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Walmart strikes gold within Flipkart

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The reported demerger of Flipkart subsidiary PhonePe to convert it into a direct holding of Flipkart parent Walmart at a valuation of about $10 billion is a significant and positive development.

Images of this triggering another Klondike rush of alternate investment prospectors hunting for hidden gold in Indian startups might exaggerate matters, but not by much.

Walmart acquired Flipkart for close to $17 billion. If the demerged subsidiary alone has a value of $10 billion, this would make the acquisition a bargain for Walmart. The move also attests to the technological cutting edge occupied by Indian payment apps and the big market that India represents for digital payments.

It also pays tribute to the wisdom of the vision that set up the National Payments Corporation of India (NPCI) in 2008 and, subsequently, Aadhaar and the associated India Stack, a clutch of application programming interfaces (APIs) for developing Aadhaar-linked applications, which spawned the United Payments Interface (UPI) and apps like PhonePe that use UPI.

It would make little sense for Walmart to restrict PhonePe’s use to the Indian market. Wherever a complementary ecosystem exists or can be created, PhonePe would work like a breeze.

ICICI Bank’s mobile app for digital payments making use of UPI has a Pay Later feature that allows a UPI payment to be made from something like an overdraft generated for the account from which the payment is made.

This virtually eliminates the need for a third party such as Visa, Mastercard or RuPay to interlink the payer’s bank, the payee’s bank and keep accounts, while providing credit to the payer for a limited period of time.

The banks can do the job through UPI and the National Payments Corporation of India that enables it. If this model can be universalised, elimination of one intermediary would reduce the cost of payments and benefit everyone.

Walmart would be a good ambassador for the innate potential of Indian tech beyond outsourced business services. That should encourage more Indian startups to venture beyond me-too efforts in ecommerce and hotel bookings, and create genuine value for the world.

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