Fintech companies PhonePe and CRED have started testing rent payments through credit cards under a marketplace-based model and are expected to officially launch the service within the next month.
The move is aimed at aligning with the Reserve Bank of India’s regulatory framework after several fintech platforms had earlier suspended credit card-based rent payments due to concerns around person-to-person transactions being routed through credit cards.
Rent payments were a major revenue source for many fintech firms. In its updated draft red herring prospectus, PhonePe revealed that exiting the rent payments business resulted in a revenue impact of nearly ₹1,250 crore.
Earlier this year, several platforms, including RedGiraffe, PayZapp and NoBroker, either resumed or continued offering rent payments through credit cards after modifying their processes to address regulatory requirements. However, PhonePe had kept the service discontinued.
PhonePe, Paytm and CRED had previously halted rent payment services following the RBI’s stricter Payment Aggregator (PA) and Payment Gateway (PG) guidelines issued on September 15. These rules prevent payment aggregators from facilitating transactions for entities with whom they do not have a direct contractual relationship.
To strengthen compliance, the new model is expected to include enhanced verification measures. These include collecting PAN details of both the tenant and landlord, along with rent agreement documents, to validate genuine rent transactions.
The RBI’s concerns were linked to credit cards being primarily designed for person-to-merchant transactions. Regulators were wary of routine person-to-person transfers being processed as rent payments, creating compliance and regulatory risks. Under the marketplace model, landlords are treated as merchants and are required to undergo stricter merchant KYC procedures.
On June 26, 2024, HDFC Bank informed credit card customers that rent payments made through fintech apps would attract a 1% fee, capped at ₹3,000 per transaction. Around the same period, ICICI Bank and SBI Cards discontinued reward points on rent payments.
In March 2024, PhonePe, Paytm, Mobikwik, Freecharge and Amazon Pay stopped accepting rent payments through credit cards, although some platforms later resumed the service after introducing additional KYC and compliance checks.
Industry players have argued that credit card payments to individuals are increasingly common due to the rise of freelancers, consultants, content creators and independent professionals. However, banks and fintech firms have gradually reduced rewards and cashback benefits on rent payments as the cost of supporting such transactions became unsustainable.
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