Why it’s only a matter of time before Uber owns the taxi industry

From the outside looking in, not many of us saw a problem worth solving in the taxi business.  Uber founders did, and its rise is surfacing problems that have existed for decades.

Credit card payments serve as the perfect example of everything that’s wrong with the taxi industry.  Everyone knows that we don’t carry cash anymore- and the taxi industry doesn’t care.  You’d think that one innovative operator would put their customers first and blow the competition out of the water, but it never happens.  Why?  Because taxi fleets are owned by small, tight-knit, old-school groups of industry vets (true in every major market I experienced), and they don’t care.  They’ve never had to, because they mostly stick together and wield tremendous influence over municipal taxi authorities. From a market standpoint, they’ve remained convinced that there would never be an alternative.

Poor treatment of drivers, one symptom of broken industry.

Like all businesses, culture is established from the top-down and ultimately trickles down to employees and customers.  As this relates to credit card payments, operators often force drivers to pay the fees for processing credit cards, and typically, their own compensation for the fare is delayed until the payment has been processed. Even worse, cabbies are often on-the-hook for declined credit card payments. Antiquated payment systems mean that the passenger is long gone before anyone is aware of the declined card. This means that when you pay with a credit card, often the driver assumes all of the risk and doesn’t get paid for multiple business days. The alternative to this is that the fare is deducted from the driver’s monthly lease payment, which is tremendously advantageous for the operator (early lease payment for the operator, and up to 30 day compensation delay for the driver).  Not surprisingly, customers get drivers who can be outright awful when they know that you’ll be paying with a credit card.  At its worst, a credit card paying patron will even be refused a ride, despite the prominent Visa/Mastercard sticker on the window.

Understanding the circumstances of the driver- you can’t blame them. This can be tough, as it can be absolutely infuriating in the moment (I’m guilty of a regrettable freakout or two).  But drivers are acting, like any of us would.  They are underpaid, under-appreciated, and working one of the most dangerous jobs in America. Driver treatment of passengers is only the consumer-facing result of the problems with the industry.  Fleet operators don’t respect their customers, nor their drivers (to the point of outright racism, in my experience on multiple occasions), and therefore mistreat both.

All we’re talking about here is a reasonable solution for accepting credit card payments- in 2012!  Most industries would want to solve this problem for their customers and employees.  And it could have been solved years ago, but operators didn’t care to address it. Because when you need a cab, you need a cab, right?  And the best I can tell, they still don’t seem to care (see the industry response to Uber below).

“Uber is software eats taxis. It’s a killer experience”  –Marc Andreessen

ImageUber solved this problem and others with simplicity.  For those who are unfamiliar, Uber is a smartphone app that allows you to order a black car sedan in seconds, which typically arrives in less than 10 minutes (you can track the car’s progress in real-time from the app on your phone).  You get picked up (Stylin’ and Profilin’, mind you). Upon arrival at your destination, payment is automatically debited from your credit card, which is stored in your Uber profile.  No money is exchanged, tips are factored in, and your receipt is seamlessly emailed to you with the opportunity to rate your driver (and the opportunity for the driver to rate you).

This is pretty amazing stuff, and the innovation is obvious.  At its core though, they just put effort into pleasing both drivers and passengers, at which point I presume the solution became clear.  This bottom-up approach has never, ever been considered in the industry… ever!

And the industry responds.

Acting as a true industry spokesman, Ron Linton, the Washington DC Taxi Commission chief, had this to say about Uber entering his market:

  • “What they say is not true and they will be dealt with.”
  • “(Uber) is operating illegally, and we plan to take steps against them.”
  • ”We license public vehicles for hire under two arrangements. One is a time and metered distance, that’s a taxicab. The other is a fixed rate by appointment, and that’s a limo. [Uber doesn’t] qualify under either circumstance.”
  • “No one has ever reached out to me from Uber,” he said, “who are these guys kidding?”

*Quotes taken from a related Techcrunch article, by  Eric Eldon.  Follow him on Twitter @eldon

The taxi industry is getting what it had coming.  If things continue this way, Uber will own this market, because they put drivers  and customers first.  Seems obvious, right? If the existing industry ever responds, which is a huge if, it’s sure to be way too late- after they’ve already lost the fight.

