(Please note this article was not originally written for this blog but was published elsewhere).
These days, you can use a credit or debit card to pay for just about anything from almost anywhere. Whether it's a lunchtime sandwich or a new sofa, cards are an indispensable part of day-to-day modern living. In 2009, there were 162.6 million cards in issue UK-wide (UK Cards Association figures) and anecdotal evidence suggests that many people are more likely to be carrying cards than cash.
Increasing card use has led to a large-scale sea change across the taxi industry. Passengers now expect to be able to pay for taxi journeys by card, with drivers and fleets who are unable to accept this type of payment losing fares as a result. This is particularly galling for those who see their rivals taking higher value longer fares (from corporate passengers, for example) which are far more likely to be paid by card since passengers often simply don't have the appropriate cash.
If you're looking to join the revolution by taking cards in your taxi, there are various solutions available for you, but all the jargon is often confusing for someone unacquainted with the intricacies of card payments. We've outlined some of the options here, and highlighted some of the major pitfalls to watch out for when getting started with cards.
Going it Alone: Stuck in the MIDdle
One possibility for drivers would be to ask a bank whether they'll issue you with a Merchant ID (MID) and the appropriate hardware to take payments yourself. For most drivers though, this isn't really a serious option due to: the complexity of the application process; the requirement for bank-approved merchant status; high minimum weekly transaction volumes; expensive bank fees; liability for fraudulent transactions and often the need to purchase the costly hardware from your bank. The vast majority of drivers need turn to a card payment service provider instead. Handily, there are a few of these services around, and some of them are tailored specifically to cater for the unique requirements of the taxi trade.
Finding The Right Provider
Choosing the best service provider for your needs is extremely important. There are lots of companies in the UK who provide a generic card payments service, and whose clients range from pubs to ice cream salesmen. Many of these firms initially operated in a separate industry, and they treat taxis as a “tacked-on” additional offering. Taxi drivers often find these providers inadequate for their needs, since their line of work demands a constantly mobile, instant payment solution in which they are unlikely to ever see their customer again, and frequently a driver's cashflow situation doesn't allow for the same flexibility (of time from the moment of a fare being paid to the moment that money arrives in the driver's account) as a larger business would. In short, taxi drivers need cards to behave just like cash.
The cash-based model
Some providers decided to approach this problem on a cash-based model: a driver takes payment by card, keeps his copy of the receipt, physically drives to meet his provider (who has bundles of cash delivered regularly) and is then paid for his transaction in cash. The flaws of such an approach are immediately obvious: the expense of moving cash in transit, coupled with the requirement for someone to be on-hand to pay the appropriate drivers, as well as the enormous problem of accounts reconciling using this system make the platform inefficient and not scalable beyond a certain size. Unfortunately, some companies have found this to their peril, and have become inoperable because of their flawed model, leaving their drivers without a card payment solution and out of pocket as a result.
A Thoroughly Modern Approach
Thankfully, there are firms who have adopted a far more up-to-date, automated approach to card payments within the taxi industry. One such firm is CabCard Services, which was established in 2006 and has gone from strength to strength, providing a first-rate card payment solution to thousands of drivers and fleets across the UK and Ireland. Richard Akitt, CabCard's financial director, explained why his company's business model works so well for drivers:
“Because our system operates on a centralised basis, our service is totally scalable. All our financial, accounting and customer service expertise acts as a cohesive unit from one place, and paying directly to our drivers' bank accounts has allowed us to provide our service throughout the length and breadth of the UK and in Ireland too. Recently, we've also added the facility to pay drivers their fares directly to a prepaid Visa card, called the CabCash card because it makes card transactions behave just like cash payments. This is great for three reasons:
“First, it means we can cost-effectively pay drivers more than once per week on a daily basis, as soon as the payment clears our bank. This eases the cashflow problems drivers can face when other providers pay them monthly or fortnightly.
“Second, the ability to pay drivers directly onto a prepaid card is fantastic for fleet managers, who can slash their administration costs by paying individual account work automatically and even collecting despatch rentals using the cards.
“Third, our card offering has various consumer-facing developments, including loyalty-style rewards systems for passengers, which help drive more business into the taxi trade and lets firms develop their customer-base more competitively.”
CabCard's innovative and highly-tailored approach to card payments has earned them plaudits from across the taxi industry and elsewhere, including from driving instructors throughout the UK who benefit from the CabCard service.
