Swipe Left on Rent: RBI’s New Rule Sends Fintechs Packing

In a regulatory shake-up that’s sending ripples across India’s fintech landscape, the Reserve Bank of India (RBI) has mandated a new framework for payment aggregators, effectively ending the popular rent payment feature offered by platforms like PhonePe, Paytm, and CRED. The move, announced via RBI’s Master Direction on September 15, 2025, aims to tighten compliance and curb misuse of credit cards for peer-to-peer transfers disguised as merchant transactions.

This marks a significant shift for urban tenants and landlords who had embraced credit card-based rent payments for their convenience, reward points, and cash flow flexibility. With the new rules in place, fintechs have begun withdrawing the service, leaving users scrambling for alternatives.

Key developments and implications

1. What the RBI rule says  
   - Payment aggregators (PAs) can now only route funds to merchants with whom they have a direct contractual relationship  
   - These merchants must be onboarded with full KYC and due diligence  
   - PAs are barred from operating as marketplaces, meaning they cannot facilitate payments to individuals like landlords unless those individuals are registered merchants  
   - The rule aims to prevent misuse of credit cards for unverified transfers and reduce fraud risks

2. Why fintechs are shutting down rent payments  
   - Platforms like PhonePe, Paytm, and CRED had enabled users to pay rent via credit cards, transferring the amount to landlords’ bank accounts  
   - This feature became popular for its perks: cashback, reward points, and interest-free credit periods  
   - However, most landlords were not registered merchants, making these transactions non-compliant under the new framework  
   - As a result, fintechs have discontinued the service to avoid regulatory penalties

3. Impact on users  
   - Tenants who relied on credit card rent payments will now have to switch to traditional methods like UPI, NEFT, or cheques  
   - The loss of reward points and credit period benefits could affect monthly budgeting and cash flow management  
   - Users who converted rent into EMIs for liquidity will need to explore alternative financing options  
   - The convenience fee income for fintechs also takes a hit, as rent payments were among the highest-volume use cases

4. Industry response and expert views  
   - Experts view the RBI’s move as a landmark step toward streamlining digital payments and enforcing accountability  
   - The shift from micro-rules to a principle-based framework is expected to reduce regulatory clutter  
   - Payment aggregators are now directly responsible for merchant verification, rather than relying on acquiring banks  
   - While the rule may seem restrictive, it strengthens trust in digital transactions and aligns with global best practices

5. What’s next for fintechs  
   - Fintech platforms may reintroduce rent payment services in the future, but only after onboarding landlords as verified merchants  
   - This process involves KYC, documentation, and contractual agreements, which may not be feasible for casual or small-scale landlords  
   - The industry may pivot toward offering rental management solutions or partnerships with property tech firms to stay relevant in the space  
   - Meanwhile, banks are expected to continue tightening their own rules, with some already imposing fees or removing reward benefits on rent transactions

6. Broader regulatory context  
   - The RBI’s directive is part of a larger push to clean up digital payment ecosystems  
   - By eliminating grey areas in peer-to-peer transfers, the regulator aims to reduce money laundering risks and improve transparency  
   - The move also signals a shift toward formalising financial relationships, nudging landlords and tenants into more structured payment systems

Final thoughts

The end of credit card-based rent payments on popular fintech apps marks the close of a convenience era for urban India. While the RBI’s new rule prioritises security and compliance, it also challenges fintechs to innovate responsibly. For users, it’s a moment to rethink financial habits and explore new ways to manage monthly expenses without relying on reward-driven shortcuts.

Sources: Business Standard, News18, CNBC TV18.