China’s Tencent And Alibaba Bring Digital Red Envelope War To India

China's technology behemoths are set to fund another battle over e-hongbao or digital cash gifts – this time in India.

Alibaba Group-backed Paytm on Monday launched Paytm Postcards that allow users to gift money in digital envelopes. Rolled out on Raksha Bandhan, the postcards can be customised with messages and sent instantly, the company said in a statement.

Last month, homegrown messaging service Hike, backed by Tencent Holdings, had introduced Blue Packets. It's similar to the Chinese technology giant's messaging app WeChat's online red envelope to gift cash during festivals.

What's A Red Envelope?

Red envelope is a cash gift Chinese give during festivals and weddings. In 2014, WeChat allowed people to gift money through the app during the Chinese New Year celebrations in February. It led to an explosive growth of users on WeChat and helped it to lead the mobile payments market in China. This year, WeChat users sent 46 billion cash gifts via virtual ‘red envelopes,' according to a Bloomberg report. AliPay, Alibaba Group's payments arm, too allows users to send e-hongbao. While the company hasn't disclosed the number of such transactions, it's locked in a fierce battle with WeChat in China's e-payments industry.

Tencent, which holds a minority stake in Hike, last year led a $175-million investment along with Taiwan's Foxconn and valued the company at around $1.4 billion. Paytm raised $1.4 billion from SoftBank in May for a 20 percent stake purchase in One 97 communications. Alibaba and its payments affiliate Ant Financial held a 40 percent stake in One97, Paytm's parent, before this investment, according to a Bloomberg report.

India's digital payments market is expected to jump nearly 10 times to $500 billion by 2020, according to a 2016 report by Boston Consulting Group. Paytm, also backed by SoftBank Group Corp, pegs gifting industry in India at $40-42 billion. And the next battle will be to become the WeChat of India.

Facebook-owned chat application WhatsApp is only a few months away from completing necessary testing with the National Payments Council of India to start payments on its chat platform. Digital wallet Paytm is set to launch a messaging service by next month, BloombergQuint had reported earlier. Messaging platform Hike, led by Kavin Mittal, debuted Hike Wallet for money transfers in June.

Paytm leads the game with more than 250 million users. WhatsApp had over 200 million monthly active users as of February 2017, while Hike is said to have around 100 million.