Sunday, May 02, 2010

The curious case of convenience charges

The inspiration for this article lies in Gul Panag's tweet. We have all been paying that 2% extra when we make payments by credit card at some retail outlets. The IRCTC also charges between Rs. 10-40 as internet booking charges. And multiplexes too having been charging anywhere from Rs.40 onwards as "convenience charges" for internet booking.

Everybody asks the same question- "Why should we pay these charges, over and above the prices?" And people are right. The primary idea of introducing technology is to improve convenience and bring down costs for both the service provider as well as its user. In case of the Railways, internet booking has brought in more transparency with respect to reservations of the tickets. All it required was setting up of the software and secure payment gateways to put the system up in place. May be a few extra servers to handle the extra users who might log into the system. But for the Railways, this is not a very big investment. They already had a reservation software in place, for their use and servers to handle reservation systems. It has helped them reduce dependence on man power, who are unionised and definitely cost more than a set of servers and fiber optical cables and bandwidth. But still they charge that service charge and also 1.8% of the total fare, if you pay by credit card. This is disadvantageous to those who use technology that actually reduces burden on the counter staff.

For multiplexes too, the case is even more curious. They have an interactive website already in place, to display the movie show timings in their screens all across India. They too, needed to just setup the software to book the tickets and secure payment gateways. Booking through the internet gives them a guaranteed customer, compared to those coming on the spot. And it does reduce a lot of man-power time. But then why do they charge those "convenience charges". For whose convenience are they charging us? Their convenience or the viewers?

There might be issues like payments to bank gateways, credit card companies, etc. But then, airline companies too have the same issues. They do not charge extra. Of course, their pricing is dynamic and they may earn a huge premium by selling tickets at the last moment. Are these outlets trying to recover these charges from us? But if this mode of selling doesn't make business sense, then it should be shut down. They shouldn't try to recover these costs from us. And they can't charge us a premium for this service, claiming that it is convenient for you. Ultimately, it also makes business sense for them too. They are able to reach a more number of people, middle men get reduced to a large extent, confirmed buyers available much earlier and less dependence on man-power. But still they charge and still we pay!!
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  1. Vinay:

    I have often wondered about this but have not thought about it in great depth. Does this happen all over the world? Can't we do anything about this. Write to HRD perhaps.

    In the case of railways, does this money go into the welfare of the railways for the people? What happens to it?

    I am glad you write about this but what's the next step?

    Joy always,

  2. Hmm...Convenience surcharge is there here too for cinema, with weird rules like they do not charge it for the afternoon shows etc.

    As for the Railways, it is just a way to make more money so that Laloo and Mamta can say that ticket prices remain the same every year. I remember that there was a Bangalore-Chennai mail train, whose number the railways changed from 6xxx to 2xxx just so that they can charge the 20 rupees Express train surcharge extra. That train is always running full.

    One reason for the convenience charge is that setting up the "payment gateway" is the most tricky part in the website. Privacy issues would mean that they have outsourced that part to some-other firm who would charge money to IRCTC/Cinema's.

    Most airlines don't even have paper ticketing. So the online service is not some extra service that they are giving. For railway/cinema, the primary source of money is still paper ticketing, so they are willing to fleece more money from the small fraction of people using internet services.

  3. @Susan,
    The MRTPC, and its proposed successor need to ask the Railways or cinema halls to come clear on these surcharges. The DGCA has managed to do this with the airlines. Now, airlines clearly state all the surcharges charged, no matter how arbitrary they might seem.

    In the Railways' case, no idea where this money goes to!! An RTI can be filed in the Railways to get information about this.

    If they are able to reduce man-power on reservation counters, then they can use those savings to pay for the services required to handle the internet bookings. Definitely, they would be spending less money on that.

    Travel agents in India do issue paper tickets, even today. And airlines still need staff to issue boarding passes. These things are not needed by Railways.

    And cinemas are charging anywhere between 1/5th to 1/4th of the ticket cost as convenience charges. That, I guess is outrageous.

  4. Ha! you are dreaming....Our government will never reduce jobs....Mulayam Singh Yadav is the person who recommends that computers be not used in the country and he is a part of the govt :) More jobs is an efficient way to redistribute money and efficiency

    Boarding passes too can be gotten online these-days. And many travel agent generated paper tickets is nothing but a print-out. Airlines actually are minimizing staff. If I don't have to check in any baggage, all I need is a credit card to check in in American airports :)

    As regards to Cinema, it is upto them to charge any price they want. The multiplexes are in competition. MArket forces should prevail eventually there...

  5. Of course, government isn't going to cut jobs. As for MSY, his statements are just empty talk. Even his vote-bank won't approve of those.

    Here, railways too gives just a print-out of the e-tickets. Nothing more. And boarding passes are still required in India, even if you don't have check-in baggage.

    As for cinemas, you can't rely on the market to come up with a pricing mechanism. Atleast in India. The multiplex guys have formed an association, akin to cartelisation, and decide on everything through consensus. So, they would definitely not bring down the convenience charges!!