On 2/24/2016, the Cabinet, chaired by Prime Minister Narendra Modi, approved the withdrawal of convenience fees, service charges and surcharges on credit cards and digital payments. The government also mandated that payments above a certain threshold are to be made by digital means. Curbing tax avoidance and encouraging the growth of cashless transcations were cited as primary reasons.

“The promotion of payments through cards and digital means will be instrumental in reducing tax avoidance, migration of government payments and collections to cashless mode.”

“The essential features of the proposals for promotion of payments through cards and digital means include steps for withdrawal of surcharge, service charge and convenience fee on card and digital payments currently imposed by various government departments, organizations…,” according to an official statement.

In the Billing and Payments world, this move has generated a lot of excitement.

Currently, a Service charge is levied by the Government on payment gateways. Payment gateways in turn, pass this on to their customer( the vendors) who in turn recoup this fee from their customer, the ultimate consumer.

Similarly, the Government currently charges vendors using payment gateways, a Convenience fee. On credit cards, total fees are in the 1 – 2.5% range. No prizes for guessing who bears the brunt. Just to spell it out, it is the consumer!

With these fees going away (in some form), the cost of doing business is reduced and the burden of bearing this cost is lifted off of the customer. What is expected is, a surge in online transactions from customers, primarily located in the cities. They will not only find this kind of bill pay, convenient but now also easier on their wallets.

What makes this even more fabulous to the billing and payments industry, than it already is, is that when this removal of fees is extrapolated in the context of the Governments financial inclusion policy. The Reserve Bank of India recently approved licenses for setting up of payments banks, with the objective of greater financial inclusion to migrant labour, low income households, small businesses and other unorganised sector entities. This would help card and online payment to spread among the poorer strata.

The number of transactions will see exponential growth, with the use of Rupay, in conjunction with the Jan Dhan Yojna. RuPay cards presently has over 35% of market share in Indian card payment scheme behind Visa which has over 50% of the market share. More than 20% of the transactions in India is done through RuPay cards in India today.

Below are the current figures for online payment. These new measures will increase these figures manifold, resulting in gains for the Billing and payments industry and the ultimate consumer.


 As a billing, notification and payment processing company, we certainly hope that the adoption of online payments is faster !

Effect of the Service charge lift on digital transactions on the Billing and Payments industry

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