Payment Apps Turn Off Rent Payment Through Credit Cards

Major payments applications like PhonePe and CRED have stopped supporting rent payments using credit cards. According to two people in the know, credit card payments have been switched off for now, following the regulator’s recent master directions.

On Monday, the Reserve Bank of India released master directions for payment aggregators on its website. These new norms now require that payment applications conduct know your customer processes on a landlord’s bank account before allowing credit card payments to it.

The guidelines state that all payment aggregators must conduct customer due diligence for all merchants it onboards. This may either be through the merchants KYC through central KYC registry or through a due diligence process.

Re-KYC will be too expensive and cumbersome at this stage, the first of the two people quoted above said. It is easier to stop these payments now, rather than fall afoul of the regulatory requirements, the first person said.

According to both people quoted above, the regulator is set to meet with the payments industry soon to take feedback on the master directions.

As such, a landlord’s bank account has undergone a KYC process with their respective bank. So conducting re-KYC should not be mandatory, the second person quoted above said.

The industry will try and get more clarity and see if this business should be restarted, both people quoted above said.

Paying rent through credit cards has been a tremendously profitable business for payment companies. It is a predictable source of income for these companies as they charge a processing fee for it. It also aids customers to ensure they can earn credit card points and build a credit history.

However, owing to riskier nature of credit card payments and using them to pay into retail accounts, RBI has had its own problems with it. Banks have already started levying additional fee on customers using their credit cards on payment applications for rent payment.