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Indian payments spat heats up



Competition in India’s digital payments market was already fierce, but over the past month the rivalry between two leading groups has escalated into a more serious spat.

Paytm, India’s most valuable start-up worth an estimated $16bn, has bumped up against Google in a wide ranging dispute spanning everything from fantasy gaming to app building.

The conflict escalated when Google briefly removed Paytm’s app from its Play Store last month, alleging that it had violated Google’s gambling policies with a real-money cricket promotion.

Google then sparked outrage from start-ups by pushing a Play Store policy that would give the internet giant a hefty cut of in-app transactions, prompting a backlash that led Paytm to promote its own app store as a homegrown alternative.

Central to their rivalry, however, is digital money. Patym was an early darling of consumers and investors in the world’s fastest-growing cashless payments market, raising billions from the likes of Ant Financial and SoftBank.

But the arrival of deep-pocketed competitors including Google piled pressure on Paytm, which alleges that the tech giant used its dominant Android mobile operating system — which has a market share of over 90 per cent — to tilt the payments playing field in its favour.

Google “clearly see[s] no hesitation in using their dominant market position to push payments,” Madhur Deora, Paytm’s president, told the Financial Times. “That’s pretty much the definition of anti-competitive behaviour.”

Google has pushed back against Paytm’s claims, emphasising that users of its Play Store can access a range of payments services, and that there is no requirement for Google Pay to come pre-installed on Android devices.

“India’s digital payment space continues to evolve and is expanding at a very healthy rate with many new entrants, and a growing number of established players in the industry,” Google Pay said. “We work hard to innovate and to create optimal experience in order to compete in the space.”

While Paytm says it has 150m monthly active users, Google’s app leads in the share of transactions made over the fast-growing Unified Payments Interface, a government-backed system that allows easy, instant bank-to-bank transfers.

But the squabble highlights how payments are ultimately a means to an end. While digital money is not always lucrative in itself, it is a springboard to pile on a range of other financial and digital services.

While Google already has leading businesses in areas such as digital advertising, diversifying beyond payments is more important for Paytm. It has laid out plans to become a “super app”, offering consumers a full suite of services in one place, and has branched into everything from banking to gaming to ecommerce.

Patym presented its new mini app store as an alternative for developers unhappy with Google’s fees, but this could also prove to be a powerful new business tool as it looks for a new way to bring, retain and monetise customers.

Paytm says 300 apps are already participating — including Domino’s Pizza and Ola Cabs — and that 5,000 more are coming.

Mr Deora outlined Paytm’s ambitious vision:

“What if the consumer can discover ‘everything’ on Paytm?” he said. “Clearly we’re not going to build the product for everything . . . [but] we can help them with what we can be good at: Helping find customers, the checkout experience, the log-in experience.”

Quick Fire Q&A

Company name: Tractable

When founded: 2014

Where based: London

CEO: Alex Dalyac

What do you sell, and who do you sell it to: We develop artificial intelligence to aid recovery from accidents and disasters. Customers include insurers Tokio Marine, Covéa and Ageas.

How did you get started: With accidents and disasters, every recovery starts with a visual appraisal. We realised artificial intelligence could accelerate this at scale.

Amount of money raised so far: $55m

Valuation at latest fundraising: Between $180m and $250m

Major shareholders: Georgian, Insight Partners, Ignition Partners, Zetta

There are lots of fintechs out there — what makes you so special: Our artificial intelligence accelerates claims, creating efficiencies for the insurer, and a better experience for the customer.

Further fintech fascination

Follow the money: Ant Group’s much-anticipated IPO is fast approaching. The Financial Times has taken a look at the Chinese company’s overseas ambitions, with 10 per cent of the IPO proceeds earmarked for international expansion. It is not all plain sailing though. Ant is under scrutiny for the way it has marketed the IPO to retail investors.

Crypto chronicles: The Financial Times reports that OKEx, one of the world’s biggest cryptocurrency exchanges, halted withdrawals after it lost touch with an employee who is “co-operating” with a Chinese government investigation. The official is a holder of private keys that enable the authentication of transactions.

Dealmakers: Stripe has bought Paystack, a Nigeria-based payments company which has 60,000 customers, says TechCrunch. According to TechCrunch, sources close to the deal say that it is worth over $200m, although the companies have not disclosed the terms. Stripe raised $600m earlier this year, partly to fund international expansion.