Related Links:

For More Information and Sign Up visit Uber or download the app on your smartphone

Uber co-founder, Travis Kalanick interviewed for Fast Company on 6-13-12

For news on Uber’s next major breakthrough (IMHO), read Uber Experiments with Lower Priced Taxis in Chicago… by Leena Rao for Techcrunch

Ryan formerly served as National Account Manager for a fleet transportation technology company and was tasked with launching the taxi and limousine market.  Leading this business initiative resulted in countless hours of meetings with fleet owners, fleet managers, city regulators, taxi commissions, mayors’ offices, and many drivers.  Ryan currently has no affiliation with Uber Technologies.  Find him on Twitter

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61 comments

  1. As a seasoned traveler who’s felt the disdain of a cab that won’t take my company card, I’m happy that someone is pushing against the grain and setting new standards for the industry. It’s antiquated and not in the best interest of the customer to require them to carry around large amounts of cash for a cab ride they may not know the price for. It’s comical to me to read the comments from the public/trade arm of this industry.

    You’d hope more companies take this forward thinking approach. I for one will be downloading the Über App shortly.

    1. Wow, you’re quite out of touch with reality. You haven’t downloaded the app? Get out of the 90’s sir…

  2. I’ve used Uber before and the amazing part is that the price is very comparable to a taxi but the car and the service are worlds apart. Competition is good for every industry but I think it’s especially true in the taxi industry. Nice article!

    1. I agree. Even more interesting is that the industry doesn’t even know if they should consider Uber a competitor. They don’t own fleets or employ drivers. The CEO said there’s confusion about whether they’re “Orbitz (referrer) or American Airlines (operator)”.

  3. ya.. i totally agree with you.. the taxi drivers face a lot of problems these days. The article is very well written.. 🙂

  4. Yellow Cabs in NYC are alright when it comes to cards, but taxis in SF are absolutely horrific. I use Uber there almost exclusively.

    1. In my experience, NYC is the exception more than the rule. That said, when I was researching this post I read that seatback credit card readers are actually coming to SFO sometime soon (maybe some relief). I’ll spare you the details, but you wouldn’t believe how long it takes for a move like that to be sold, approved for research, obtain city approval, and then actually be implemented. On the other hand, I just had an Uber update pushed to my iPhone a couple days ago…

  5. It will take sometime for Uber to take full control of the market

  6. Tara Woodruff ~ The Challenge · · Reply

    I LOVE THIS!! I drove a cab for a while ( Way to long) and I promised myself I would NEVER EVER do that again. Horrendous… Any way, now that Life has changed and it is treating me way better, this will be the way I travel when I need a car service.

    1. Tara, I can state with confidence that you won’t regret it. Congrats on ‘Movin on up’ 🙂

      1. Tara Woodruff ~ The Challenge · ·

        Thank You!

  7. thats right!

  8. Wow, this was a really quality post

  9. That was an enlightening Blog. I never knew there was such a problem. I wonder if it’s the same here in the UK? (I never use Taxis)

  10. amazing writing…

  11. Being a taxi driver I agree with your article but I think Square Up has really helped small taxi operators out. Most drivers do have a smartphone and Square being pretty cheap is a great way to do it.

    1. Square is awesome! And taxis are a perfect application for it. Notice that even in that case the problem is being solved outside of the industry. Thanks for the insider perspective.

  12. I am not from NYC…but I have been there and know that finding a cab can be a pain. This app should be able to solve that problem…hopefully.

    1. That problem is the key driver in Uber’s adoption in NYC. You’d think that the sheer volume of taxis would result in never having a hard time finding one, on-command. But ask a New Yorker and they’ll tell you horror stories of waiting in outrageous taxi lines or being stranded.

      1. haha! the major prob as a tourist that I faced was cab drivers asking for tips..which..I found weird..

  13. Technology growth has always been the factor in changing the job market as well as the culture in many ways.

  14. It is funny and this is a prime example of a lot of established business models (banking, education, health care). Business is about adaptation but the funny thing is that many face change with resentment. There will always be the new adaptation that will drive the dinosaurs to extinction.

    Good topic!

    1. I agree. Thank you!

  15. Hi Ryan,
    Thanks for updating us on Uber. For now, my preferred way is credit card and if they don’t take credit cards I just use cash. Maybe I should try Uber? But then if we use Uber, what will happen to the credit card industry???

  16. Cool! I’m sure I’ll try this sometime!

  17. I’m obsessed with Uber! I hope they are as successful as I think they should be.

  18. Oh God I currently live in Buenos Aires and it’s not just taxis who annoy me. Most restaurants and bars don’t accept credit cards and rarely carry small change. It’s a constant headache, and one I’m glad to free myself of soon. They rarely put the customers first.

  19. Reblogged this on dohmayn and commented:
    I couldn’t agree more (see my previous post). Uber is the the future of the taxi industry! Thank god.

