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How Credit Cards are Helping Taxi Drivers

· by Venmo

A New York City taxicab old branding.

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A recent report released by the Taxi and Limousine Commission has revealed some interesting information about the link between credit cards and the health of the taxi industry. According to Matthew Daus, chairman of the Commission, speaking to the New York Times, “The credit card [reader] that we put in cabs has helped keep them afloat”.

Riders paid with a credit card one out of every five trips (20%), compared with just 6% a year ago. While other similar service industries are reeling from the economic downturn, like the black car business, which is down 30% this year, the taxi industry is relatively stable. Data shows that they are maintaining consistent levels of business, with just about 400,000-450,000 cab rides a day. Part of the success can be attributed to black car clients choosing to ride in cabs instead, since the new credit card machines enable them to now charge their cab rides to their corporate cards.

Tips and Credit Card Fees

While drivers have to pay transaction fees of up to 5% on credit card transactions, overall data seems to indicate that their revenues go up with credit cards. Information about tips before credit card machines were installed is uncertain; however, the average tip after the machines were acquired was $2.85 per trip, while bank and other fees on taxi transactions averaged 86 cents. Mr. Daus told reporters including the NYTimes, “If you really look at the big picture, the drivers aren’t paying one cent for this,” referring to the credit card system. “They are, on average, making three times as much in tips as they are paying in fees.”

Despite the increase in tips, many drivers are fiercely resistant to the installation and use of credit card machines. It’s not uncommon to see drivers refuse to take passengers who want to pay by credit card, even if they already have a machine installed. On top of transaction fees, the machines are expensive and not easy to maintain, with malfunctions being costly and annoying. The NYTimes reports, “Beresford Simmons, a driver, testified that once his credit card machine malfunctioned, and the passenger gave him all of her cash — $7 — though the fare was $45, and said she did not want to drive around looking for an A.T.M.” Just as aggravating, drivers sometimes have to wait for weeks or even months to receive their reimbursements from credit card transactions.

Venmo allows cab drivers to keep their customers happy and accept their preferred method of payment— credit cards, but to do so without the hassle of credit card machines. Venmo does not have expensive setup fees, and does not require bulky equipment that can be difficult and costly to maintain. Venmo allows the driver to receive payments directly to his own Venmo account, from where he can transfer funds to his bank account within 3-5 business days. Cab drivers and companies, make a smart long-term business decision and adopt Venmo today— accept credit card payments without the accompanying hassle!

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