3 in 4 consumers say excessive convenience fee for digital payments coming in the way of cashless India

Sep 12th, 2022, New Delhi: It would be no exaggeration to say that the COVID-19 pandemic has fuelled the already changing ways in how consumers purchase products and services online, from booking flights, train and bus tickets, shopping, banking, to name a few. Prime Minister Narendra Modi maintains that India is a big digital-global power. The PM earlier this year had urged citizens to try the experiment of ‘Cashless Day Out’. But with all the convenience that has undoubtedly been created by digital payments, a common consumer complaint that LocalCircles has continued to receive in the last 12 months is that of high “convenience fee” levied by various service providers for digital transactions. A convenience fee is a charge that consumers end up paying to digital service providers for the service or the convenience they offer, which could be for payment of electricity, broadband, railway ticket or air ticket. IRCTC, the railways ticketing website, under the Ministry of Railways, charges a convenience fee of up to 10%. Similar charges are levied to book a movie ticket online, a safari on a State Government website or paying school fee. Recently, a parent had cited on LocalCircles how they incurred over INR 2000 as convenience fee for paying the quarterly fee of children. Consumers using credit cards face an additional charge levied on merchants by the banks and network providers who in turn pass it on to the consumer. Recently, the RBI made some comments on UPI charging a transaction fee in future which was later clarified by the Government explicitly stating that UPI transactions will continue to remain free and platforms need to find other ways to monitise.

Taking cognisance of the issue of convenience fee being levied for many services, LocalCircles conducted a nationwide survey to understand consumer pulse on convenience fees charged by digital service providers that facilitate online services. It also sought to know from consumers if they feel that the government should eliminate such charges atleast for government and its related entities and cap it for private entities. The survey received more than 30,000 responses from citizens across 344 districts of India. 65% respondents were men while 35% respondents were women. 46% respondents were from tier 1, 34% from tier 2 and 20% respondents were from tier 3, 4 and rural districts.

77% consumers say they are being charged convenience or service charges for majority of the tickets or services they book online

Many ticketing or services purchased online require consumers to pay a certain fee as convenience charges, particularly for booking tickets. To the question that asked consumers their experience with convenience charges in the last 12 months, 38% said they have been charged “Convenience fee for all services purchased online”, 39% paid “Convenience fee for majority of the services purchased online”, and 18% were “Charged convenience fee only for a few services purchased online”. There were only 2% of consumers who have “Never been charged a convenience fee for services procured online”, while 3% couldn’t say. The survey result indicates that 77% of consumers are being charged convenience or service charges for the majority of the tickets or services they book online. This question in the survey received 7,910 responses.

75% consumers pay convenience or service charges for online purchase of tickets or services though they disapprove of it

Convenience or service charge is levied to cover IT costs in some cases. In other cases, in addition to internal IT costs levied in form of convenience charge, an additional amount is charged by businesses to cover the cost they pay to payment processing companies when a customer makes a payment using an electronic or digital payment mechanism. The fee is typically a fixed amount or a percentage of the sale, which varies from one company to another. The following question sought to know how consumers proceed when they see convenience or service fee being levied before opting to purchase an online ticket or service purchase. In response, 75% of consumers said they “Pay disapprovingly”, while 15% said they “Happily pay, atleast I don’t have to stand at a counter”. There were only 9% of consumers who would “Buy the ticket or service at physical counter instead”, while 1% couldn’t say. This question in the survey received 6,831 responses.

93% consumers want the Government and its PSUs to stop charging convenience or service charges and promote Digital India

Consumers have also complained that in many cases this convenience fee is charged per person and not per transaction. This means that if a person is booking a ticket for three passengers in the same booking, they would be charged a convenience fee per passenger. Citizens on the LocalCircles platform have reported that even government affiliated sites like IRCTC, power corporations, etc. charge a certain fee as a convenience charge when booking a ticket or making payments for services online.

There have been many suggestions in the past that the Government of India should prohibit levying of any convenience fee and other charges on the use of any digital mode of payment to a merchant, which in return could boost its effort to promote Cashless or Digital India. In the following question that asked consumers if the Government should eliminate convenience fee for online bookings of services or tickets sold by the Government and its PSUs, 93% answered “Yes”. There were, however, 4% of consumers who said “No”, while 3% couldn’t say. This question in the survey received 7,448 responses.

Most consumers want convenience or service charges to have an upper limit as absolute value of INR 50 or 0.5% of transactions value

Currently, there are no rules to regulate “convenience fee” in India, and most digital service providers continue to charge consumers such fee. Consumers say that most service providers add convenience fee just before checking out or making the final payment and not share it upfront. The final question asked consumers how the convenience charges for online ticketing and service purchases should be best kept in check. In response, 63% said it should “Be defined as an absolute value with a maximum of INR 50”, while 30% want it to “Be capped at 0.5% of the transaction value”. Only 3% said, “Don’t take any action and let service providers decide” while 4% couldn’t say. The findings indicate that most consumers want convenience or service charges to have an upper limit as an absolute value of INR 50 or 0.5% of transaction value. The question in the poll received 8,082 responses.

Many consumers in the community discussions over the last 12 months have been expressing how at times they have refrained from conducting a cashless or digital transaction due to these charges. Be it visiting the school to drop the fee check instead of paying digitally or making a check payment to a travel agent instead of paying by credit or debit card, the examples are aplenty.

Undoubtedly, India has seen exponential growth in digital payments over the last 6 years since demonetisation. The pandemic has accelerated the adoption of digital payments further. However, there is still a long way to go. In most tier 2, 3 & 4 towns, digital payments are still not the primary mechanism for payment, it is cash. If India is able to implement some of the changes proposed i.e. removal of convenience fee for any Central or State Government related digital payments including affiliated entities like PSUs, IRCTC, etc. and find a way to cap convenience charges levied by private entities on digital transactions, it could go a very long way in driving up digital payment transactions, moving us further towards a Cashless India.

LocalCircles will share the findings of this survey with the concerned Government authorities and would request them to consider taking actions to reduce the “convenience fee” pinch currently faced by the Indian consumer.