Google Pay introduces transaction fees for bill payments made via credit and debit cards

Google Pay, one of India’s leading digital payment platforms, has introduced a convenience fee for bill payments made using credit and debit cards. This marks a significant shift, as millions of users who previously enjoyed fee-free transactions for essential services like electricity, water, and gas bills will now incur additional charges.

According to Google Pay’s official website, the new charges range from 0.5% to 1% of the transaction amount, plus applicable Goods and Services Tax (GST). However, transactions made through UPI-linked bank accounts remain unaffected, allowing users to continue using UPI for payments without incurring extra costs.

Google Pay’s Shift Towards Monetisation

This move follows Google Pay’s earlier decision to introduce a Rs 3 convenience fee on mobile recharges, which was implemented over a year ago.

A source cited by The Economic Times stated that Google Pay’s decision to introduce platform fees aligns with a broader trend in the fintech sector. As UPI (Unified Payments Interface) adoption continues to grow in India, digital payment companies are exploring ways to make their business models more financially viable.

Google Pay is a dominant player in the UPI ecosystem, accounting for nearly 37% of all UPI transactions, second only to PhonePe, a digital payments platform backed by Walmart. In January 2025, Google Pay processed transactions worth a staggering Rs 8.26 trillion, highlighting its significant market presence.

PhonePe and Paytm Also Levy Platform Fees

Google Pay is not the only digital payment platform charging convenience fees on card-based transactions. PhonePe also levies transaction fees on credit and debit card payments, covering a wide range of bill payments, including water and piped gas bills.

Similarly, Paytm, another major player in India’s fintech landscape, imposes platform fees ranging from Rs 1 to Rs 40 on UPI recharges and bill payments, as per its official website.

These changes indicate a shift in the Indian digital payments industry, where leading fintech firms are monetising specific services to cover their operational costs.

Understanding the Cost of Processing UPI Transactions

A major reason behind this move is the increasing cost of processing UPI transactions. In the financial year 2024 (FY24), the total cost of processing UPI transactions reached Rs 12,000 crore, with Rs 4,000 crore spent on transactions below Rs 2,000, according to The Economic Times.

The Indian government had earlier mandated that no Merchant Discount Rate (MDR) be charged on UPI transactions below Rs 2,000 to encourage digital payments. In 2021, the government introduced reimbursement policies to cover these costs. However, for transactions exceeding Rs 2,000, merchants are allowed to charge a 1.1% fee, helping them recover a portion of the transaction costs.

UPI Transactions Continue to Surge in India

Despite the introduction of convenience fees by major players like Google Pay, PhonePe, and Paytm, UPI usage in India continues to rise. In January 2025, UPI transactions hit a record high of 16.99 billion, amounting to Rs 23.48 trillion in total value.

This represents a 1.55% increase in transaction volume and a 1% rise in transaction value compared to December 2024. On an annual basis, UPI transaction volume grew by 39%, reaffirming its position as the preferred digital payment method for millions of Indians.

With the growing adoption of digital payments, fintech companies are expected to introduce more monetisation strategies while ensuring that UPI remains a cost-effective and user-friendly payment option.