Convenience fee angers paying users

Tony Poulos

Convenience fee angers paying users

January 13, 2012

As featured on TM Forum’s the Insider Blog

You have to wonder why, at a time when most operators are espousing the virtues of improving the experience of customers, some seem hell-bent on upsetting them. And, it appears the best way to do that is to charge them for something they don’t expect to be charged for.

Take the example of US mobile mega operator, Verizon. It decided that its customers should pay a ‘convenience fee’ of $2 for making payments online or over the phone. Apparently, customers did not think that this extra chit was at all ‘convenient’ and the backlash from them has forced Verizon to withdraw the charge. In just one day, over 60,000 customers reportedly signed a petition against the fee. The situation also attracted the interest of the regulator, the FCC.

The new fee was to go into effect in mid-January, and would have affected all those who weren’t enrolled in Verizon’s automatic bill payment system. With over 90 million customers, the company stood to rake in some serious cash with the fees, but it could have also lost a lot of customers over it.

Verizon’s logic for applying the charge was pretty sound. From its point of view: “The fee will help allow us to continue to support these single bill payment options in these channels and is designed to address costs incurred by us for only those customers who choose to make single bill payments in alternate payment channels.”

This type of charge is certainly not unique to Verizon, and many operators in other countries also levy fees for costly payment processing options, usually in the hope of moving customers to less costly options. Australian telcos have long levied check-processing fees, for example. Sadly, not all customers want to change their long-trusted method of payment, regardless of the operators intentions or costs, and any attempt to force them is likely to result in the response, and subsequent bad publicity, Verizon received.

For most customers, the mere act of paying bills is painful enough, but being charged for the privilege is pushing it a bit far. For the operators, the cost of payment processing should be built into their cost structure and would be best made invisible to customers or clearly stated as an extra cost in any contract the customer commits to.

It’s not just the telecom industry that is coming to grips with the cashless, online society. Low cost airlines have long added ‘extra’ and often undefined ‘convenience’ fees to their tickets, but do not offer any alternative ‘inconvenient’ fee-less option. In fact, many charge extra if you have the audacity to try and book over the phone. It seems you are damned if you do, and damned if you don’t!

Paying bills online is becoming increasingly common, but not everyone is happy to set up a standing direct debit for bill payments. These days, many juggle their monthly bill payments across multiple credit cards. Surely operators must weigh up the payment processing costs associated with credit card payments and compare them against improved cash flow, lower debt recovery costs and the high risk associated with handling cash and check payments through stores or agents.

Discouraging any customer from paying by charging them for the privilege is simply bad business and is an example of what happens when you allow finance departments anywhere near the customer experience process. If finance had its way, everybody would be forced into prepaid accounts with the only top-up available by linked direct debits to customer bank accounts.

When you consider that most of those high-yield customers are post-paid and like the convenience of paying their bills the way they choose to, then you can see why ‘convenience’ fees should be viewed more as ‘churn’ fees.
 

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Tony Poulos


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