I doubt they see any benefit in this, especially with wallets like Paytm and Mobikwik already there which are fast and periodically offer big discounts. In fact I have been using Paytm a lot due to the huge cashbacks.
That is obviously temporary. It is not the merchant who is giving you the cashback but these wallet providers themselves. Same as uber offering 7INR per km rides. It will eventually stop some day when they can no more raise money. From what I have heard, paytm has burnt 30% of their recent raise just for giving discounts and cashbacks.
Regards