By Ishita Ganguly

Copyright startuppedia

“Fintech leaders – PhonePe, Paytm, and CRED have ceased rent payment services on their apps, a category that has become one of the fastest-growing use cases for credit card payments in recent years. RBI mandates new rule for payment aggregators Advertisment This follows the Reserve Bank of India”s (RBI) reinforced Payment Aggregator (PA) and Payment Gateway (PG) guidelines, issued on September 15, which prevent PAs from facilitating payments to entities with whom they lack a direct contractual relationship. “A PA shall aggregate funds only for the merchant with whom it has contractual relationship. PA business shall not carry out marketplace business,” the circular said. As reported by MoneyControl, it impacts rent payments routed via fintech apps, where the landlord often isn”t an onboarded merchant with full KYC. MC further mentioned that the new rules mandate that funds can only be settled into merchants” bank accounts post due diligence and prevent PAs from acting as marketplaces, a structure under which rent payments were earlier processed. “Rent was basically happening because PA-PG was acting as a marketplace for landlords without merchant KYC,” said another industry source. “That”s no longer permitted under RBI”s updated framework.” On June 26, India”s largest private sector lender, HDFC Bank, in an email to its credit card customers, notified that rent payments made using credit cards through fintech apps will attract a 1 per cent fee up to Rs 3,000 per transaction. In March and April, ICICI Bank and SBI Cards, the other two large credit card issuers, had stopped offering reward points for rent payments. Since March 2024, fintech apps such as PhonePe, Paytm, Mobikwik, Freecharge and Amazon Pay have stopped accepting rent payments through credit cards. However, some resumed by adding more KYC and compliance processes for users, with a surge in rent payments using credit cards. In its new circular sent out on 15 September, RBI explicitly mentions “A PA shall ensure that a marketplace onboarded by it does not accept payments for a seller not onboarded on to the marketplace”s platform” The central bank raised regulatory concerns around KYC compliance and potential misuse. Currently, users will no longer be able to use these apps to pay their monthly house rent through credit cards, compelling them to return to traditional bank transfers or cheque payments. Also read: Rolls-Royce opens its largest 700-seat GCC in Bengaluru (startuppedia.in)”