Trendwatch: Sifted reports on the new fintech “mafias” — the people that helped to start the likes of Klarna, Revolut and Monzo and have now become founders themselves. Ten former Klarna employees have gone on to start new ventures, including Kevin Albrecht, who used to work in the Klarna product team and went on to found PFC, a Swedish neobank.

AOB: The chairman of the US Securities and Exchange Commission said that it was working on rules that could permit the creation of crypto ETFs, reports the Financial Times; Clair, an American payday lending start-up, has raised $4.5m of seed funding, according to Finextra; Wealthsimple, a Canadian robo-adviser, has reached a $1.5bn valuation in its latest fundraising, reports Fintextra; the Financial Times has produced a special report on payments that features insights into Wirecard, the Turkish payments scene and the impact of the pandemic.

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PayPal to acquire ‘buy now, pay later’ provider Paidy for $2.7bn




Mergers & Acquisitions updates

PayPal, the US online payments company, has agreed to acquire Paidy, a Tokyo-based “buy now, pay later” group, for ¥300bn ($2.7bn) in the latest shake-up in the industry.

The deal announced late on Tuesday, which will be paid for principally in cash, deepens PayPal’s push into the crowded BNPL sector, in which consumers spread the cost of goods over a small number of payments, typically without interest and often without requiring a credit check.

Last month, Square, the payments company led by Twitter chief executive Jack Dorsey, acquired BNPL group Afterpay for $29bn, in the largest takeover in Australian history.

Shares in San Francisco-based Affirm, another BNPL company, soared last month after it announced a partnership with Amazon allowing shoppers who spend more than $50 to make payments in monthly instalments.

Paidy, founded in 2008, is one of Japan’s few “unicorns”, or start-ups worth more than $1bn. The company launched the country’s first zero-interest post-payment service last year.

While the global BNPL market has exploded in popularity owing to the pandemic-driven boom in online shopping, the trend is only starting to catch on in Japan, where consumers still depend heavily on cash payments.

Paidy allows its 6m registered users to split the cost of goods into three equal instalments with no interest. Users can pay off their balance using cash at convenience stores or bank transfers.

According to Yano Research Institute, the volume of transactions made through post-payment services in Japan is expected to more than double from an estimated ¥882bn in fiscal 2020 to ¥1.88tn by fiscal 2024.

Paidy was valued at $1.3bn when it raised $120m in March, and was expected to list its shares in Tokyo later this year. It has been backed by trading house Itochu, Goldman Sachs and Soros Capital Management along with PayPal.

Russell Cummer, the Japanese fintech’s founder, recently told the Financial Times that a public listing “made sense” — though no firm timetable had been established. Instead, the company is now expected to become part of PayPal by the fourth quarter of this year.

“Paidy pioneered ‘buy now, pay later’ solutions tailored to the Japanese market and quickly grew to become the leading service, developing a sizeable two-sided platform of consumers and merchants,” said Peter Kenevan, PayPal’s vice-president and head of business in Japan.

“Combining Paidy’s brand, capabilities and talented team with PayPal’s expertise, resources and global scale will create a strong foundation to accelerate our momentum in this strategically important market.”

PayPal said Paidy would “continue to operating its existing business, maintain its brand and support a wide variety of consumer wallets and marketplaces”. Cummer and Riku Sugie, Paidy’s president and chief executive, will continue to lead the company, according to a statement.

“Paidy is just at the beginning of our journey and joining PayPal will accelerate our plans to expand beyond ecommerce and build unique services as the new shopping standard,” said Sugie. “PayPal was a founding partner for Paidy Link and we look forward to working together to create even more value.”

The acquisition comes as PayPal rolls out its broader strategy to become a “super app” — incorporating payments, cryptocurrency investments and savings — drawing inspiration from under-one-roof Chinese apps such as WeChat.

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Bitcoin: El Salvador’s experiment does not warrant cross-cryptocurrency price rise




Bitcoin updates

Early adopters of virtual currencies have a clear incentive to promote mainstream acceptance. The more buyers, the higher the price. Crypto fans, therefore, hatched an online plan to bolster bitcoin as El Salvador legalised the tokens for payments. That was logical. The knock-on rise in other cryptocurrency prices was not.

