Why It's So Complicated to Put Credit Card Readers in D.C. Taxis
Wednesday, August 14, 2013 - 11:22 AM
WAMU - Washington –
By Thursday, Washington, D.C. taxi drivers are supposed to show they have scheduled the installation of a credit card payment machine in their vehicles. Many won't.
The paying public is asking why this is so complicated? The reason, in part, is a mismatched market.
At a time when you can buy a pack of gum with plastic, installing credit card readers in cabs might not seem like a complicated task. But the head of a major D.C. taxi company says the problems are less technical than logistical. And the deadline itself is creating a bad negotiating position for cabbies, leaving drivers inexperienced with cashless payments groping for a favorable deal with any of the ten payment service providers (PSPs) approved to process cashless payments in D.C.
Moreover, large taxi companies must make a large, upfront investment for their fleet’s payment equipment with no guarantees their drivers will stick around.
“Even though I have made a commitment and signed a contract for 550 systems, my drivers are out there who have not signed up yet. They are out there shopping. So we are all in a situation where there is a lot of uncertainty down the way,” said Roy Spooner, the general manager of Yellow Cab Company, which owns 100 taxis and has another 450 affiliated with his brand.
Yellow Cab Co. has accepted credit card payments for seven years and its drivers process $4 million annually in credit card sales. But after D.C. passed a taxi modernization law, Spooner had to change his system to comply with the new one mandated by regulators. The investment was huge: $2.4 million that required signing a five-year contract with a hardware vendor.
For Yellow Cab’s customers, all 550 of the company’s taxis will be ready to accept credit cards and smartphone payments by the end of September, as is required by the D.C. Taxicab Commission. But Spooner’s new costs have to be passed down to his drivers, who are now shopping around with other companies for a better deal, looking for the lowest possible credit card processing fees (Yellow Cab is one of the ten approved PSPs, in addition to being a taxicab company).
“The PSPs are signing contracts, long-term contracts, with vendors, some of which are worth millions of dollars. They now have to turn around and sell that equipment to drivers. They have to have the same commitment from the drivers that they’ve made to the equipment vendors,” said Spooner, who said five of his drivers have already left his company, leaving five taxicabs sitting in his garage with pricey new credit card equipment that may potentially go unused for some time.
Spooner’s criticism of the process doesn’t end with the financial challenges posed by installation. He also believes the new credit card systems will be a loser for most cabbies, who will be required to install backseat video monitors with advertising and a new dome light as well. Fees will eat into take-home pay and the initial capital cost will be lost, he argues.
The D.C. Taxicab Commissioner strongly disputes Spooner’s analysis.
“We anticipate ultimately driver revenue will see an increase after calculating the expenses for installation and transactions fees and that increase will be somewhere between two and four percent,” said Taxicab Commission spokesman Neville Waters.
“The commission did its due diligence and spent a good a deal of time researching the adoption of cashless payments in other markets and our calculations indicated that adoption tended to increase driver revenue. Passengers tended to also tip in a greater percentage,” Waters added.
While the commission expects the great majority of cab drivers and companies to meet the District’s deadlines for cashless payments, it seems likely that some cabbies will be late, or may quit driving altogether if they cannot come up with the capital to invest in the new technology or if a vendor does not trust a driver’s credit worthiness.