TENANTS CANNOT PAY THROUGH MOBILE APP NOW

TENANTS CANNOT PAY THROUGH MOBILE APP NOW

18-SEP-ENG 1

RAJIV NAYAN AGRAWAL

DELHI-------------------------------The RBI has implemented stricter regulations for transactions involving payment aggregators (PAs) and payment gateways (PGs). According to the new rules, transactions are now permitted only with merchants with whom the payment aggregator or gateway has a direct contract and whose KYC process has been completed.

If you used mobile apps like PhonePe, Paytm, Amazon Pay, or Cred to pay your rent every month, this is important news for you. The Reserve Bank of India (RBI) issued new guidelines on September 15, 2024, following which fintech companies have completely suspended the rental payment service on their platforms.

The RBI has implemented stricter regulations for transactions involving payment aggregators (PAs) and payment gateways (PGs). According to the new regulations, transactions are now permitted only with merchants with whom the payment aggregator or gateway has a direct contract and whose KYC process has been completed. The problem is that most landlords aren't registered as merchants. This is why paying rent with credit cards through apps will no longer be possible.

This change will most impact those who used to earn reward points or cashback by paying rent with credit cards every month. They also benefited from the interest-free period of credit cards, which made cash management easier. Now, tenants will have to return to old methods, such as direct bank transfers, checks, or cash payments.

Tenants appreciated this feature because they earned points and cashback. Landlords received the money immediately. Furthermore, credit cards made it easier to manage expenses. However, even before the RBI's strict stance, many major banks had begun to curb this practice. For example, HDFC Bank began charging up to 1% on credit card rent payments from June 2024. Similarly, ICICI Bank and SBI Cards stopped offering reward points on rental transactions. This gradually led to the service's popularity waning.

In fact, major apps like PhonePe, Paytm, and Amazon Pay suspended their rent payment services in March 2024. However, some companies temporarily resumed the service after adding additional KYC procedures. However, now, with the implementation of the new RBI regulations, the service has been completely discontinued. The use of credit cards for rent payments has grown rapidly over the past few years. There were several reasons for this: tenants received reward points and cashback, and the monthly interest-free period allowed them to better manage their cash flow. Landlords also received instant payments. This is why the service became extremely popular in urban areas.

While this RBI move will cause difficulties for tenants dependent on cash flow, it is also a major blow to digital payment companies. Fintech companies will now only be able to validate transactions that have complete merchant registration and KYC. Currently, the option to use credit cards for rent payments has been discontinued. Tenants will now have to resort to traditional methods—bank transfer, IMPS, NEFT, RTGS, or check.