Whalesbook
The Regulatory Tightening Grips Fintech Rent Payments
New directives from the Reserve Bank of India (RBI) have reshaped the landscape for credit card rent payments facilitated by fintech platforms. These updated regulations, primarily targeting payment aggregators (PAs) and payment gateways (PGs), were issued around September 15, 2025, prompting a strategic re-evaluation by industry players. The core of the RBI's concern lies in ensuring that all financial transactions adhere to robust KYC norms and contractual agreements, aiming to curb potential misuse of credit facilities and bolster transparency in digital flows.
Divergent Strategies Amidst Compliance Pressure
In the wake of these regulatory shifts, a clear divergence in strategy has emerged among prominent fintech firms. Walmart-owned PhonePe has elected to maintain its discontinuation of rent payment services. This decision is reportedly driven by a prioritization of regulatory certainty, particularly as the company gears up for its planned Initial Public Offering (IPO). The company had previously reported a revenue shortfall of approximately ₹1,262.27 crore in FY25 stemming from this business vertical, underscoring its prior significance. In contrast, platforms such as RedGiraffe, PayZapp, and NoBroker have either quietly restarted or continued to offer rent payment facilities. These services now operate under significantly enhanced verification measures, including the mandatory submission of PAN cards for both payer and payee, alongside rent agreement documents, to meet the regulator's heightened compliance demands.
RBI's Rationale and Historical Context
The RBI's intensified scrutiny stems from concerns that credit card rent payments through third-party apps were increasingly being exploited for person-to-person (P2P) transactions, circumventing standard credit card usage intended for person-to-merchant (P2M) transactions. This practice also raised issues related to Know Your Customer (KYC) compliance and potential credit risks for financial institutions. Prior to the RBI's direct intervention, banks had already begun to tighten their policies. For instance, HDFC Bank introduced a 1% fee on rent payments via fintech apps in June 2024, while ICICI Bank and SBI Cards had previously discontinued reward points on such transactions. These moves signaled a growing unease within the banking sector regarding the sustainability and risk profile of credit card-based rent payments.
Navigating the Payment Aggregator Framework
The RBI's Master Direction for Payment Aggregators prohibits them from operating a 'marketplace' model for entities not directly onboarded with full KYC. This means that platforms can only settle funds to officially registered merchants with whom they have a direct contractual relationship. The fragmented nature of India's rental market, where most landlords are individuals rather than registered businesses, presents a significant operational hurdle for strict compliance. The licensing regime for Payment Aggregators itself demands substantial net worth and rigorous adherence to security and governance standards, making the re-engineering of rent payment services a complex undertaking. While payment firms argue that the gig economy's growth necessitates flexible credit card usage for individual payments, the RBI's current stance emphasizes stringent tracking and verification, classifying such transactions as a 'grey area'. The continued caution from some credit card-issuing banks further indicates persistent discomfort with the segment, irrespective of the quiet resurgence by certain platforms.