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Exclusive: Amazon to inject fresh funds into India payments arm

03 October, 2017

In what is a clear indication of e-tailer Amazon’s rising focus on payments, a critical piece of the Indian e-commerce puzzle, it is set to infuse fresh funds into digital payments arm Amazon Pay (India) Pvt. Ltd, show filings with the Ministry of Corporate Affairs.

The company passed a resolution to this effect on 25 August. This was followed by an increase in the company’s authorised share capital from Rs 400 crore to Rs 2,000 crore through the creation of additional shares, the documents show.

Though VCCircle could not ascertain the size of the proposed investment, it is likely that it will be equal to the increase in the authorised share capital, that is, Rs 1,600 crore ($245 million). It is well known that Amazon does not rely on external funding to meet its financial requirements.

“We remain committed to our India business with a long-term perspective to make digital payments a habit for Indian customers and to invest in the necessary technology and infrastructure to grow the entire ecosystem,” an Amazon spokesperson said in an e-mailed response.

Amazon Pay had recently received two fund infusions, of $20 million and $10.67 million, from its US-based parent Amazon Inc and Singapore-based arm Amazon Corporate Holdings Pvt. Ltd.

Industry experts feel the move implies that wallet will continue to be a significant part of Amazon’s strategy to ring-fence the consumer and guard its turf.

“All e-commerce majors realise that if they have to get a share of the consumer wallet to grow their business, it is important to have their own wallet. Whether it’s high-ticket, low-volume transactions or vice versa, companies have to be present where the money is flowing,” said Anup Jain, managing partner at consumer and retail research firm Redback Advisory Services.

Amazon Pay, which rolled out third-party payments services in July, is currently accepted across food delivery, travel, and movie-ticketing platforms.

Jain thinks the Indian consumer has leapfrogged from a paper economy to digital when it comes to financial transactions. “Data show cheque transactions have fallen 20% from 2012-13. Paper money is getting replaced by digital money. Likewise, UPI transactions have risen from Rs 90 crore in November 2016 to Rs 3,070 crore in June 2017,” he added.

Though the filings state the funds will be used to “expand business operations”, it is likely that Amazon will use a portion of the capital for cashback and promotions during the ongoing festive sale season. The e-tailer conducted the first round of its flagship sales event, the Great Indian Festival Sale, between 21 September and 24 September.

It will conduct the second leg over 4-8 October.

In the first edition, Amazon Pay offered 20% cashback on every top-up. Besides, it tied up with private lender HDFC Bank to offer a ‘buy now, pay next year’ option as well as zero-cost EMI schemes.

During the four-day event, Amazon claims that its wallet and payments service did business that was 27 times that on normal days. It also claimed to have registered a 34 times increase in the number of customers opting for EMIs, and a 48 times rise for the zero-cost EMI option.

By varying accounts, Amazon is estimated to have clocked Rs 2,500-2,700 crore in gross sales in the first sale of the season while homegrown rival Flipkart is estimated to have sold goods worth Rs 5,000 crore. Amazon has, however, disputed these figures.

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Exclusive: Amazon to inject fresh funds into India payments arm

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