Google Pay Introduces Convenience Fees for Card-Based Bill Payments—What You Need to Know

In a significant shift affecting millions of users, Google Pay has begun implementing convenience fees for bill payments made via credit and debit cards. This change impacts essential services such as electricity and gas payments, marking the end of an era of fee-free transactions for these utilities. Notably, payments made directly through UPI-linked bank accounts remain unaffected.

Google Pay : Details of the Convenience Fee

According to recent reports, the newly introduced fees range from 0.5% to 1% of the transaction value, in addition to the applicable Goods and Services Tax (GST). For instance, a user paying an electricity bill with a credit card might incur a convenience fee of approximately ₹15. This fee is charged per bill payment transaction, regardless of the specific bill or recipient. It’s important to note that the exact fee is displayed at the time of payment within the Google Pay app, ensuring transparency for users.

Industry-Wide Trend

Google Pay’s move aligns with a broader industry trend where digital payment platforms are exploring monetization strategies for UPI transactions. PhonePe, for example, also levies charges on credit and debit card transactions for bill payments, including utilities like water and piped gas. Similarly, Paytm imposes platform fees ranging from ₹1 to ₹40 on UPI recharges and various bill payments. This collective shift indicates a move towards financial sustainability as digital payment adoption continues to rise.

Rationale Behind the Charges

The introduction of these fees is partly attributed to the costs associated with processing UPI transactions. In the financial year 2024, the total cost of processing UPI transactions amounted to approximately ₹12,000 crore, with ₹4,000 crore linked to low-value transactions below ₹2,000. Despite the government’s mandate since 2020 that no Merchant Discount Rate (MDR) be levied on UPI transactions below ₹2,000, the financial burden on payment service providers has prompted the exploration of alternative revenue models.

Implications for Users

For users, this means that while UPI transactions linked directly to bank accounts remain free, those opting to pay bills via credit or debit cards on platforms like Google Pay will now incur additional charges. Users are encouraged to review the fees displayed during the payment process and consider using UPI-linked bank accounts for transactions to avoid these extra costs.

Conclusion

The implementation of convenience fees by Google Pay and other digital payment platforms signifies a notable change in the landscape of online transactions in India. As the industry adapts to the growing demand for digital payments, users must stay informed about these changes to make cost-effective decisions regarding their payment methods.