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FUTURE OF FINANCE FRIDAY

Warren Buffett’s protégé is backing a local rival to Google and Facebook in India’s payments battle

What’s in his electronic wallet?
By John Detrixhe
Published Last updated This article is more than 2 years old.

After Todd Combs joined Berkshire Hathaway in 2010, he made an early bet on the payment industry through his investment in Visa. The card payment company’s stock has gained about 500% since then. Warren Buffett’s investment conglomerate also holds stock in Mastercard, which has rallied dramatically. This week, Combs, a former hedge fund manager, reportedly bought a stake in the owner of India’s largest digital payments firm, Paytm.

The investment brings the Oracle of Omaha’s company into a crowded field of global tech giants vying for a piece of India’s electronic payments network. Alibaba of China and Japan’s SoftBank already have stakes in Paytm, and the list of tech companies competing with the Indian payment provider—including Amazon, Google, Flipkart-owned PhonePe, and Facebook—is just as distinguished. This week, Google said it also plans to offer loans in India through its payment app.

Omaha-based Berkshire has traditionally invested in companies with specific qualities, like a defensive moat protecting the business, strong long-term prospects, and a modest valuation. Buffett, the CEO, is generally wary of tech companies, but Combs and Ted Weschler, another potential heir to the Berkshire empire, have been more open to the industry, snapping up shares of Apple (paywall) a few years ago, for example.

Paytm CEO Vijay Shekhar Sharma had his first meeting with Combs in Omaha in February—on Valentine’s Day, a good day for forging new relationships—according to the Economic Times. They reportedly discussed the shift to mobile in China and India, and the potential for mobile payments to usurp traditional networks. Terms of the Paytm deal were kept private, but Berkshire reportedly invested (paywall) at least $300 million in parent firm One97 Communications, which has previously been valued at $10 billion.

Berkshire has been rewarded for its forays into payment company investments to date: Combs and Weschler are credited with the decisions to buy Visa and Mastercard, while American Express was Buffett’s idea. But does Paytm belong in the portfolio for the Nebraska-based conglomerate that also owns, of all things, a railroad?

Consider that Visa and Mastercard are often referred to as “payment rails,” as their infrastructure is vital and difficult to replicate. Berkshire, for its part, often seeks out toll-taking businesses that profit from a steady stream of fees or charges.

While the battle for India’s payments market is far from settled, Paytm’s CEO told the Financial Times (paywall) that Berkshire’s investment is “validation of Indian entrepreneurs fighting the global companies in this country.” The stake suggests Combs is confident Paytm will emerge a winner in the shift to electronic payments in one of the world’s most populous countries.

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The future of finance elsewhere

  • The SEC is looking to make it easier for ordinary US investors to buy stakes in private companies. The agency wants small-timers (paywall) to get a crack at promising startups that delay public listings for longer.
  • When it comes to bitcoin investing, fear has taken over from greed. For now, The Economist thinks (paywall) crypto is little more than a casino.
  • UBS is selling its robo-investing platform. The Swiss bank decided there was little potential for the service in the near future.
  • Stripe and Visa are among investors in African payment startup Paystack. But despite optimism in electronic services, Nigeria’s unbanked population has grown.
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Previously, in Future of Finance Friday

Aug. 24: Financial firms are increasingly giving away their services for free

Aug. 10: Tesla and Spotify say public markets have major flaws. Do they have a point?

Aug. 3: The most influential financial revolutionary is an 89-year-old with no interest in crypto


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