Digital payment service Paytm has announced that it will now levy a 2% additional charge for its users who recharge their wallets through their credit cards. This is being done to plug a loophole in its zero-fee transfer process, where some financially savvy users (surprisingly many of them employees of national financial institutions) exploited this model to rotate money. However, to ensure that genuine users don’t lose money, Paytm will return the 2 percent charge in the form of coupons that can be used on its platform, or with third parties like Swiggy and Uber. Users recharging their wallets through a┬ádebit card, net banking, or UPI/ IMPS systems, are not affected by this move.

In an official blog post, the company clarified, “As you are aware, in the month of November we launched a new payment platform for small merchants at 0% fee. Millions of merchants are accepting Paytm at their shops/establishments. They prefer to take money to their bank accounts and as a promise to democratizing payments, we made transfer to bank fee at 0%. This was extended to all our users as many shopkeepers/merchants also used their personal Paytm accounts to accept payments at their Shops.”

The post further clarified the move, stating, “This 0% transfer to bank fee left an opportunity to misuse this great service meant for our valuable customers. We saw a disturbing trend when many users started funding their Paytm wallet with their credit cards and transferring it 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.”

Justifying the charge, the company said, “Paytm pays fee to card networks or banks whenever you use any payment instrument like any other online commerce company. Paytm pays a hefty charges when you use your credit card to card networks & issuing banks. If user simply adds money and takes to bank, we lose 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.”