A recent consumer focussed survey has revealed that a huge majority of Indians want the government and public sector undertakings to do away with convenience fees altogether. They also feel that the high convenience fees will act as a deterrent to the Digital India growth story
As much as 93 per cent Indian consumers want the government and utility services, such as railway ticketing services offered by the IRCTC, to scrap convenience fees. Consumers also want caps to be put on such convenience fees for such transactions and online ticketing services. A huge 75 per cent consumers, in fact, feel that excessive convenience fees charged for digital payments are becoming a hindrance in the way of a cashless India.
These findings appear in a recent report published by Localcircles, a Delhi-based market research company on September 13, 2022.
The nation-wide survey involved 30,000 respondents across 344 districts, with 65 per cent of the respondents being male and the rest 35 per cent being female. About 46 per cent of the respondents were from tier-I cities, with 34 per cent from tier-II, and the rest 20 per cent from tier–III, tier-IV and the rural districts.
According to the survey, most consumers have complained that the ‘convenience fees’ being charged across various digital payments and transactions are very high.
A convenience fee is an extra charge which one has to pay for transacting with a merchant. For example, when buying a railway ticket, one is charged a convenience fee of up to 10 per cent, according to the Ministry of Railways. In addition, Paytm recently started charging a small convenience fee of Rs 1-6 for mobile recharges, according to various media sources.
Convenience or service charges are costs imposed on digital payments because these payments entail some expenses on IT infrastructure utilisation. Businesses pass on these costs to the consumers by way of a fixed fee or variable percentage on the transaction amount, in order to safeguard their margins. In the end, most consumers feel they are forced into paying convenience fees, the survey revealed
The survey revealed that 75 per cent of the respondents felt they had to pay the convenience or service charges out of compulsion though they strongly “disapproved of it”.
Only 15 per cent of the consumers said that they would happily pay a convenience or service fee, and 9 per cent consumers even said they would instead buy the respective ticket or service at a physical counter instead of buying it online because of the imposition of convenience fee.
Nalin Agrawal, CEO and co-founder, Snapmint, a e-commerce website, said, "Convenience fees do hamper consumer experience. We have seen that adding convenience fee to any digital payment reduces conversion rates by as much as 60-70 per cent."
A good majority of consumers (93 per cent) want the government and public sector enterprises to stop charging convenience or service charges.
Incidentally, when the Reserve Bank of India (RBI) floated the idea of introducing a charge for Unified Payments Interface (UPI) payments, it created quite an uproar among consumers. The government then had to step in and assure the public that UPI would remain a free service.
One of the main complaints among consumers, which Localcircles highlighted in their report, is that convenience fee is charged per person and not per transaction, which is a huge hindrance.
For instance, if one is booking a train ticket for a family of five in the same booking window, then IRCTC will charge a convenience fee for each of the five travellers and not on the single transaction which one is making for booking a ticket for the the family of five travellers.
Most consumers in the survey said they have been charged a convenience fee and that the levy of such fees is always mentioned at the point of checking out or before the final payment and never upfront.
About 63 per cent of consumers felt that an absolute figure like Rs 50 at most should be the capped convenience fee, while 30 per cent consumers said that the convenience fee should be capped at 0.5 per cent of the transaction value.
Many consumers also said that they have “refrained from conducting cashless or digital payment transactions” at certain times due to the imposition of these charges.
The survey cited the example of a parent who reported that he had to pay over Rs 2,000 as a convenience fee for his child’s quarterly school fee.
The report concluded that “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, such as PSUs, IRCTC, and others, and find a way to cap convenience charges levied by private entities on digital transactions, it could go a long way in driving up digital payment transactions, moving us further towards a cashless India.”
Digital payments have advanced in the country with the rapid adoption of UPI and other payment mechanisms in recent years. The UPI network processed about Rs 10.73 lakh crore worth of transactions in August, as per data published by National Payments Council of India (NPCI). This is the highest volume of transactions processed by UPI in a single month.