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Taxi drivers put up with a lot: congested traffic, rising fuel prices, demanding customers and long hours. Outfitting taxis to electronically accept payment cards is supposed to make fare payments more convenient for drivers and riders alike in New York and Philadelphia–two U.S. cities where taxi drivers have protested loudly against requirements that they accept cards.
But the convenience, cost and reliability of card-payment equipment and networks now required in cabs operating in those cities still are the subjects of intense debate among drivers, local government leaders and payment-services vendors. Drivers opposed to mandated card acceptance in Philadelphia and New York have organized repeated strikes over the past year, and city transportation leaders have charged that some drivers pretend equipment does not work.
Whether taxi drivers in New York and Philadelphia come to like–or at least tolerate–cards could help influence the voluntary growth of card acceptance in taxis elsewhere. In New York City alone, cabs accept an estimated $1.5 billion in fares each year.
Government officials overseeing the Philadelphia and New York projects say requiring card acceptance improves service for riders and brings taxi drivers bigger fares and better tips. Groups representing drivers in those cities say most drivers do not oppose credit card acceptance in principle, but they resent being forced to accept cards and to pay the extra costs.
In Philadelphia, drivers pay $18 per month to rent mandatory electronic devices whose functions support card acceptance, satellite navigation services and cab dispatching. VeriFone Transportation Services Inc., a joint venture between payment-terminal maker VeriFone Holdings Inc. and Taxitronic, a provider of fare meters and other taxi equipment, is providing the devices. Drivers also pay VeriFone Transportation 5% of each fare paid with a card to cover interchange, processing and other fees.
John Houghs, a spokesperson for the Taxi Workers Alliance of Pennsylvania and a driver who owns two taxis, says he would accept credit and debit cards voluntarily with the proper conditions. "What I have a problem with is having to pay that 5% fee," he says. "If I was a regular merchant with my own business, I would only have to pay 1% or 2%."
Philadelphia drivers risk $150 fines if they refuse to accept cards or instead use carbon-paper forms to capture card imprints and signatures.
Representatives of the Taxi Workers Alliance say many of their 1,200 members say that, after more than a year of use, the equipment provided and wireless network VeriFone Transportation uses are unreliable. The units send drivers to wrong locations and become unresponsive at times when customer use is heaviest, they say.
Houghs says VeriFone's network, which relies on AT&T wireless service, goes dead in some parts of the city, including the airport. He says terminals also sometimes fail to capture card-transaction details.
Other times the system authorizes transactions too slowly, Houghs says, noting he occasionally has to wait five minutes for the terminal to approve a transaction and print a receipt. "Riders need receipts for work," Hough says. "Most people understand, but a lot of people don't want to wait around."
Nick Holland, an analyst at Boston-based Aite Group, says many driver complaints stem from aversions to new technology. Cash-based merchants also often are reluctant to give up payments that leave less of a paper trail for audits of full earnings, which include tips, and still others contend cash payments are less expensive to accept and quicker to complete for cab fares, he says.
But card acceptance offers drivers some benefits, Holland says. "It broadens significantly the number of prospects drivers can pick up on a given evening because people don't carry vast amounts of cash with them," he says.
At Cards&Payments deadline, the Philadelphia Parking Authority, which oversees taxi and limousine services in the city, was midway through a two-month investigation into drivers' and riders' complaints about the system. Jim Nye, head of the authority's taxi division, says service has improved since the investigation began.
"The [network] outages were caused by problems that VeriFone Transportation Systems had with one of their major servers," he says. "They've established a new server dedicated to our needs in Philadelphia, and things have been operating pretty smoothly."
Duane M. Deane, VeriFone Transportation strategic planning director, wrote in an e-mail response to a C&P inquiry that the problem was with a data center in Virginia that "resulted in some connectivity issues." He says the circuit associated with the system's dispatch element has been rebuilt, "and there have been no ensuing connectivity or network outages since."
VeriFone's own investigation found several taxi-dispatch companies had not upgraded their electronic communication systems to work with VeriFone's. That may have contributed to the dispatching malfunctions, Deane adds. "Dispatchers may need further training through the Philadelphia Parking Authority," he notes.
