Amazon.com (NASDAQ:AMZN) is going abroad for its latest asset buy. The company has reached a deal to buy privately held Emvantage, a start-up online payments solutions provider based in India. The price was not disclosed.
Amazon.com will use Emvantage's technology to facilitate payments on its Indian website. Among its numerous offerings, Emvantage provides prepaid "wallet" services. In India, such services can be funded through cash payments. This is critical to the success of e-commerce in the country, as credit card penetration is relatively low and cash transactions remain common.
Amazon.com should absorb its new purchase relatively quickly; the company anticipates the transaction will close next month.
Does it matter?
In buying Emvantage, Amazon.com is securing an asset for the future. The Indian economy is growing robustly, which, when combined with increased uptake of more modern payment methods, could very well mean a real explosion in e-commerce. Goldman Sachs, for one, is estimating that the country's total e-commerce sales could reach $100 billion by 2020, from an estimated $5 billion or so in 2014.
Emvantage, of course, is not the only game in town. Other online payment providers, be they local start-ups or competitors from outside the country, also have an early presence in the country. And we can imagine that before long, Western rivals like PayPal Holdings (NASDAQ:PYPL) will ramp up their presence, too.
By buying into the space relatively early, though, Amazon.com stands an excellent chance of becoming a (or even the) standard online payment option. This would be reminiscent of how eBay established PayPal as a top e-commerce option back when the payments provider was under its wing (PayPal was spun off into a stand-alone company last year).
Although it's difficult to ascertain just how the e-payments segment will shape up in India over the next few years, it's good that Amazon.com is wedging itself in early. Assuming it didn't pay an arm and a leg for Emvantage, we can consider this to be a smart move by the retailer.
Eric Volkman has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Amazon.com, eBay, and PayPal Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.