PhonePe, Cred Plan To Reintroduce Rent Payments Via Credit Cards

Fintech companies like PhonePe and Cred are testing rent payments through credit cards under the marketplace model.

The companies plan to launch the service publicly over the next month, according to a report by Moneycontrol.

Most fintech companies had stopped allowing rent payments through credit cards after the Reserve Bank of India had expressed its displeasure over the service.

According to the banking regulator, the service could be used to make routine person-to-person transactions using credit card, which is essentially for person-to-merchant transactions.

To continue the service, landlords were required to be treated as merchants which would have brought them under stricter merchant KYC norms.

In their latest testing round of the service, the companies are believed to follow the RBI’s guidelines.

PhonePe, Paytm and Cred had discontinued rent payment service after the RBI tightened its payment aggregator and payment gateway guidelines.

The guidelines restricted payment aggregators from facilitating payments to entities with whom they do not have direct contractual relationship.

This time, the companies are bringing the service back through the marketplace platform model which would ensure end-user and end-usage are verified.

Hence, the companies will collect PAN cards of the payer and the payee and rent agreement documents.

Rent payment had become a significant contributor to revenues of many fintech firms. According to the draft red herring prospectus of PhonePe, it had lost Rs 1,250 crore in revenue after exiting the rent payment business.

Soon, banks were finding it unsustainable to incentivise rent payments through credit cards.

In June 2024, HDFC Bank imposed 1 percent fee for rent payments using credit card on up to Rs 3,000 per transaction.

ICICI Bank and SBI Cards also stopped reward points for rent payment through credit cards.

Fintech firms like PhonePe, Paytm, Mobikwik, Freecharge and Amazon Pay also had to stop the service.

However, some companies reintroduced the service after introducing stringent KYC norms for the payer and the payee.