Convenience fees on digital payments are blocking India's cashless economy goal

Currently, there are no rules to regulate convenience charges in India.
Inconvenience is deeply regretted.
Inconvenience is deeply regretted.
Photo: Danish Siddiqui (Reuters)
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Indians aren’t taking kindly to paying heavily for digital payments.

Up to 75% of them felt that hefty convenience charges on services like ticket-booking were uncalled for, a survey by social community platform LocalCircles has shown. It indicates the absurdity of the service fee or convenience fee rates.

Yet, an overwhelming 90%, according to the survey, would continue to pay—willingly or disapprovingly—these high rates simply to avoid visiting a physical counter.

The LocalCircles survey involved responses from 30,000 citizens across 344 districts.

What are convenience charges?

A direct source of revenue, convenience charges are levied to cover technology costs, LocalCircles said. An additional amount, guised as internet handling fee or facilitation fee, too, is sometimes charged by businesses to make up for their dues to payment processing companies.

Usually, it is levied “per unit” of service availed, and varies from one service provider to another. Such commercial charges do not fall under the purview of the Reserve Bank of India (RBI).

The RBI, however, has elicited a feedback on the matter: Should convenience charges remain the same irrespective of, for instance, the number of tickets booked or should it be based on the overall value of a transaction.

“Being an additional load for the customers, such charges can create friction in smooth adoption of digital payments,” the central bank said in a discussion paper in August (pdf).

Government agencies also charge service fees

The Indian Railway Catering and Tourism Corporation (IRCTC), which comes under the union ministry of railways, charges a convenience fee of up to 10%. Schools, too, charge a certain amount on online payment of tuition fees.

The survey shows that 93% Indians want government companies to abandon such charges, even if only to boost the “Digital India” initiative.

No cap on convenience fee

Currently, there are no rules to regulate convenience charges in India. Many service providers add them just before check-out or the final payment. That’s not being upfront, the survey respondents said.

Most consumers also want such fees to have an upper limit.