The debate over credit card interchange fees has taken to the streets of San Francisco, where taxi cab drivers have challenged city rules about accepting plastic from passengers. A city-commissioned study reviewed the results of a pilot program that allowed taxi cab companies to pass along the cost of credit card transaction fees to drivers, in exchange for upgrading back seat technology. The new payment structure replaced a 1997 rule that stuck cab company owners with the bill for processing charges.
Under merchant agreements with Visa, MasterCard, American Express, and Discover, cabbies and other service providers cannot pass transaction fees along to consumers. Unlike other merchants, who can mark up their products and services to absorb interchange fees, taxis must charge rates set by city laws.
As independent contractors, cab drivers don't enjoy the same rules as hourly-paid workers in other jobs, like restaurant waiters and retail clerks. According to a report from The Wall Street Journal's Geoffrey A. Fowler, cab drivers unhappy with the new payment systems have started carrying alternative credit card processing tools, like the smartphone-based Square reader. Other cabbies simply claim their credit card swipers have malfunctioned, leaving tourists and business passengers scrambling for cash.
Similar arguments have cropped up in Philadelphia, where cabbies protested the extension of an existing credit card processor's contract with the city agency that regulates taxis. There, city law dictates that cabs can't leave their garages without working credit card payment terminals. Verifone supplies the systems, which include GPS tracking and dispatch tools that enable city regulators to review taxi routes and performance. Cab operators complained that city officials placed their own needs before consumers' by preventing competitors from entering the market.
According to news reports, Verifone charges approximately 5 percent of each transaction for its real-time, mobile taxi payment processing service. Company CEO Doug Bergeron inked a deal with NBC to supply entertainment and news programming for the next generation of the company's payment terminals, which double as touch-screen information devices. Bergeron has told officials in numerous cities that such content agreements can help cover the cost of future technology upgrades, removing much of the burden from cab owners.