Alibaba grabs a bigger chunk of Paytm as India pushes digital payments

Mobile wallet provider Paytm has strengthened its existing hold on e-commerce in India through a $200 million funding round spearheaded by China's Alibaba Group Holding Ltd.

Alibaba invested $177 million into Paytm E-Commerce, while the remaining $23 came from Saif Partners. China's main e-commerce payment method, Alipay, is an affiliate of Alibaba.Alibaba, and its financial services unit Ant Financial, have a significant investment behind the Paytm strategy, having spent more than a billion dollars to acquire a 40% stake in the Indian firm.

Earlier this year, Paytm revealed it received permission from Indian regulators to launch Paytm Payments Bank, a digital banking option in light of the country's recent moves to limit the use of cash.

Scott Eells/Bloomberg

That move came about six months after Paytm said it would split its e-commerce business from its payments unit so as to better compete with the likes of Flipkart, Snapdeal and even Amazon.

Paytm intends to to sell close to a billion products from merchants across South East Asia on its platform, a number that far exceeds the sales of rival sites.

Alibaba's first indication that it intended to move Paytm forward occurred two years ago when backing Paytm's wallet expansion into various restaurants throughout India.