Google Pay, a prominent UPI (Unified Payments Interface) platform, has begun implementing a convenience fee for utility bill payments, including electricity and cooking gas bills. Previously free for low-value transactions, the service now charges between 0.5% and 1% plus GST for payments made using credit and debit cards.
This development follows the platform’s previous implementation of a Rs 3 convenience fee for mobile recharges implemented over a year ago.
A review by ET revealed that a customer paid approximately Rs 15 as “convenience fee” whilst settling an electricity bill with a credit card. The charge, which included GST, was also described as a “processing fee for debit and credit card transactions”.
An industry insider explained to the financial daily that the introduction of platform fees for bill payments by Google Pay indicates a wider movement towards monetising UPI transactions, as service providers aim to recover payment processing costs. The source added that fintech firms are striving to achieve a balance between expansion and sustainable revenue as UPI usage increases.
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Google Pay maintains a significant market presence, handling approximately 37% of UPI transactions, ranking second to Walmart-supported PhonePe. The platform processed UPI transactions worth Rs 8.26 lakh crore as of January.
According to an informed source, charging convenience or platform fees is standard practice in the industry. The source indicated that while Google Pay previously covered this expense, it has now opted to transfer the cost to users.
Google Pay’s website indicates that while convenience fees apply to card payments, UPI transactions linked directly to bank accounts remain fee-free. The timing of when these charges were introduced remains unclear.
For specific bill payments including water, piped gas and electricity, PhonePe implements convenience fees on card transactions, as stated on their website. Similarly, Paytm levies platform fees between Rs 1 to Rs 40 for UPI recharges and various utility bill payments, including gas, water and credit card settlements.
UPI’s widespread adoption hasn’t translated into substantial revenue for fintech firms. PwC’s study reveals that processing UPI person-to-merchant transactions costs stakeholders approximately 0.25% of transaction value. During FY24, UPI transaction processing expenses reached Rs 12,000 crore, with Rs 4,000 crore spent on transactions under Rs 2,000.
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The Indian government’s policy since 2020 has waived MDR for UPI transactions below Rs 2,000 to boost digital payments. From 2021, the government began covering MDR costs for these smaller transactions. Transactions exceeding Rs 2,000 permit a 1.1% merchant fee.
“The Indian government has played a crucial role in ensuring UPI’s growth, covering the costs associated with low-value transactions to encourage adoption,” an industry executive said. “However, the absence of MDR for smaller transactions has left UPI platforms with limited avenues to generate revenue directly from users.”
UPI’s growth trajectory remains strong, with January 2025 recording 16.99 billion transactions worth Rs 23.48 lakh crore. This shows a 1.55% volume increase and 1% transaction value growth from December 2024, whilst demonstrating 39% year-on-year growth.
