On credit and debit card payments via Google Pay, convenience fees are now charged

Google Pay, a major player in the Unified Payments Interface (UPI) ecosystem, has introduced a convenience fee for bill payments made through credit and debit cards. This charge applies to payments for utilities such as electricity, water, and cooking gas. However, UPI transactions conducted directly from bank accounts remain free. The newly implemented fees range from 0.5% to 1% of the transaction amount, along with the applicable Goods and Services Tax (GST).

PhonePe, which holds the top position among UPI payment providers, also imposes a convenience charge for bill payments made via credit and debit cards for services like water, piped gas, and certain electricity bills. Meanwhile, Paytm applies a platform fee between Rs 1 and Rs 40 on recharges made through UPI, as well as various utility bill payments, including gas, water, and credit card settlements. Google Pay’s decision follows its earlier move to introduce a Rs 3 convenience fee for mobile recharges over a year ago.

A recent report highlighted an instance where a customer was charged approximately Rs 15 as a “convenience fee” when paying an electricity bill with a credit card. The charge was listed as a processing fee for card transactions and included GST. A source familiar with the industry noted that such fees are standard practice and that Google Pay, which had previously absorbed these costs, has now opted to pass them on to users. Information on the company’s website explains that this convenience fee helps cover the cost of processing credit and debit card payments, though no charges are applied to UPI transactions made directly from a bank account.

Industry insiders suggest that Google Pay’s introduction of platform fees for bill payments reflects a broader strategy by fintech companies to monetize UPI transactions. As digital payment adoption grows, service providers are seeking sustainable revenue models to offset processing costs. Holding a significant position in the market, Google Pay processes nearly 37% of UPI transactions, making it the second-largest platform after Walmart-backed PhonePe. In January alone, it handled transactions amounting to Rs 8.26 lakh crore.

Despite UPI’s widespread popularity, fintech firms have struggled to generate substantial revenue from these transactions. A PwC analysis estimates that processing UPI person-to-merchant transactions incurs costs of approximately 0.25% of the transaction value. In the 2023-24 financial year, the cost of handling UPI transactions reached nearly Rs 12,000 crore, with Rs 4,000 crore attributed to small transactions under Rs 2,000.

To promote digital payments, the Indian government mandated the waiver of the Merchant Discount Rate (MDR) on UPI transactions below Rs 2,000 starting in 2020. In 2021, it began reimbursing the MDR costs for such transactions. However, for payments above Rs 2,000, a merchant fee of 1.1% is permitted. An industry expert highlighted that while the government has played a crucial role in UPI’s expansion by subsidizing costs for small transactions, platforms have limited ways to directly generate revenue from users.

Despite financial challenges, UPI continues to grow rapidly. In January 2025, it recorded 16.99 billion transactions, amounting to Rs 23.48 lakh crore. This represented a 1.55% increase in transaction volume and a 1% rise in value compared to December 2024, with year-on-year growth reaching 39%.