Every startup hero needs a villain. For payments companies, that villain was cash. But in the tumultuous digital payments journey, those like India’s PhonePe are now seeing cash as an unlikely ally.

In January this year, Walmart-owned PhonePe doffed its hat to cash. It said PhonePe users can now digitally transfer money to any neighbourhood store that accepts payments through the app in return for cash. That feature turned mom-and-pop stores into ATMs for small-ticket withdrawals in one stroke; some one million of them across 400 cities in just a month in a country that has only about 232,000 ATMs. 

A payments company steeped in the digital way of things wants to now be in the business of promoting cash. “It’s a crazy idea for a digital payments company,” said a government official responsible for framing policies around digital payments. He requested anonymity due to his role.

But PhonePe’s parent Walmart hailed the move as the best thing yet. “It’s a revolutionary solution with the potential to transform cash in India,” said Judith Mckenna, CEO of Walmart International, at the retailer’s post-earnings presentation to analysts in New York recently, adding that the service will bring a nearly 5X increase in access to cash.  

A unique solution but not a new one. It’s an idea that the country’s central bank and regulator The Reserve Bank of India (RBI) had as far back as 2009. It allowed people with debit cards to swipe at point-of-sale terminals and collect an equivalent amount in cash, the goal being financial inclusion and lower dependence on ATMs. But it has largely been overlooked as a solution due to accounting hassles for merchants. Even as recently as August 2019, the RBI pulled up RBI Notification on cash withdrawal at PoS Read more pulled up the payments industry for not promoting this solution. 

PhonePe is dusting the cobwebs off this forgotten mode of payment. It is putting a structure around what was already a naturally occurring solution in case people ran out of cash. “The only service we are providing here is letting you discover stores that you can withdraw cash from, instead of awkwardly going from store to store,” says Sameer Nigam, chief executive officer and co-founder of PhonePe. 

While convenient, the feature brings empty calories to the company, full of user numbers that do not amount to any revenue.

All cash but no money

PhonePe's revenue in the financial year ended 2019 was Rs 184 crore with losses of Rs 1,907

The company doesn’t charge the merchant or user for the service. It could actually bring in accounting and tax headaches for the merchants involved.


Arundhati Ramanathan

Arundhati is Bengaluru-based. She is interested in how people use money in the digital age and how new economies will take shape based on that interaction. She has spent over 10 years reporting and writing on various subjects. Previous stints were at Mint, Outlook Business and Reuters.

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