Merchant Account Blog Presents: D.C. Taxicabs and Credit Card Readers

In August, D.C. Mayor Vincent C. Gray, unveiled his plan to modernize D.C taxicabs. In every cab a meter with GPS, merchant account readers and a television screen was to be installed in every taxi. The cost to the taxi drivers has been debatable between $150-$500 per cab. Now, the modernization plan has been halted due to the cab drivers suing the city over the suspicious circumstances that this law was passed. Council member Mary M. Cheh (D-Ward 3) who introduced the legislation described the halt as “unfortunate.”

This delay stalls a winning $35 million bid by Verifone to be the equipment installer of 10,000+ taxicabs. The losing bidders, Creative Mobile of New York and Ride Charge of Alexandria, VA are in favor of the delay. So far, District Cab Fleet is the only company moving forward with 30 units installed out of 650+ cabs.

The reason the taxi drivers are angry is simple math. Cab drivers are charged a 15% surcharge from their brokers in order to accept credit cards. Many other taxicabs are instructed to charge $2-3 in “convenience fees” to accept credit cards. The drivers see none of these surcharges or fees. After speaking to a few owners in the taxi industry, neither do the cab companies! [So the question lies…”Where does the money go?”]

Fortunately, was given a credit processing statement from a major taxi company (which will remain unnamed). In the statement, we noticed that the average cab fare is $50, and the average taxi earns $2,000/month in credit card processing. If we were to follow the taxicab driver’s union, and allow drivers to select their own system (for example Square or Phone Swipe) the charge would range from 2.75% to as low as 10 basis points. That means out of the $3 surcharge cost would be $1.38 (out of a 2.75% worst case scenario). That leaves $1.62 in revenue for every cabbie that accepts credit cards. Using the fore mentioned averages, that means the cabbies are losing $64.80 a month in revenue on average. Obviously Councilwoman Cheh and Mayor Gray are aware of this. [This is not even mentioning the potential monthly credit card residual profit share].

It would be irresponsible or (at least) inept for a government official to miss potentially $648,000/month in collective revenue. Remember, in History of Capitalism 101, the founding principle was laissez-faire [individualism: the doctrine that government should not interfere in commercial affairs]. Now 10,000+ small businessmen and women and the taxi companies are taking a loss when officials use faulty math to a corporate giant’s advantage.

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