PhonePe, Paytm, and Cred Halt Rent Payment Services After New RBI Rules

India’s top fintechs, PhonePe, Paytm and Cred have stopped offering rent payment services on their apps after the Reserve Bank of India (RBI) rolled out stricter norms for payment aggregators and payment gateways, as per the news reports. 

The move, which comes under the central bank’s updated framework announced on 15 September, directly impacts one of the fastest-growing categories for credit card usage, where millions of users have been relying on fintech apps to settle their monthly rent and earn reward points.

RBI’s Revised Framework On Payment Aggregators

As per the news reports, the latest circular issued by the RBI states: “A PA shall aggregate funds only for the merchant with whom it has a contractual relationship. PA business shall not carry out marketplace business.” 

This effectively means that aggregators cannot process payments for landlords who are not onboarded merchants with full KYC.

Business Impact And Past Developments

Rent payments had grown into a large-volume business, contributing meaningfully to the topline of fintechs, as customers used credit cards to cover high-value rents while gaining rewards. The new rules, however, mandate that settlement can only be made into merchants’ bank accounts after due diligence, closing this lucrative channel.

The segment had already come under scrutiny last year. On 26 June 2023, HDFC Bank notified cardholders that such payments through fintech apps would attract a 1% fee up to ₹3,000 per transaction. Earlier, in March and April 2023, ICICI Bank and SBI Cards had withdrawn reward points for rent transactions. 

By March 2024, several players, including PhonePe, Paytm, Mobikwik, Freecharge and Amazon Pay, temporarily stopped supporting rent payments, only resuming after adding stricter KYC checks. While the RBI never directly barred the practice then, its concerns over cards being misused for peer-to-peer payments were clear.

Implications For Users And The Fintech Sector 

The September circular has now explicitly spelt out compliance requirements, ensuring that only merchants with proper onboarding can receive payments. While fintechs had benefitted from convenience fees and higher credit card spends in this category, the risks around KYC gaps and misuse tipped the balance. 

For users, this means they can no longer pay rent through these apps with their credit cards, forcing a return to more traditional options such as bank transfers or cheques.

Read More: Investors Can Use UPI Apps for Mutual Fund and Insurance Investments Up to ₹10 Lakh!

Conclusion

The end of rent payments via fintech apps reflects the RBI’s ongoing push to strengthen compliance and transparency in digital payments. While PhonePe, Paytm and Cred had tapped into a growing use case that boosted both card spends and app revenues, regulatory oversight has now curtailed the model.

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