[This post has been updated to reflect Paytm's roll back decision]
Paytm has rolled back its decision to charge the 2 percent fee. In a latest blog post it said, "We are suspending the 2 percent charge on credit cards for adding money to wallet keeping users convenience in mind. With an intent to prevent the misuse of transfer to bank facility at 0 percent, we had applied a refundable fee of 2 percent on add-money through credit cards. At the same time, we are conscious that this move caused inconvenience to a large segment of our users, including those who are using their credit card for genuine transactions.]
A day before the roll back, digital payments platform Paytm has announced that they will charge users a 2 percent fee whenever their mobile wallet is recharged using credit cards. The reason stated in Paytm’s blog is that, misusing the free option earlier, many users funded the Paytm wallet with credit cards and later transferred that money to the bank - all for free.
“They were not only getting free loyalty points, which effectively is free cash, but also getting access to free credit,” the blog says.
According to government regulations, all e-commerce platforms. including Paytm, have to pay banks (or card networks) whenever the customer pays them online. Paytm also pays hefty charges when the customer uses credit cards to recharge their wallet, to card networks and issuing banks.
However, when a user adds money and transfers it to a bank, Paytm ends up losing money. “Our revenue model requires users to spend money within our network, and we make money from the margins available to us on various products/services we offer,” Paytm explains in the blog. It has specified that there will be no fee when users shop on Paytm, and using payment options other than credit cards remains free.
Although they will charge a 2 percent fee (inclusive of taxes) for adding money to the wallet using credit cards, this can be reversed in the form of a gift voucher for amounts of Rs 250 and above. It will be issued within 24 hours of adding the money using a credit card.
Taking on their biggest rival, online payment platform MobiKwik also released a press statement today, declaring that it will continue to offer free uploading of money into their wallet for all users, including credit card users.
MobiKwik’s Founder and CEO, Bipin Preet Singh, has said in the statement, “In order to popularise the government’s vision of a cashless society, we at MobiKwik have decided not to charge 2 percent on credit card recharges so that more people can transact online without having to worry about additional charges.” Mobikwik has more than 55 million users, while Paytm recently crossed 200 million wallet users.