Payments Apps, Banks Call For Regulation Of PhonePe UPI ATM Service

Last month, Flipkart-owned payments platform PhonePe had launched a Unified Payments Interface-based (UPI) PhonePe ATM service. While it claims to be helping users get cash by transferring money to merchants digitally, other payments players are questioning how such a service has been allowed under the current regulations.

During the steering committee meeting of the National Payments Corporation of India (NPCI), held last Friday (February 14), payment providers shared their concern with NPCI officials. According to a TOI report, the members of the UPI steering committee complained about PhonePe launching the service in an absence of any regulatory framework. A total of 21 payments companies and banks are a part of NPCI’s steering committee. Some of the payments companies include Paytm, Mobikwik, Google Pay, and PhonePe. Banks such as ICICI banks, SBI, HDFC, among others are also a part of the steering committee.

Besides regulation, the committee also discussed on monetising this service by levying a charge on users. While banks are pushing for levying a charge on users, a TOI report said that PhonePe is not in favour of monetising the ATM service as it feels that charging users for withdrawing money via UPI will leave a negative impact on the newly launched service.

In a statement, a Paytm spokesperson told Inc42 that the company already has ‘Paytm ka ATM’ which provides cash deposit and withdrawal facilities at over 67K locations in India. Launched in December 2017, Paytm facilitates this service in partnership with Paytm Payments Bank.

While PhonePe’s competitors are having issues with entry into digital ATM business, the company has left parent company Walmart quite impressed. Recently, CEO of Walmart International Judith Mckenna had said, “It’s a revolutionary solution with the potential to transform cash in India… If you think about it, there are only two lakh ATMs in India and this service will increase the capability to access cash by nearly five times soon.”

In the span of one month, PhonePe’s ATM service has already crossed one lakh transactions in a single day. As of now, the PhonePe has around 10 Mn merchants out of which it has converted around 1 Mn as ATM partners as well.

The committee also noted that this new service needs to be handled carefully as some stakeholders can misuse the cash withdrawal without the regulatory provisions. To resolve this issue, NPCI is now looking to issue an official notification which would be on the similar lines to RBI’s PoS withdrawal scheme. As of now, users can get cash from merchants by transacting with their cards at the point-of-sale (PoS) machines.

A source close to the development said that NPCI is looking to charge a maximum of INR 10 for withdrawing cash via UPI. NPCI is also looking to cap the daily withdrawal limit to INR 2000. Moreover, it is also looking to limit the number of daily number of withdrawals to three.