Magazine article American Banker

Chicago's Taxicabs Could Become New Frontier for Card Payments

Magazine article American Banker

Chicago's Taxicabs Could Become New Frontier for Card Payments

Article excerpt

A proposal by Chicago's mayor that all taxi drivers be required to accept credit and debit cards has not thrilled the city's cabbies -- who may have to pay the interchange fees, and who prefer cash -- but has gladdened card industry executives who are working to make plastic more pervasive.

Mayor Richard M. Daley announced on Jan. 31 that the city's Department of Consumer Services, which regulates taxicabs, was considering a regulation that would require them to have wireless payment terminals for card acceptance. He was responding to a spate of taxi driver robberies, and arguing that hacks would be safer if they carried less cash.

Visa U.S.A., which is trying to foster use of payment cards in new categories, including taxi fares, is cheering for the mayor's proposal. In 2000, $497 million was charged in cabs nationwide on Visa cards, a 35% increase over 1999, said Armen Khachadourian, senior vice president of merchant sales and integrated solutions at Visa U.S.A. But there is still a ways to go, he said, since spending on cab fare is $4 billion a year in the United States.

Mayor Daley's proposal was open to public comment until Feb. 8, and Consumer Services will decide whether to make the regulation final. If it does -- and the agency usually accedes to the mayor's wishes -- wireless devices would have to be installed immediately in cars with licenses issued after the regulation's effective date, and all others would have to have them by March 1, 2002. Customers would then be able to pay in any of Chicago's 6,700 cabs with a credit or debit card, or perhaps even with the city's transit stored-value chip card, called the Smart Card.

"The public is more and more interested in credit cards everywhere," Mr. Khachadourian said. Consumers feel better about using credit cards in cabs because they can swipe the card themselves and get instant authorization. "The public did not feel comfortable giving the card to the driver," Mr. Khachadourian said.

Now that wireless terminals are making cab credit card payments possible, the industry must get the drivers themselves more comfortable with noncash payments, said Alfred Lagasse, executive vice president of the Taxicab Limousine and Paratransit Association, a trade group headquartered in Kensington, Md. Mr. Lagasse predicts that customers will come to seek out cabs that take plastic, giving drivers an incentive to switch.

"The driver would like to collect cash and have the full face value," he said. "But if being able to take a credit card gives me two more calls a day, then it is worth it to me, because I make more money."

One of the largest taxicab companies in Chicago is eager to make its vehicles plastic-friendly. Yellow Cab Management runs 2,300 cabs, or about one out of every three in Chicago. …

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