Bitcoin’s 8 per cent rise over the past seven days means that it is now worth about $51,000. But according to data from CoinGecko, which tracks more than 9,000 coins, it is not the largest mover. Ethereum, the world’s second-largest cryptocurrency, has leapt 16 per cent over the past week. Solana’s SOL tokens have risen 69 per cent.

There is no sensible reason for these rallies. El Salvador is not expected to make other virtual currencies legal tender. Instead, the jumps reflect a soupy mixture of low rates, blind faith and better investor access.

Trading apps make it easier for retail investors to buy cryptos. The initial public offering of Coinbase in April raised its profile, leading to a jump in downloads.

The make-believe world of nonfungible tokens, or NFTs, has also given cryptos a boost. These prove ownership of digital assets such as art, music or even virtual pet rocks. Many use the ethereum network. Solana, which is backed by Andreessen Horowitz, has its own NFT marketplace, Solanart.

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None of this, however, has anything to do with El Salvador’s attention-seeking adoption of bitcoin. This diverts domestic attention from the failing economy of this impoverished Central American nation, the first country to embrace bitcoin as legal tender. It also supplies cheerier news flow to bitcoin fans than did the cryptocurrency’s collapse in value this spring.

Rising prices mean the total market value of cryptocurrencies has reached nearly $2.4tn. It is rapidly closing in on the previous record of $2.57tn set in May. Bitcoin’s share of the market has fallen. It is now about 40 per cent, down from 57 per cent a year ago. Yet bitcoin remains a powerful bellwether.

This could be a problem if bitcoin’s latest rally depends on success in El Salvador. President Nayib Bukele says the country has purchased 400 bitcoins — equal to just 0.002 per cent of the outstanding value. Local opposition is widespread, suggesting take-up will be low. A damp squib is more likely than the financial dislocation some critics are prophesying.

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Europe stocks notch best day in 6 weeks on sustained stimulus hopes




Equities updates

European equities had their biggest rise since late July on Monday as weaker-than-expected US jobs data suggested pandemic-era stimulus, which has helped prop up markets, may continue for longer than anticipated.

The Stoxx Europe 600 index gained 0.7 per cent, the region-wide benchmark’s best day in six weeks, as traders analysed the implications of a large miss in US job creation. Employers in the US added 235,000 jobs in August, which fell wide of economists’ projections of more than 728,000 new hires.

“The weak jobs number gave the Federal Reserve ample room to take it easy in terms of how and when it will taper” its $120bn of monthly bond purchases that begun in March 2020, said Maarten Geerdink, head of European equities at NN Investment Partners.

Before Friday’s non-farm payrolls report, some analysts had expected the Fed to announce a reduction of its asset purchases as early as this month.

European stocks, Geerdink added, were “in a sweet spot with the eurozone economy doing well while financial conditions remain extremely loose”.

London’s FTSE 100 index also ended the session 0.7 per cent higher while US markets were closed for Labor Day.

Column chart of Stoxx Europe 600 index, daily % change  showing European stocks notch best day in six weeks

Economists expect the European Central Bank to provide an update about its own debt purchases at its meeting on Thursday, with government bond prices signalling some expectations of a pullback. The yield on the benchmark German 10-year Bund, which moves inversely to its price, was steady on Monday at minus 0.37 per cent, around its highest point since mid-July.

Technology shares, which tend to perform well when expectations of low-for-longer bond yields flatter valuations of growth companies, were the best performers in Europe with the sector rising 1.7 per cent on Monday.

In Asian equity markets on Monday, Chinese shares rallied after vice-premier Liu He said the government would continue to support private businesses despite a regulatory crackdown across the technology and education sectors. 

“Policies for supporting the private economy have not changed . . . and will not change in the future,” Liu said in comments reported by state news agency Xinhua. The CSI 300 index of mainland Chinese stocks climbed 1.9 per cent. 

Japan’s Nikkei 225 gained 1.8 per cent as investors bet that last week’s abrupt resignation by prime minister Yoshihide Suga would usher in a successor more focused on protecting the nation’s economy from rising Covid-19 cases. 

Brent crude, the international oil benchmark, slid 0.7 per cent to $72.10 a barrel.

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