As more companies pass card fees on to customers, Google Pay has started charging convenience fees for bill payments made by debit or credit card in India.
According to the Economic Times, electricity and gas bill payments will now incur a fee of 0.5% to 1%, including goods and services tax. These payments were previously free for low-value transactions. The Economic Times cited an instance where a customer was charged roughly ₹15 ($0.17) for paying their electricity bill with a credit card.
However, these fees apply only to card-based transactions—United Payment Interface (UPI) transactions linked directly to bank accounts will continue to be exempt from convenience fees.
Prominence to Profitability
Google Pay’s move aligns with its competitors, such as Walmart-backed PhonePe and Paytm, which already impose processing fees for card payments on bill transactions and recharges. These fees are a response to the rising costs fintech firms incur when processing transactions on UPI.
The payments platform has skyrocketed in popularity among consumers, with 16.99 billion UPI transactions recorded in January alone. However, this prominence hasn’t translated into profitability for the fintech firms operating on the platform.
According to the Economic Times, fintech companies incurred ₹120 billion ($1.38 billion) in costs for processing UPI payments in the fiscal year 2024, many of which were low-value transactions.
Improvement Initiatives
India’s government has worked to improve UPI’s profitability for payments companies through several initiatives, including waiving the Merchant Discount Rate (MDR) for UPI transactions below ₹2,000 four years ago.
More recently, the country delayed the implementation of market share caps for the platform by two years. The original proposal would have limited fintechs to a maximum 30% share of the total transaction volume processed on UPI.
This decision directly impacted Google Pay and market-leader PhonePe. PhonePe currently holds roughly 48% of UPI payments, compared to Google Pay’s 37%. Despite these efforts, platforms continue to face challenges in monetizing their services on UPI and will likely keep exploring new revenue streams.
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