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When you're booking tickets for a flight, train, or a movie and the prices look good, then all of a sudden, a ‘convenience fee’ shows up to jack up the final cost. Recently, convenience fee was in news due to a flip-flop in the government decision asking IRCTC to share half of this fee earned from passengers.
What is it?
Convenience fee is charged by a seller/platform when a consumer completes a transaction electronically. It may sound ironic but consumers actually pay more for going the ‘cashless’ way, instead of paying cash and buying physical tickets. Platforms argue that convenience fees help them cover the costs for putting up and maintaining the digital payments infrastructure. They justify ‘convenience fee’ as the charge for booking from the comfort of your home, instead of queueing up at their office.
Why is it important?
Convenience fee offers a direct and sustainable source of revenue for online transaction platforms, which sometimes is their only source of income. For ticket booking platforms, apart from convenience fee, the other sources of revenue could include cancellation charge, rescheduling charge, advertisement, cross-selling products and services, and commissions/incentives from service providers and card companies based on the volume of sales generated.
From a consumer perspective, convenience fee appears to be a necessary evil. It helps you avoid queueing up at ticket counters or handling physical cash. It also enables the sellers to serve a large volume of consumers without having to employ ground staff. For platforms, it ensures that there’s enough payback from existing investments to facilitate a growing volume of transactions without a proportionate increase in costs. So, there is a direct and scalable impact on bottomline from the convenience fees we pay.
Why should I care?
People who use online platforms quite often, must be familiar with convenience fee. Convenience fees are usually a fixed fee irrespective of the booking amount, but can vary based on your location, type of transaction and mode of payment. For instance, from September 1, 2019 onwards IRCTC started charging ₹15 (plus GST) on booking of non-AC Railway tickets and ₹30 on AC tickets. For ticket payments done online either through BHIM or UPI, IRCTC charges a lower convenience fee.
Similarly, if you wanted to book a 3D IMAX movie ticket for upcoming superhero flick Eternals on the opening day, Bookmyshow charges ₹32 as convenience fee plus ₹5.76 GST on a base ticket that costs ₹330 in Chennai. But for a similar ticket in Delhi, the convenience fee is ₹54 for a ₹490 base ticket. If you use Makemytrip to book the 4.45 a.m. Chennai to Mumbai flight for December 1, the convenience fee is ₹290 for a ₹1,830 fare, but the convenience fee is ₹299 on Paytm or ₹300 if you directly book the flight from the IndiGo website.
You may not have much choice about paying convenience fees, but you are paying only the services you use, without breaking a sweat or wringing hands in front of a middle-man who reigned supreme just some years ago. Of course, some platforms such as Easemytrip, and ones in the future will attempt to build business models that may avoid charging convenience fees directly to the user. The onus is on consumers to assess the final cost, service level and other factors when they transact on such platforms. Standardisation of convenience fee for each product/service will help streamline the systems and boost awareness as well as growth.
The bottomline
Payments today would be inconvenient without convenience fees!
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