1 in 2 consumers pay extra on most online orders; majority want convenience fee-free shopping

Hyderabad: What is the common element in the price breakdown of an online movie ticket and a flight ticket? They both, most probably, will have a minor mandatory fee called a convenience fee.

Almost anyone who has shopped would have encountered this fee in the bill or invoice. It has become so ubiquitous that people are now questioning the reason for its addition to the price they pay.

According to a latest survey by LocalCircles, one in two consumers report paying a convenience fee for the majority of their product and service purchases, and eight in 10 say they will prefer platforms that do not levy such a fee.

What is a convenience fee?

The concept of a convenience fee is not new. However, the talk around its addition has become more prominent with the rise in e-commerce and online transactions.

As when booking an air, train or movie ticket, fixed charges are included in the payment of electricity or broadband bills too. Recently, Google Pay has started levying a convenience fee on payments made for utilities such as cooking gas and electricity, as reported by The Economic Times.

How the convenience fee constantly keeps changing

Many times, extra charges are levied as a convenience fee in the name of packaging, delivery or if the order is below a minimum threshold. The survey stated that in many cases, the convenience fee is not uniform for not just different platforms but also for what is charged by the same platform.

What more, the convenience fee varies in different cities and towns to meet varying delivery charges. In case a product is returned for whatever reason by the customer, the convenience fee is not refunded.

Here is a list of companies that charge a convenience fee.

What does the RBI say about the convenience fee?

According to an RBI paper about charges in payment systems, convenience fees are ‘additional fees levied by service providers/online platforms over and above the cost of service.’ Generally, this fee is levied ‘per unit’ of service availed, and may be the same for all modes of digital payments.

While normally, convenience fees can be up to 3 per cent of the transaction amount. This may seem small, but it can significantly impact the profitability of a business or any transaction if a large sum is involved in the short term or over a period.

The reason to pay a convenience fee is mentioned as the charge for the convenience that consumers enjoy through online modes. For example, the chance to escape the lines by booking movie tickets from home.

The paper also delved into discussing the calculation of value in digital transactions. For example, IRCTC charges convenience fees according to the number of people planning to travel on a ticket and not a single transaction. Its calculation of convenience fees might be different from other places.

That further leads to the need for discussing the regulation of convenience fees across all businesses and payment methods.

Are convenience fees displayed/informed properly?

Although, as per the RBI, the convenience fee is said to be disclosed upfront to the customers by the merchants, complaints are not uncommon about the fee being included among hidden charges or not being informed at the beginning.

It is not only the online platforms that charge convenience fees.

Many stores charge extra when consumers make a card payment, particularly a credit card payment. However, hardly any of these companies display the convenience fee and other side charges prominently before the payment is made.

62% of consumers paid convenience charges for online tickets/services

When LocalCircles asked consumers about their experience with convenience fees while booking tickets/services online in a year, out of 13,357 who responded to the question, as many as 62 per cent of respondents said they had been charged a convenience charge for all or a majority of tickets/services purchased online.

52% of consumers paid a convenience fee for online products

Similarly, when asked about their experience with online shopping for groceries, fashion and beauty products, as much as 52 per cent of consumers said that they have been charged a convenience fee for all or a majority of the products they bought online in the last 12 months.

Some platforms do not charge a convenience fee if the value of the order is above a certain value, and some others that are still getting established tend not to levy such a fee.

78% of consumers prefer platforms that do not levy a convenience fee

The survey showed that many Indian consumers also prefer platforms which do not levy convenience fees. Out of the 13,273 respondents, who were asked about how their choice of business changes with the presence or absence of convenience fees, 78 per cent stated that they are ‘very likely’ to choose an online business without the fee.

Extent of survey

The LocalCircles survey received over 40,000 responses from consumers located in over 321 districts of the country; 64 per cent respondents were men while 36 per cent respondents were women, 42 per cent respondents were from tier 1, 22 per cent from tier 2 and 36 per cent respondents were from tier 3, 4 and rural districts.