Should convenience fee on movie, flight tickets be regulated? RBI asks public

The Reserve Bank of India (RBI) in its discussion paper on charges in payment systems says that convenience fee on movie or flight tickets can create friction in smooth adoption of digital payments, more so if the reasons or manner of levy are not transparent or apparently justifiable.

"A digital payment transaction is largely value independent. This means that the same effort and use of infrastructure is involved irrespective of the value of transaction. A transaction to book one or more movie tickets involves the same effort from the user and the service provider. Hence, should the convenience fee be based on the number of tickets booked in a transaction, or should it be uniform irrespective of the number of tickets? Alternatively, should it be a mix of the two? These issues need to be thought through," the banking regulator notes in the discussion paper.

"Being an additional load for the customers, such charges can create friction in smooth adoption of digital payments," the central bank points out.

Convenience fee is usually a fixed fee irrespective of the booking amount but can vary based on service availed. It also varies from one service provider to another.

To be sure, convenience fees levied by service providers or online platforms are commercial in nature, and thus do not fall under direct purview of RBI. "Since the purpose of this document is to elicit feedback, which in turn can be passed on to the concerned stakeholders, some discussion points on these charges and a few questions thereon have been included," the RBI says.

Generally, convenience fee is levied "per unit" of service availed and may be same for all modes of digital payments. For instance, an online platform may charge convenience fee from customers for booking movie tickets or flight tickets. Customers may prefer to pay these convenience charges (for availing the facility of booking tickets from the comfort of their home) instead of travelling to the company's booking counters and standing in queues for purchasing the tickets.

The convenience fee offers a direct and sustainable source of revenue for such online platforms, and sometimes, it is the major source of revenue for them, says the RBI. This is seen, for example, in the case of online ticket booking platforms. It helps moviegoers to avoid queues at counters and to handle physical cash; it also enables the theatres to serve a large volume of customers without having to employ requisite staff.

The convenience fee can come in different guises – internet handling fee, facilitation fee, etc. – but the intent is to recover something more than the cost price of the product or service, the RBI adds.

"Should convenience fee be regulated? By whom?" the RBI asks in the discussion paper, which is available for public comments till October 3, 2022.

The central bank has also sought comments on whether such charges should be the same irrespective of the number of tickets booked or based on value of a transaction.