Nye acknowledges that many drivers still resent the authority's requirement that they accept cards. But he says more drivers are growing accustomed to using the equipment, which has reduced mistakes.
Big Apple Mandate
In New York, VeriFone Transportation provides the units in 5,600 cabs, Long Island, N.Y.-based Creative Mobile Technologies LLC serves about 4,500 cabs, and Richmond, British Columbia, Canada-based Digital Dispatch Systems Inc. serves some 800, New York City Taxi and Limousine Commission representatives estimate. A fourth vendor, Taxi Technology Corp., declared bankruptcy in 2007, and the other vendors will install the equipment in the 2,200 taxis whose owners had contracts with Taxi Tech.
Devices installed in back seats of cabs include magnetic stripe and, in some cases, contactless card readers. They also include touch-screen monitors on which riders can indicate preferred payment methods and initiate card payments.
Drivers can let fleet owners add their names to the fleets' merchant accounts to accept cards. In those cases, fleet owners may reimburse drivers in 48 to 72 hours, but most pay drivers at the ends of their shifts, says Ira Goldstein, New York City Taxi and Limousine Commission chief of staff and manager of the card-acceptance project. Garages may add up to 5% of the fare amount to each transaction.
Or drivers may set up their own merchant accounts, in which case card-acceptance fees drivers pay to one of the three payment services vendors tend to average less than 3%. Those drivers should receive settlement of card transactions within 72 hours, Goldstein says.
The units print receipts at the conclusion of each trip. Merchant accountholders may view card-transaction data via password-protected Web sites supported by the three payment-equipment vendors.
Being able to check Web sites for card transactions will not make up for a transaction process many drivers consider too slow. Bill Lindauer, campaign coordinator for the New York City Taxi Workers Alliance, says drivers often complete card transactions in as fast as 10 seconds. "Normally it takes two minutes or three minutes," he says. "Compared to a New York minute, that's very long."
Lindauer says drivers "detest" the card systems, which he estimates malfunction in 60% to 65% of transactions. "We're all for credit cards," he says. "We even use them ourselves. But to have it tied to this system that is totally unreliable is ridiculous."
Goldstein calls such claims "baloney." He says the vendors usually comply with contracts that require transactions of eight seconds or less from card swipe to approval. "That happens 97% of the time," he says, adding that transactions in the 800 or so taxis with contactless readers can occur as quickly as two seconds.
If authorizations do not occur within 20 seconds, terminals can store card data to process later. Vendors must guarantee drivers settlement of card transactions that are $25 or less. If the transaction is more than $25, the driver has the option of requiring cash, Goldstein says, adding that the average cost of a cab fare in the city is $10.
Goldstein says card transactions sometimes must occur offline when Sprint, which operates the wireless network through which the devices of all three vendors communicate transaction data, upgrades its equipment. In those cases, Sprint notifies payment vendors, who notify drivers that service will be interrupted, Goldstein says.
Goldstein says payment-system vendors provided training materials for fleet owners to share with drivers. "Some of the vendors even placed demonstration units at (garages of) large fleets," he says. But many drivers still make transaction mistakes, and others pretend the terminals are malfunctioning, Goldstein says.
In January, the commission began monitoring driver behavior toward passengers. Investigators and undercover police officers pose as riders. At the end of some trips they notify drivers of violations, such as cell-phone use or denial of card acceptance, or perhaps praise outstanding service. Fines for denying card payments range from $150 to $300.
Out of 2,844 "ride-alongs" as of April 1, the commission found 18 drivers refusing to accept credit cards. "They would tape an 'out-of-order' sign over the card swipe, or something to that effect," Goldstein says.
Investigators, who carry special cards to test transaction authorizations, are able to test whether those out-of-order signs are true, Goldstein says. But the test system is designed to return a card-declined message, after which riders pay cash instead.
The debate rages over whether local taxi authorities should force cab drivers to accept payment cards, and it shows no signs of ending. CP
