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Wed. Sep 28th, 2022
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Three in four consumers feel the excessive convenience fee for digital payments is coming in the way of India transforming into a cashless society, according to a survey conducted by Local Circles.
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.
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 Rs 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. Many have expressed how at times they have refrained from conducting a cashless or digital transaction due to these charges.
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.
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.
Moreover, 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.
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.
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 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.
Most consumers want convenience or service charges to have an upper limit as absolute value of Rs 50 or 0.5% of transaction value
Currently, there are no rules to regulate “convenience fee” in India. 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”.
“Undoubtedly, India has seen exponential growth in digital payments over the last six 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,” said Sachin Taparia, founder of LocalCircles.

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