Google Pay begins charging fee for bill payments via credit, debit cards

Google Pay, one of India’s dominant digital payment platforms, has started imposing a convenience fee on bill payments made with credit and debit cards, a shift that ends the era of fee-free transactions for millions of users paying for essential services like power and gas.

According to Google Pay’s website, the newly introduced fee ranges from 0.5 per cent to 1 per cent of the transaction value, in addition to the applicable Goods and Services Tax (GST). However, transactions made directly through UPI-linked bank accounts remain unaffected.

The change follows Google Pay’s earlier decision to impose a Rs 3 convenience fee on mobile recharges over a year ago.

Monetisation strategy

A person familiar with the matter told The Economic Times that the introduction of platform fees by Google Pay reflects a larger industry shift towards monetising UPI transactions. As digital payment adoption increases, fintech firms are exploring ways to make their business models financially sustainable.

Google Pay currently holds a significant share of the UPI market, accounting for nearly 37 per cent of transactions, second only to PhonePe, which is backed by Walmart. In January 2025, the platform processed transactions worth Rs 8.26 trillion.

Phonepe, Paytm levy charges on card payments

The introduction of convenience fees is not exclusive to Google Pay. PhonePe also levies charges on credit and debit card transactions for bill payments, including water and piped gas bills. Paytm, another major player in India’s digital payments space, imposes platform fees ranging from Rs 1 to Rs 40 on UPI recharges and bill payments, as per information available on its website.

Cost of processing UPI transactions

In the financial year 2024 (FY24), the total cost of processing UPI transactions amounted to approximately Rs 12,000 crore, with Rs 4,000 crore linked to low-value transactions below Rs 2,000, according to a report by The Economic Times.

Since 2020, the Indian government has mandated that no Merchant Discount Rate (MDR) – the fee merchants pay for processing digital transactions – be levied on UPI transactions below Rs 2,000 to encourage digital payments. In 2021, the government introduced reimbursements for these MDR costs. For transactions exceeding Rs 2,000, a merchant fee of 1.1 per cent is permitted.

UPI usage continues to surge in India. In January 2025 alone, UPI transactions totalled 16.99 billion, amounting to Rs 23.48 trillion in value. This represents a 1.55 per cent increase in transaction volume and a 1 per cent rise in value compared to December 2024. On an annual basis, UPI transaction volume grew by 39 per cent.