Fintech Giants PhonePe, Paytm Discontinue Credit Card Rent Payments After Revised RBI Norms

India's top fintech players Paytm, Cred, and PhonePe have halted their rent payments services on their respective applications. This segment had established itself as the fastest growing use cases for credit card transactions over the last few years. 

What Led To This Sudden Halt In Rent Payment Services?

Indiviuals who were dependent on paying rent via credit cards now face turbulence, as removal of such e-services will result in fewer options for digital payments.

This mode of making rent payments had grown in popularity as a result of reward points, cashback or benefit from interest-free credit periods.  

However, the Reserve Bank of India’s (RBI) new circular issued on September 15 led to halting this top growing use case by fintech players.

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What Does The New RBI Guidelines Imply?

The Reserve Bank of India has made rules for payment aggregators (PAs) and payment gateways (PGs) more stringent on September 15, restircting such entities from processing transactions for those who don't have a direct contractual relationship.

As per the new guidelines, PAs and PGs can only handle payments for merchants, who've complied full KYC (Know Your Customer) verification. Consequently, these fintech apps can no longer facilitate rent payments to landlords until they register themselves as merchants.

Did Banks Scale Down Ahead of RBI Directive?

Even before the RBI’s directive, banks reportedly began halting transactions of this nature. In June 2024, HDFC Bank informed its customers via email of a 1 per cent fee applicable on rent payments made using fintech apps, capped at Rs 3,000 per transaction.

ICICI Bank and SBI Cards have also discontinued reward points for rent payments made via credit cards, as per reports.

Since March 2024, several fintech platforms, including PhonePe, Paytm, Mobikwik, Freecharge and Amazon Pay, have suspended credit card-based rent payments. Some of these services later resumed, implementing stricter KYC and compliance procedures for users.

The latest RBI move is expected to affect a wide range of urban tenants who relied on the convenience and benefits of digital rent payments, signalling a return to more conventional modes of transaction.