Indian users who rely on UPI (Unified Payments Interface) for digital transactions may soon have to pay a service fee for using UPI payment apps. This comes after the government significantly reduced subsidies provided to merchants for UPI transactions, prompting payment service providers to shift the cost onto customers.

UPI Transactions to Get Costlier

Previously, the government subsidized UPI transactions below ₹2,000, but with subsidy cuts, companies like Google Pay, PhonePe, and Paytm have started implementing transaction fees. For example:

• Google Pay has introduced a 0.5% to 1% charge on transactions via debit and credit cards.
• PhonePe and Paytm have begun applying additional fees on mobile recharges.

This means that digital transactions via UPI apps could now come with additional costs, making payments more expensive for users.

Government Subsidy Cuts on UPI Payments

Previously, the government covered the cost of small-value UPI transactions to promote a cashless economy. However, this financial support is now being scaled back:

• The annual government expenditure on merchant UPI transactions was ₹12,000 crore, of which ₹4,000 crore was allocated to transactions below ₹2,000.
• The subsidy allocation for UPI transactions has been reduced drastically over the years:
  • ₹2,600 crore in 2023
  • ₹2,484 crore in 2024
  • Only ₹477 crore in 2025

With such a sharp decline in subsidies, payment service providers are now shifting the burden onto users, making digital payments potentially more expensive.

UPI’s Growing Role in Daily Transactions

UPI has become an integral part of daily life, with 60-80% of all transactions now being conducted through this digital payment system. India records crores of UPI transactions every day, involving financial exchanges worth hundreds of crores.

Common Uses of UPI Payments

Apart from shopping, UPI is widely used for a variety of services, including:

• Fuel payments (petrol, diesel)
• Mobile and DTH recharges
• Electricity, water, and gas bill payments
• Train, flight, and movie ticket bookings
• FASTag recharges and metro card top-ups
• Insurance premium payments
• Money transfers between individuals and businesses

Given its widespread usage, any additional charges on UPI transactions could significantly impact a large number of users across India.

Conclusion

The reduction in government subsidies has led to UPI payment apps introducing service charges, making digital transactions potentially costlier. While UPI remains a convenient and widely used payment method, customers must now be prepared for additional charges when using these apps for transactions.