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Credit card use frustrates cabdrivers

Operators say they lose out, even with more riders

By Eric Moskowitz
Globe Staff / May 16, 2011

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More than 1 of every 4 Boston taxi passengers now pays by credit card, an option that has made cabs more attractive to riders but provoked tension among drivers, passengers, and city regulators.

Data collected from taxi meters show that Boston cabs are busier than they have been in years, ferrying more passengers, collecting more fares, and traveling more paid miles than before the recession. Analysts attribute the growth in part to the credit card processors that, per order of the city, were fully installed in Boston’s 1,825 licensed taxis by mid-2009.

But cabdrivers say that the mobile-payment and taxi radio dispatch companies that partnered to install the credit card devices have profited at drivers’ expense, and that taking cards has made it harder, not easier, for them to earn a living.

Drivers absorb a 5 or 6 percent processing fee on credit-card fares, while many also must pay $1.50 each time they withdraw cash from an account in which card payments are deposited.

They say those fees, coupled with $4-a-gallon gas, have reduced their take-home pay to the equivalent of minimum wage or less for the grueling 12-hour shift that is standard. And it has prompted many drivers to groan at the sight of credit cards, claim their processors are broken, or encourage riders to pay with cash.

“It’s costing us a lot of money,’’ said Emad Derebala, a Boston taxi driver for 15 years. “It’s getting really, really hard to be a cabdriver.’’

But the companies behind the card machines say taking plastic has been a boon to the industry.

“The best thing we ever did in my business was put in credit cards,’’ said John Ford, owner of Top Cab and City Cab, two of Boston’s five major radio associations, companies that provide 24-hour communications for drivers and notify them of waiting riders.

Radio companies have existed for decades, but membership has been mandatory only since the late 1990s, an initiative motivated by a series of attacks on drivers and a desire to provide better taxi coverage for urban neighborhoods. The radio companies do not directly own the cabs or the scarce medallions that allow them to operate legally — and that trade for $400,000 or more — but they are the ones whose colors and insignias adorn vehicles.

In New York, where the credit-card readers were introduced two years before Boston, drivers similarly resisted them but eventually came to see them as a benefit, making the recession less painful, said Michael Woloz, spokesman for Creative Mobile Technologies, one of two companies that dominate the taxi mobile-payment market.

“There was a lot of trepidation among drivers and really, the industry in general, about how this was going to change things,’’ Woloz said.

But New York’s density makes it a more lucrative place to be a cabdriver, Derebala said. While his friends who drive taxis in New York might clear $400 before expenses during a busy shift, Boston cabdrivers say they are lucky to collect $250.

Boston mandated the credit-card machines as part of new regulations sweetened with a 16 percent fare increase, the city’s first since 2002.

At the time, the mayor and police commissioner said the higher fares were intended to cover rising gas costs. City regulators now say the increase was also meant to offset credit-card processing fees.

But even as the fare increase was meant to put more money in drivers’ pockets, the city allowed fleet owners to raise the rent they charge on cabs, from $77 to $95 per 12-hour shift, intended to subsidize newer and more fuel-efficient taxis.

In the old days, cabdrivers did not widely advertise that they took credit cards, but some allowed customers to pay by taking imprints of their cards on carbon-paper receipts, then brought the receipts to the radio companies, who cashed them and submitted the charges, typically taking a 10 percent cut.

Six percent seemed like a compromise, and was necessary to underwrite the cost of the new credit-card machines, satellite-enabled devices linked electronically with the radio and the meter, said Mark Cohen, director of the Boston Police Department’s licensing division, which oversees cabs.

But 6 percent out of hundreds of dollars a week is a lot bigger bite than 10 percent on a rare transaction, said Arthur Rose, a cabdriver since 1976.

“It’s the gift that keeps on giving,’’ Rose said. Like many drivers, he said the mobile-card machines often fail on a momentary or prolonged basis, sparking friction between drivers and passengers.

Cohen said those concerns are real but exaggerated and much of it amounts to “foot dragging’’ over modernization.

“The drivers are really slow to come around and embrace this kind of change,’’ Cohen said. “They’ve been fundamentally a cash business since it was literally horse and carriage.’’

CMT, which has nearly two-thirds of the Boston market, charges 6 percent; competitor VeriFone assesses 5 percent.

But the charge is not assessed on tips and tolls, making the 6 percent more like 4.8 percent of the total, said Woloz, the CMT spokesman. And after paying Visa, MasterCard, and other card companies, he said, less than half is left for equipment, service, and profit.

Taxi ridership in Boston has been growing, said Richard La Capra, a New York regulatory-industry consultant hired by Boston to track taxi data obtained from meters.

In fall 2010, meter data showed that fares collected in the previous six months were up 6 percent over fall 2008 and 15 percent over fall 2009, during the depths of the recession. Had credit-card machines not been installed, the effects of the recession would surely have been more pronounced, La Capra said.

By February of this year, nearly 29 percent of passengers were paying with plastic. Credit cards accounted for an even higher percentage of total revenue — 37 percent — suggesting riders are more likely to use cards when the fare is more expensive.

But drivers say they should be given a choice about cards, or at least set a $10 minimum.

“Even those people who have a $3 fare, a $4 fare, now they just swipe the credit cards, and they pay less tip, and the company is making big money off of us,’’ said Mitch Paul , who became a cabdriver shortly after arriving from Haiti in 1997.

A reporter who rode eight cabs was able to pay by credit card each time, though not without complication. A few touchscreens were sluggish, like computers in need of rebooting, the buttons reluctant to respond.

In one cab, headed from Faneuil Hall to Prudential Center, the reader was mounted so high on the plexiglass partition that it was nearly impossible to swipe a credit card without being stymied by the ceiling — though the driver waited patiently and offered a “thank you’’ when the passenger eventually succeeded.

In another, from Park Street to Fenway, the driver displayed an elaborately typeset sticker purchased from another cabdriver at the airport taxi pool and he cajoled the passenger in hopes of deflecting credit-card payment on a $10.20 fare.

“How much cash do you have?’’ he asked.

In another cab, a hop from North Station to the State House, the fare was not even $5, and the machine declared the stripe on the first card unreadable. As an attempt was made to swipe a second card, the driver turned impatient, demanding cash.

“If it says it is not working, it is not working!’’ he said — at the very moment the machine blinked in acceptance of the second card.

“This is a waste of time,’’ the driver grumbled, as the passenger stepped to the curb, and the cab sped off down the back of Beacon Hill.

Eric Moskowitz can be reached at emoskowitz@globe.com.