Square Tries To Hail a New York Cab Deal

Merchant processor Square Inc. is seeking a piece of the booming payment card business in New York City taxicabs, a market that is currently the exclusive domain of VeriFone Systems Inc. and another company that provide TV content and card acceptance to 13,237 cabs.

San Francisco-based Square is proposing to test its mobile-payments system in 50 cabs, each of which would be outfitted with an iPad from Apple Inc. or similar tablet computer, and Square’s cube-shaped reader for swiping cards. The tablets would replace the existing Taxi TVs in the cabs. Besides accepting card payments, the devices would enable riders to access Internet applications such as Foursquare, a social network that allows members to report their locations to other members, according to a Feb. 20 story in The New York Times.

The New York City Taxi and Limousine Commission is scheduled to review Square’s proposal on Thursday. A commission spokesperson tells Digital Transactions News that the commissioners could approve the test right away, or consider the plan and vote later.

Under a contract that expires in about a year, VeriFone’s media unit and Queens, N.Y.-based Creative Mobile Technologies LLC provide news, comedy spots, and advertising content to New York cabs from the NBC and ABC television networks. Each company has about half the market, the commission spokesperson says.

Square’s plan has at least one attractive feature for cab drivers, who today pay 5% of the fare to accept cards. Square would charge its standard card-present rate of 2.75% for Visa, MasterCard, American Express, and Discover transactions. Square also reportedly will cover some of the drivers’ hardware and other costs. The current VeriFone and CMT pricing plans include 3.5% for processing and 1.5% to fleet owners to compensate them for the expense of installing the media and payment hardware and making related operational changes. Drivers were not charged up front for the hardware, according to mobile-payments consultant Todd Ablowitz of Centennial, Colo.-based Double Diamond Group.

Drivers complained loudly in the months before the commission began rolling out the new system in the summer of 2007, questioning the technology and saying card-acceptance expenses would eat into their pay. The commission spokesperson downplays Square’s proposed test as a possible way to revisit the issue of card costs. “This isn’t about the driver-payment aspect, it’s about testing the technology,” he says.

Though born in controversy, card payments are finding a ready market with cab riders. The commission spokesperson says that in January, passengers paid for 47% of their trips with cards, and cards accounted for 55% of fare revenues. Total fares currently average $6.3 million per day.

A spokesperson for San Jose, Calif.-based VeriFone declined to comment, saying the company hadn’t seen an actual proposal yet. But The New York Times said the commission postponed its original consideration of the plan from Jan. 19 until March 1 after receiving a letter from CMT’s attorney, who noted that the two current vendors went through more than six months of vetting. The attorney also raised questions about Square’s security, an issue VeriFone raised earlier, though not in the context of New York cabs.

Thus, it’s uncertain how far Square will get in the rough-and-tumble world of New York politics even though it’s casting its plan as a way to extend new Web technologies to taxicabs in addition to making card payments simple. “It’s very, very political and you can expect them to have some major battles,” says Ablowitz.

A Square spokesperson did not address the political issues, but noted by e-mail that, “Taxi drivers are among our most active and loyal users, with thousands of drivers around the country choosing Square as a more simple, cost-effective way to get paid for their work. By partnering with the New York City Taxi and Limousine Commission on this pilot, we’ve built a system that meets the specific needs of New York City taxi drivers and makes the payment experience even better for their passengers.”

Cab companies in a number of cities accept Square, including, according to The New York Times, San Francisco, Baltimore, Orlando, and Portland, Ore.