.
Sandip Ginodia , CEO
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