Wa, Ca, Sa,” declares Vijay Shekhar Sharma, “will be the core of our business.” You would expect the founder of Paytm as a mobile wallet, who then moved into ecommerce and is now preparing to set up a payments bank, to have the word “Ma” on his lips, as well. After all, Jack Ma-founded Alibaba Group, along with affiliate firm Ant Financial Services Group, is the single largest shareholder in One97 Communications, the parent company of Paytm.The Wa, Ca, Sa, which Sharma refers to, stands for wallet, current account and savings account, a pointer to his next big focus area after ecommerce: the payments bank. And, yes , Ma’s Ant Financial, the payments arm of the Alibaba Group, will be critical to the 38-year-old Sharma’s financial technology ambitions.“You have to see what has happened in China,” says Sharma, adding that in a short span of time Ant Financial has built a fintech business worth $60 billion. As per the projections of the Alibaba top team, he lets on, Ant Financial will be more valuable than Alibaba in five years.The Alibaba Group is currently valued at around $195.62 billion. In April, Ant Financial, China’s most valuable fintech company, raised $4.5 billion at a $60 billion valuation.Ant was spun out of Alibaba before the ecommerce giant went public in the US in September 2014. So can the financial management business get bigger than ecommerce in India? “Definitely. Financial services will be many times bigger than ecommerce,” reckons Sharma, who claims to have over 126 million users of his mobile wallet and boasts of having over 1.20 lakh merchants on his online marketplace.No wonder, Sharma is planning to spin off his ecommerce division — where Alibaba will call most of the shots — and focus his energies on financial services as Paytm attempts to integrate itself deeply with Ant Financial’s Alipay, the world’s largest third-party digital payments platform which is used by over 450 million users.“Alipay is massive,” says Sharma. “If we can somehow bring the learnings of Alipay in India, then we can do magic in the country’s financial ecosystem.” While maintaining that the ecommerce business is at breakeven levels, Sharma contends that the opportunity in financial services outweighs the positives of online retail. “My calling personally is in the financial services,” he says. Had it not been for the financial services opportunity in terms of a payments bank licence, the main focus would have remained ecommerce, he says.Currently, the Noida-based startup does 3.5 million offline transactions in a month worth $8.5 million, excluding mobile recharges. It estimates transactions in the offline business alone to grow 10 times to 35 million by year-end.Retail experts are not surprised that Ant Financial and Paytm are laying the foundations for a financial technology operation that can emerge larger than the higher-profile ecommerce marketplace in the years to come.With losses ballooning (combined losses of top three etailers Flipkart , Amazon and Snapdeal reportedly crossed the Rs 5,000 crore mark), and investors reluctant to pump in more money, there is pressure on ecommerce players to rejig their business model.Paytm too reportedly posted a loss of Rs 372 crore in 2014-15, compared with a profit of over `5 crore the year before. According to One97 Communications’ filing with the Registrar of Companies, as reported by media in January this year, the company posted revenues of Rs 336 crore in 2014-15, as against Rs 210 crore the year before.Expenses too sharply jumped to Rs 697 crore, compared with Rs 200 crore in the previous year.To add to the woes of the online retailers are the new ecommerce rules framed by the government early this year, which prohibit them from offering discounts and capping total sales originating from a group company or one vendor at 25%.Arvind Singhal, founder of Technopak, a retail consultancy firm, says that Sharma is smart enough to understand that there is no point in acquiring customers at a loss or fulfilling a particular order at a loss. While Sharma started with mobile wallet, later on he got carried away with the notion of gross merchandise value and got into ecommerce, says Singhal. “Going back to the finance part of the business makes sense and is a smart move,” he adds.This is where the partnership with Alibaba is a powerful investment. It is not just money. “Alibaba is not a private equity fund but a strategic investor,” says Singhal, adding that the Chinese retail giant can give Sharma the know-how to build a product, share technology, and provide him access to the global market as a recent tie-up with Uber and Alipay shows (earlier this week, the two forged a partnership that will allow Uber customers more convenient ways of paying for their rides).“They could potentially become another Visa or Mastercard ,” says Singhal. Every time and any time a transaction happens, you stand to make money rather than lose in a bleeding ecommerce game, he adds. Sharma, of course, realises the value of emulating the Alipay model. And there are a lot of learnings that can be used in the new banking business of Paytm, which is likely to go live in August this year.

“Alipay is helping us in two big ways: building fraud-protection systems and big data analytics,” says Sharma, adding that financial services in China are unparalleled. While their money market fund is one of the best in the world, their experience of how consumers are using smartphones for wealth management can be replicated in India. Alipay’s peer-to-peer lending, microloans, insurance lending capabilities using big analytics are some of the areas where synergies can be explored.

While payments banks can accept deposits from individuals and small businesses up to Rs 1 lakh an account, they cannot lend. However, they can sell mutual funds, insurance and pension products as well as facilitate payments and remittances with a focus on the unbanked segment.Venture capitalists see merit in Sharma’s new financial technology bet. Avnish Bajaj, managing director, Matrix Partners, says that while Sharma’s play in ecommerce is not very clear to him, he sees more potential in the payments bank model. “He is extremely strategic in his thinking,” says Bajaj, who too wanted to invest in One97 but lost the opportunity.Alibaba is bullish on his Indian partner and Indian market. Benny Chen, executive director, global partnership for India of Ant Financial, feels that the potential of the Indian market is larger than what it was a couple of years back in China. There is a lot of opportunity, especially in financial technology.“Paytm will be Ant Financial’s strategic partner in India,” says Chen, adding that Ant will use its technology, risk management and financial services to support Paytm. Experience gained by Ant over a decade of working in China would be handy for Paytm, he adds.While investors see a lot of value in Alibaba and Paytm combination, they sound a word of caution: Excitement around having Alibaba as a partner must be tempered as the Indian ecommerce sector has witnessed similar kind of euphoria before, albeit with different foreign players. When Flipkart managed to get Tiger Global on board, it was assumed to be the biggest thing in Indian ecommerce sector, says a venture capitalist requesting anonymity.Similarly, when Snapdeal roped in SoftBank , it was assumed that Flipkart would be in for tough competition. Though Alibaba is a strategic partner, unlike investor partners which other Indian ecommerce players had, there is no guarantee that other big strategic foreign players like Baidu or Rakuten can’t or won’t invest in other Indian players, he points out.A top-ranking official with an Indian ecommerce company points out another issue that Sharma might have to grapple with: stake dilution. While he owns a 21% stake in One97 and has a 51% share in the payments bank, he will be forced to dilute more as he hunts for funds for his banking venture. “This might reduce his bargaining power and he might just end up becoming a front of Alibaba in India,” he points out.While Sharma concedes that he would further dilute his stake to raise money for the bank, he doesn’t think it is going to alter the nature of his relationship with Alibaba. “We are lucky to have Jack Ma as our strategic partner, and nothing matters to us more than this relationship.” Wa, Ca, Sa — with Ma.