Google Pay Introduces Platform Fees for Bill Payments: A Sign of UPI Monetization

Google Pay has started implementing platform fees on utility bill payments, signaling a significant shift in how UPI platforms are monetizing transactions. The convenience fee, which ranges from 0.5% to 1% plus GST, is now applicable on payments made using credit or debit cards. Previously, these transactions were free for lower-value payments.

Google Pay Follows Industry Trend

This move follows a similar step taken by other UPI platforms such as PhonePe and Paytm, who have already introduced convenience fees on card payments for utility bills. Google Pay had previously introduced a Rs 3 convenience fee for mobile recharges over a year ago, indicating a clear shift toward charging for services that were once free.

What Does This Mean for Users?

For example, one customer recently paid approximately Rs 15 as a “convenience fee” when settling an electricity bill using a credit card. This charge, which also included GST, is being referred to as a “processing fee” for debit and credit card transactions. While these charges may seem small, they indicate a larger trend of UPI platforms looking to recover payment processing costs.

Why the Shift to Platform Fees?

An industry insider explained that Google Pay’s decision to introduce platform fees is part of a broader move within the fintech sector to monetize UPI transactions. As UPI usage increases, companies are seeking a balance between growth and sustainable revenue. The costs of processing UPI transactions, especially when using cards, can be high, and these new fees aim to cover some of those expenses.

Google Pay’s Market Presence

Google Pay continues to hold a significant portion of the UPI market, accounting for around 37% of UPI transactions. In January, the platform processed UPI transactions worth Rs 8.26 lakh crore, making it one of the leading players in the digital payments space.

The Industry Standard

Charging platform fees for utility payments is becoming standard practice across the UPI ecosystem. While Google Pay has introduced this fee for card transactions, UPI transactions linked directly to bank accounts remain fee-free. Other platforms, such as PhonePe and Paytm, have also implemented similar charges. PhonePe applies fees for utility bill payments and water, gas, and electricity bills. Paytm charges platform fees ranging from Rs 1 to Rs 40 for various UPI recharges and utility bill payments.

The Need for Monetization

Despite UPI’s massive growth, the revenue generated from it has not been significant for fintech firms. According to PwC’s report, processing UPI transactions costs stakeholders around 0.25% of the transaction value. In FY24, UPI transaction processing expenses amounted to Rs 12,000 crore, with Rs 4,000 crore spent on transactions under Rs 2,000.

The Indian government’s policy, which waives Merchant Discount Rate (MDR) for UPI transactions below Rs 2,000, has played a crucial role in encouraging the adoption of digital payments. However, the absence of MDR on small transactions limits UPI platforms’ ability to generate revenue from low-value payments.

UPI’s Continued Growth

UPI continues to grow rapidly, with January 2025 seeing 16.99 billion transactions worth Rs 23.48 lakh crore. This marks a 1.55% increase in transaction volume and a 1% rise in transaction value from December 2024. Year-on-year, the platform has experienced a growth of 39%, showing the continued rise of UPI as a preferred mode of digital payment.

Conclusion

As UPI’s adoption grows, fintech platforms like Google Pay are shifting toward monetizing transactions to offset rising processing costs. While these new fees may raise concerns for some users, they highlight a necessary evolution in the digital payments ecosystem. As UPI continues to evolve, it’s likely we’ll see more platforms following suit, balancing growth with the need for sustainable revenue.