Terminal Velocity: Hard-Wearing Hardware
When it comes to taking cards, the most important issue is security. It's in everybody's interests to protect card payments against fraud, from the cardholder (passenger) and the merchant (driver) to the bank. Card fraud is a serious crime in the UK, with card fraud losses in 2009 totalling £440.3m in 2009 (UK Cards Association figures). You need to make sure that you're using a secure card payment method, because if you don't you might find you're liable for the costs of fraudulent transactions.
As explained on chipandpin.co.uk, “Since January 1 2005, if a retailer does not have a Chip and PIN acceptance device, and the use of such a device could have prevented the fraud from occurring, the retailer may bear the cost of a fraudulent transaction.” It's worth bearing in mind that in 2009, according to the UK Cards Association, “the two main areas of fraud were on transactions not protected by Chip and PIN” and furthermore, “the introduction of Chip and PIN means that lost and stolen card fraud is now at its lowest level since the collation of industry fraud losses began in 1991.”
You should always check that the hardware you're using to take cards is fully compliant with PCI DSS, a set of security standards which aims to dramatically reduce card fraud. This is particularly relevant to fleet operators who are trying to take cards using their own Merchant ID (MID). If your hardware isn't PCI compliant, you could find yourself at risk of large fines imposed by your bank, or being placed on an inter-bank blacklist (losing future ability to take cards) if you fall victim to fraud or disingenuous passengers who use chargebacks to withdraw payment after the journey is over.
Again, there are various hardware options available, and some are far more secure than others. For instance, some taxi fleets use an old-style swipe slot which integrates with their despatch system. This leaves card details open to interception over the open radio frequencies, and since it isn't Chip & PIN, you could be liable for fraudulent transactions.
The increasing popularity of smartphones has led to the introduction of various payment 'apps' which at first glance seem to be a cheap solution to taking mobile card payments. Unfortunately, it is very difficult to assess to what extent these devices are PCI compliant, since a mobile phone can easily be compromised by hackers, and these 'apps' invariably have no Chip & PIN facility, which again could leave you vulnerable to fraud. Perhaps more importantly, drivers often note that customers feel uncomfortable putting their card details into their taxi driver's mobile phone, and the whole process (usually slow, as dictated by mobile phone reception) smacks of an unprofessional approach – not least because the device can't even print them a receipt.
Integration - a restrictive option?
Some providers have started to offer drivers a so-called “integrated” solution, in which various elements are installed into a driver's vehicle. This will usually include two payment terminals (one for the driver, one for the passenger) and an advertising screen of some description which the service provider uses for additional revenue. This type of system was forced by law onto taxi drivers in New York City, for instance. Many UK drivers feel this kind of integrated system may appeal much to UK drivers, since the high costs of installation usually mean drivers have to sign lengthy contracts of five years or more. Since the system is linked to a vehicle, not to an individual driver, this can cause problems if a taxi is shared between two or more drivers, or if a driver wishes to sell, exchange, service or repair his vehicle without losing the ability to take cards.
Mobile Chip & PIN
In view of all this, perhaps the best solution on the market today in terms of hardware comes from those firms who provide a basic secure mobile Chip & PIN terminal, of the sort used in most shops. These devices, which are totally wireless and linked to individual drivers (not installed to a particular vehicle) are secure, PCI-compliant hardware which take payment in seconds and provide receipts for both passenger and driver. They can be removed from a vehicle between shifts, and, as is the case with firms like CabCard Services, linked directly to a driver's bank account or prepaid card. Not only that, the fact that this type of card terminal is already commonplace, with passengers already accustomed to using them in shops, pubs and other businesses, means that they're already comfortable with the technology and know that it's secure. This has the added bonus of enhancing the driver's or fleet's professional image.
In short, we believe that a simple Chip & PIN terminal, as provided by CabCard Services, is by far the most elegant, robust and secure solution for taking card payments in today's taxi industry – one which carries clear benefits to passengers and drivers, as well as fleet administrators. Remember that above all, security and protection against card fraud should be your paramount concerns when choosing a card provider; as APACS spokeswoman Jemma Smith points out, “History shows that fraudsters target the weakest link in the chain.” Those who do not adopt the Chip & PIN system are likely to attract card criminals who will target the weakest links.
Overall, drivers seem to be very impressed with the service provided by CabCard Services, and their innovative payment system and high quality customer service certainly seems to have a good deal of mileage. The firm encourages customers to shop around because they know their offering is absolutely first-rate, and their fees and pricing structure are very easy to understand and completely transparent – they're certainly not playing their cards close to their chest. For more information on their services, visit paycabs.com or call 0845 491 8410.