  20. Namrata · · Reply

    wow, this was a great read. truly.
    enjoyed it thoroughly. 🙂

  21. Great Post and reblogged at swampweapon.wordpress.com! Thanks. I am going to download it and share it with everyone I know who takes a taxi every now now and then.

  22. Reblogged this on extremist kenyan and commented:
    this can actually save you…………

  23. I think you make some very valid points. Great post.

  24. I’m using uber almost everyday now..it’s honestly worth it.

    If you haven’t taken a ride yet then use promo code UBERSWAG and you’ll get $10 off your first ride.

  25. I had no idea there was even an alternative! Of course they will eat the industry, just as every uncaring and unconscious industry is eaten by someone putting the customer first. Kudos to Uber.

  26. that is cool guy

  27. Spot on my friend, great post.

  28. What an interesting post! I live in Australia, and I’ve never had a problem paying via card in taxis here. However, when I visited the US for the first time last year, I was surprised at how much of a no-no cards were in cabs. (It was mostly San Fran we were taking taxis in, though, so that explains that).
    Hallelujah for Uber! Thanks for the enlightening read!

    1. You’re welcome. I can see how the credit cards in cabs situation would be surprising. It doesn’t make sense. That problem is finally being addressed on multiple fronts, but in my experience, no one is doing it as well as Uber.

  29. Brilliant, it is that kind of creative thinking that will be the norm in the future of biz.

  30. Reblogged this on varshabi.

  31. Great idea, but never discount the power of entrenched bureaucracies.

    1. Well-said! At this point, you’re spot on. That’s their biggest hurdle. Uber’s trajectory would indicate that they’re managing to overcome it (in one case defeating a ‘cease and desist’ served by the City of San Francisco- a taxi commission that I have personal experience with).

  32. liked your post.. checking out the others! following you now

  33. Transportation is political and change is hard to implement when it touches an entire industry. I actually just wrote an article about the politics of the transportation industry based on my research in El Salvador. Good post!

    http://juangmelara.wordpress.com/2012/06/16/transportation-is-political/

    1. You’re absolutely right, transportation is absolutely political. In fact, in the US its almost always controlled by politicians and/or political appointees (see the comments in the post from the D.C. taxi commissioner- a mayoral appointee). On the bright side here, it is primarily controlled at the city level, so change is more attainable.

      Really enjoyed your post!

  34. Interesting, I used to drive a cab, credit cards were handled by the company for the rides then you’d receive credit on your lease next day. But uber definitely sounds like it could make that even easier. Great post!

    1. Thanks for the insight, Martin. It sounds like you drove for a pretty solid operator (they definitely do exist).

      I think the key is to find the intersection of super-satisfied passengers, and profitability and respect for drivers. Based on what I can see Uber is leading the way on that. Hailo, based in London, appears to be on that path, as well.

  35. Uber does sound like the future – if the future is a place where things are done easier.

  36. Love Uber, they are getting HUGE in Chicago!

    1. I’m not at all surprised! Your blog is awesome. I wish I’d known about it when I was traveling there monthly. I’ll definitely consult your Rooftop Roundup post before I head back.

      1. Thanks! So is yours. Hope you make it back this summer so you get to enjoy Chicago in all of it’s glory 🙂

  37. As a cab driver in the metro Boston area I just wanted to say I like your blogs and I feel your pains.

  38. Uber will never beat us. Their drivers and some customers here locally in Boston already have complaints and you have to admit they are far more expensive. Also they are the “iphone” of the on demand livery service. First to market does not necessarily mean largest market share in the end does it? Cabulous and several other competitors that don’t just accept black cars are pushing into the market.

    1. I think that your “iPhone of the on demand livery service” analogy is perfect! Right now Uber is more expensive and they still have kinks to workout, just like the iPhone did from 2007-2011. But now, the iPhone is absolutely blowing up! It’s become more affordable, it’s available on more networks, and its competitors are falling (see Blackberry).

      I took a look at luckytaxicab.com and it looks like you guys are actually doing some of the same consumer-focused stuff that Uber is. The testimonials tout your key strengths as speed and friendly drivers. If those were the norm in the taxi business, I don’t think Uber would’ve had an opportunity to begin with. It sounds to me like you’re capitalizing on the same industry weaknesses that Uber is, only a more affordable version.

  39. […] Why it’s only a matter of time before Uber owns the taxi industry (ryanclifford.me) […]

  40. I think Uber are doing particularity well in this segment but other companies are performing extremely well at present. The online taxi market is wide open at the moment.

    1. I agree. And I think that Uber, being the most-hyped, is taking the bulk of the regulatory heat for the entire segment. Hailo appears to be growing rapidly, but still flying under the radar a bit, and I think that’s to their benefit.

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