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SoftBank to invest $1.4 billion in India's Paytm in bet on demand for mobile money

SoftBank is set to announce it will invest $1.4 billion in India's Paytm, a source familiar with the matter told CNBC asking not to be identified, placing a bet on a continued surge in the spread of mobile phones to make payments in the country.

Paytm is India's largest digital-payments provider. Its parent company, One97 Communications, was valued at $4.2 billion in 2015, according to reports. However, recent estimates suggest the latest figure could be between $7 billion to $9 billion if the SoftBank India investment is factored.

Paytm offers consumers a mobile wallet solution, much like Alibaba, in a nation of more than 1 billion people where credit card penetration is low and cash has become complicated recently.

In November of last year, the mobile payments solution saw a massive surge in money added to customer's wallets, after Prime Minister Narendra Modi ordered a swap of large currency notes in an effort to curb corruption.

Mobile payment app, Paytm sign in New Delhi
AFP | Getty Images
Mobile payment app, Paytm sign in New Delhi

Softbank did not immediately return a request for comment to CNBC.

Backers of Paytm include Alibaba and its finance affiliate, AliPay, along with chip-maker Meditek, and firms SAIF Partners, Sapphire Venture, Silicon Valley Bank and K2 Global.

Softbank, has invested in India's startups for some time. It's now heavily involved in India's e-commerce space and hoping to pressure a merger between Snapdeal and Flipkart, the two largest homegrown e-commerce groups in the nation, according to the Financial Times.

The potential merger would come as Amazon looks to spend $5 billion in an attempt to become India's dominant retailer.

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