High charges for digital payments an obstacle for cashless India: Survey

The coronavirus pandemic fuelled the purchasing of products and services. But with the convenience of digital payments, has come a common consumer complaint of high convenience fee levied by various service providers for online transactions, which LocalCircles has been receiving over the last 12 months.

A convenience fee is a charge that consumers pay 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.

Consumers using credit cards have to pay an additional charge levied on merchants by the banks and network providers who in turn pass it on to the consumer.  

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 at least for government and its related entities and cap it for private entities. The survey received more than 30,000 responses from across 344 districts of India. About 65% respondents were men while 35% 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 paid for online services 

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. 

75% consumers reluctantly pay convenience charges

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 company to company. About 75% of consumers said they “Pay disapprovingly”, while 15% said they “Happily pay, at least I don’t have to stand at a counter”. 

93% consumers want government, PSUs to stop charging service charges  

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, as per the survey.

Upper limit for service charges required 

Currently, there are no rules to regulate convenience fee in India, with such charges left to the discretion of digital service providers. 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 Rs 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 ₹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, as per the survey.