Facebook's big India deal portends a bruising time for SoftBank-backed Paytm

NEW DELHI/MUMBAI (Reuters) - Facebook's $5.7 billion investment in Reliance promises to be the biggest headache yet for Paytm, a SoftBank-backed pioneer in India's digital payments market but which has been losing ground to rivals with deeper pockets. It will also be able to link up with Reliance's telecoms business, which has taken the market by storm since its launch in late 2016, and WhatsApp itself has an enormous presence in India with more than 400 million users. Compared to other major players in India's digital payments markets, Paytm is seen as more vulnerable to attack, already on the backfoot amid competition from Alphabet's Google Pay and Walmart's PhonePe. While having previously attracted investments from the likes of Japan's SoftBank , China's Alibaba and U.S.-based Berkshire Hathaway , it lacks its own wells of capital for funding, putting it at a disadvantage. India's digital payments market is expected to more than double in size to $135 billion in 2023 from 2019 levels, according to a study by PwC and Indian industry lobby group ASSOCHAM. Paytm has branched out into services including insurance and gold sales, movie and flight ticketing, and bank deposits and remittances. Paytm was also part of a lobbying campaign against U.S. firms over local data storage - an issue now mostly resolved but which had been an impediment to WhatsApp gaining regulatory approval. But the Reliance-Facebook combination represents a Goliath-like opponent, especially given Reliance's track record in decimating rivals when it entered the telecoms market with Jio Infocomm and cut-throat pricing. "This is a formidable combination of bandwidth and platform player so it will easily shake up the payments industry," said Ashvin Parekh, an independent financial services consultant. He added that in any bruising battle over digital payments, a telecom firm like Reliance's Jio would be hard to beat as it has far more insight into consumer data habits and a greater number of stores to reach potential customers.