(This story originally appeared in on Mar 20, 2016)

As Indian e-commerce majors ramp up their presence in the payments space, Digbijay Mishra and Samidha Sharma find out why online retailers are taking a leaf out of the China playbook and throwing their weight behind this new line of business.India's largest e-commerce player Flipkart recently launched a digital wallet, Flipkart Money, while its arch-rival Amazon ap plied for a wallet license with the country's central bank.Amazon is also in the midst of scouting for potential acquisitions in the super buzzy payments space after snapping up Noida-based Emvantage Payments just a month ago. Away from their core commerce business of selling products online, domestic e-tailers are keenly looking to identify and capture areas like payments in an effort to shore up revenues. The first bold move was made by Snapdeal , last year, when it bought Freecharge with the intent of creating a separate payments business.The frenetic activity around payments among Indian internet companies is starting to look similar to what happened in the Chinese market with the likes of Alibaba's Alipay, Tencent's Tenpay and Baidu's wallet leveraging their large user base to expand into payments and financial services. While India's e-commerce companies are, for now, looking at wallets only to help their shoppers get quick refunds and push cashless payments, it's clear they are betting on customer adoption for other uses in the long run.Today in China, Alipay and Tenpay jointly own almost 70% of the third-party internet payment market, as per Fung Business Intelligence Centre, the research arm of the Hong Kong-based multinational Fung Group. Besides, Baidu, Alibaba and Tencent, online retailers like JD.com have built a significant play in the financial space online going far beyond just offering wallets.“E-commerce players in India are trying to learn from the experiences of Alipay in China. Most of the e-tailers here are looking to get a hold of the huge payments market by going through the mobile wallet route,“ says Satish Meena from Forrester Research.Data from the Reserve Bank of India says the number of transactions conducted via digital wallets swelled to 153 million last year between October and December compared to 65.9 million a year ago at the same time. In value terms, transactions worth Rs 5,539 crore were made during this period compared to Rs 2,226 crore a year ago. That explains the interest digital wallets are generating among inter net players which may lead to a wider presence in payments and finance for some of them.“Unfortunately, banks and payment companies haven't done enough to keep up with the explosion in mobile growth with high failure rates on mobile. Ecommerce players have been forced to solve the payments problem for their short-term growth. Payments is also strategic (eBay bought Paypal ) because it gives tremendous data about users and merchants which can then be monetized to drive up profits of online retailers. Large companies with huge user numbers will play a pivotal role in shaping the payments ecosystem, but innovation will likely be driven by smaller companies with no conflict of interest,“ says Vikram Vaidyanathan, MD at Matrix Partners, which has invested in Razorpay, an online payment gateway solution, and mobile point-of-sale payment services provider MSwipe.Besides, e-commerce majors, transportation startups like Ola and Uber are also in the fray to get a share of the wallet business. “The Ola Money app is being used widely for mobile recharges across a range of operators. We will soon be facilitating ticketing and utility bill payments across online and offline merchants and through leading payment gateways,“ an Ola spokesperson says.Flipkart's earlier attempts at building a payments business did not take off.In 2014, it shut Payzippy, a year into its launch, and acquired NGPay, but nothing came of it either. In September last year, the e-tailer valued at $15 billion said it has bought FX Mart, which held a prepaid wallet licence helping it launch Flipkart Money a few weeks ago.Amazon, too, has not had success in payments, having recently folded up its mobile wallet app which was in the beta stage in the US.But the Indian market may turn out to be different considering the growing usage of wallets. Both Flipkart and Amazon said they did not want to participate in the story.The bulk of the transactions that digital wallets like Paytm, Mobikwik and others make come from mobile recharges, followed by utility payments, both of which have small ticket sizes but high repeat usage. Pure play third-party payments through wallets are yet to take off aggressively in India. “Nowhere in the world has a digital payments platform been successful without strong anchor use case. The most obvious examples are that of Alipay and Paypal. But what's important to note is that it's really hard to get focus on a payments business if you aren't running it like an independent company,“ says a senior executive from an e-commerce firm.Alibaba-backed Paytm, which started off as a payments platform, has now thrown its hat into the commerce business hoping to convert its existing users into shoppers just like e-tailers have crossed over into payments. But independent payment operators say most of the wallet success in India has come on the recharge websites owned by wallet providers and not on other platforms.“Most big retailer-owned wallets have failed internationally, with the exception of China, while third-party independent wallets have flourished in emerging markets. We believe the Indian consumer will not accept a 15-yearold concept of wallets. The future is in device fingerprinting where the consumer is recognised and the purchase is completed without an actual payment. The payment will be later completed at the consumer's convenience as post-paid,“ says Amrish Rau, MD of Citrus Pay.Some industry insiders say Alibaba and Tencent are technology conglomerates and their users access payment platforms across consumer-to-consumer and business-to-consumer commerce, taxi hailing, daily deals, chat apps, savings and investments among other segments. Ubiquity of the wallet across these platforms is what drives users to transact seamlessly and till that happens in India it would be difficult for online retailers to create a meaningful payments business.