As kids, we learn that bad people use the cover of darkness to do bad things. Shining a light and illuminating the situation often takes care of the problem.
With its opacity and fat margins, the payments space represents a huge pinata of opportunity for entrepreneurs. Along those lines, I blogged, recently, about Dwolla, which appears to be a full-fledged attack on the current payment system. Even staying within the current system, transparency and simplicity offer major opportunities to bring benefits to customers. Some interesting news concerning Square today exemplifies this value.
Several years ago, credit card acceptance became mandatory in New York cabs. Reports say that this has driven both usage and tips higher. But the 5% fee on credit card fares has infuriated drivers. 3.5% goes to the credit card processor. And the garages and fleets that hold the medallions and lease out the cabs to drivers have taken a 1.5% cut for nebulous “overhead.” The medallion holders have piggy-backed on and exploited the opacity around payments to grab their own cut.
Enter the experiment with Square, under which 50 cabs will be equipped with Square-equipped tablets if approved later this week. Not only should it remove any justification for the 1.5% grab from the driver’s take, it presumably will lower the processing fee since even Square’s standard rate of 2.75% is lower than the incumbent processors. This is great for the driver, putting a little more into his pocket.
And, as more than just an additional benefit, thankfully, it will return a little sanity back into the cab for both driver and rider by shutting off the ridiculous and useless television screen and replacing it with a tablet that should offer something more useful to riders.
Welcome to the Big Apple, Square!