Now I’ve written a few times before about the importance of taxis in contactless roll-out and cash replacement, but really the key case study is New York. The iconic New York taxi driver is as militant as they get, but as you will remember even they were eventually forced to start taking cards, and it turns out to have been good for them.
Remember how the story of cashlessness went there? The taxi drivers fought tooth and nail to avoid installing POS terminals and eventually they were forced to by the city.[From Digital Money: I had that Dave Birch in the back of my cab once]
The evidence from New York seems clear. The drivers resisted the change, but once the terminals were installed, taxi takings went up because they took cards (by about 13% in the first instance). And goodness, they could use it.
New Yorkers are a little on edge over the recent news that the city’s Taxi and Limousine Commission is likely to raise the taxi rates by as much as 20 percent. Drivers and the cab companies have been lobbying for years for an increase, citing higher gas prices and other costs, however, but some drivers are not so sure they will see any of that extra cash. That’s because every time the TLC raises rates, the cab owners raise the price the drivers must pay to use their cars.[From The Hidden Costs of Being a New York City Cabbie – National – The Atlantic Wire]
Sounds like they are getting squeezed. But let’s look at some more numbers. It isn’t just that the fares went up. There’s some more good news for drivers in there as well.
The average New York City taxi cab driver makes $90,747 in revenue per year. There are roughly 13,267 cabs in the city. In 2007, NYC forced cab drivers to begin taking credit cards, which involved installing a touch screen system for payment.
During payment, the user is presented with three default buttons for tipping: 20%, 25%, and 30%. When cabs were cash only, the average tip was roughly 10%. After the introduction of this system, the tip percentage jumped to 22%.[From The $144,146,165 Button ◇ notes.unwieldy]
That’s where the $144m figure in the headline comes from. It’s the additional tips earned by the cabbies since they went over to cards, and I can see where this comes from. If you’re paying with cash for a $9.50 fare, you’ll give the guy $10, but if you’re paying with a card then you’ll press the 20% button. The driver is better off and so are you (because you were able to take cab when you would otherwise have to have walked). Cards make total sense in the taxi context, contactless even more so because it’s so quick. And there are other benefits too.
Just 30 taxis, marked only by Octopus stickers on the back of the front seats, are included in the pilot program that started last week. Passengers and drivers said the scheme is practical.
Driver Law Chan-wing said it could also avoid disputes: he once argued with a passenger over whether he got a HK$50 or a HK$20 banknote[From Thumbs up for Octopus taxi scheme – The Standard]
Talking about Octopus, by the way, I can’t tell you how many times foreign visitors have asked me why London taxis don’t take Oyster cards, but it was hard enough to get a small number of them to start taking cards at all. Taxis, it seems to me, are a key benchmark of progress toward a cashless society, so it’s good to see lots of experiments taking place is this roving retail environment. And cards and contactless aren’t the only game in town.
Vodafone is now allowing its customers to pay for their taxi fares using their phone. Simply send ‘Taxi’ plus the taxi’s number and amount to pay to 31255.[From Vodafone’s patriotic taxis offer free mobile charging and payments service | CNET UK]
Having said that, I’m not sure if I’ll be using my contactless card in a London taxi in a hurry again though – last time I got charged an additional 12% (which I was outraged about, so no tip). The same thing happened to me in Australia. When I asked my Australian taxi driver why I was being charged an extra 10% for a contactless transaction that costs him nothing like that, he told me that there was nothing they could do because it was the fault of the “bank charges”. This is probably Aussie-specific profiteering because of interchange regulation, but it seems a bit steep. I noticed that many of the shops in Oz, and the hotels I stayed at, charged an additional 1.5% for credit cards, which seems reasonable, since that’s approximately what they get charged. But 10%? For an offline authorised contactless transaction? Joke. And I’m pretty sure it costs the taxi drivers money too, since if you look at the NY figures, the drivers could be capturing that extra 10% in tips.
With an average London black cab fare for a three mile journey standing at approximately £12*, this payment option provides a very quick, convenient and secure method of payment for passengers and taxi drivers alike.[From London cabs go contactless]
I’m outraged about being charged an average of £1.20 to pay by card, whereas if I could pay £12 by card then I’ll press the button to give the driver a tip of £2. What is the explanation for this state of affairs? Someone must know. If the explanation is that it’s so expensive to equip cabs with POS terminals and networking and set up acquiring agreements and so forth then it’s time for the cab drivers to ditch these terminals and acquirers and just fire up Square and iZettle instead.
These are personal opinions and should not be misunderstood as representing the opinions of
Consult Hyperion or any of its clients or suppliers