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.
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 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?”
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.
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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