After the government stops providing benefits on low -cost payments made through UPI transactions and RuPay debit cards, such UPI apps are now looking for ways to make money from their big customer base by adopting methods like levying facility fees on certain types of transactions.
For example, Google Pay has recently implemented a facility fee of 0.5 to 1 percent on paying electricity or gas bills using credit or debit cards. Earlier such facilities were available free of cost at low prices. However, these services are still available for UPI connected to bank accounts. Similarly, PhonePe and Paytm have also imposed convenience fees on various bill payments, including credit card payment or mobile recharge in addition to various expenses. Expressing his opinion on the matter, an official of a major organization said that a comprehensive customer base can benefit from charging such facility with price -added services. In Peer-to-Cracha (P2M), the margin is already with the third party application providers (TRAPs). Even though they are taking a small part of the total fee, they are still doing profitable business.
Currently, every PSP and TRAP providing this type of service receives only 5 basis points or an equal share of 0.05 percent on each payment. However, 0.25 percent of the entire transaction value is shared between the sending and receiving banks.
To encourage such payments, the government initially exempted the merchant discount rate (MDR) for transactions of less than Rs 2,000 and payment made through RuPay Debit Card. To compensate for its cost, banks started various schemes for PSP and TPAP. However, after the financial year 2024, such schemes have declined drastically. For the year 2024, where a provision of Rs 2484 crore was made for such schemes, it has been reduced to Rs 2000 crore for the year 2025 and now it has been reduced to Rs 437 crore for the year 2026. In addition to such cuts in subsidy, the convenience fee becomes a source of revenue for UPI apps. Many of these companies charge the distribution fee by selling insurance, mutual funds, loans or even airplanes and travel tickets to each other’s customers.
