Ride or Die

Uber Wants Its Yellow Cab App to Cost Riders the Meter Plus a 20 Percent Tip

Verifone is standing in Uber's way and Hailo's numbers might not be as big as they implied.
 Uber Wants Its Yellow Cab App to Cost Riders the Meter Plus a 20 Percent Tip

(Photo: Wikimedia)

Yesterday, we broke the news that Uber, the San Francisco-based request-a-ride service, was close to launching an app in New York City to let you digitally hail and pay for a yellow cab with your smartphone. The launch was planned for today, but hit a road block in discussions with the Taxi and Limousine Commission (TLC)–prompting CEO Travis Kalanick to offer free taxi rides for New Yorkers for a week while they sorted it out.

This morning, we spoke to Mr. Kalanick, as well as Uber NYC’s general manager Josh Mohrer by phone. Both offered more detail regarding what Uber’s taxi app might cost riders and drivers, why the launch was delayed (cough Verifone cough), and why they rushed into the market (hint: it concerns a different kind of British invasion). 

screen shot 2012 09 05 at 12 41 42 pm Uber Wants Its Yellow Cab App to Cost Riders the Meter Plus a 20 Percent Tip

(Photo: an unverified screen grab of Uber’s messages to drivers)

How the Taxi Service Might Work

A similar service Uber offers for private black cars and hybrid cars comes at a prohibitive premium on your standard cab–40 to 100 percent for black cars and 10 to 25 percent for hybrid ones. Negotiations are ongoing in terms of how the taxi option will work in New York City. However, Mr. Kalanick pointed out that Uber’s yellow cab service in Chicago and Toronto only sets riders back a 20 percent tip, with no additional fee.

“The level of details we have on New York are not finalized,” he said, “But what we would like to do is charge what’s on the meter plus gratuity and that’s it.”

In other cities, riders request a cab through the app and the meter is turned on. Once the ride is over, the meter is turned off, the fare is punched into the app. “The 20 percent tip is automatically added and that covers our service charge, so the driver is still getting a tip,” said Mr. Mohrer. According to Mr. Kalanick, if you average it out across the board for all Uber taxi services in Chicago and Toronto, “Uber makes [a] single digit percentage on rides.”

It’s worth noting that after New York City introduced default payment buttons with a 20 percent, 25 percent, and 30 percent option, the average tip percentage for riders who paid with credit cards jumped to 22 percent.

To keep the service “elegant,” Uber doesn’t let riders increase or decrease the size of the tip from 20 percent. “We may have to put in choice in New York,” Mr. Kalanick noted, emphasizing that discussions are very much up in the air.

Uber’s taxi app also doesn’t allow for payment in cash, which is one of the reasons trade groups representing cab drivers–like Metropolitan Taxicab Board of Trade and the Livery Roundtable–have expressed reservations about the service creating “a two-tiered taxi system” for riders with smartphones, as the New York Times reported.

Mr. Mohrer explained, however, that Uber’s use case is more about filling dead time with supplemental income. Since launching a taxi cab service in Chicago in April, Uber has seen the thousand-odd drivers that have registered for its service earn an average of an extra $200 a week through a couple extra fares a day.

“You’ll probably have a pretty easy time getting street hail,” during rush hour in Midtown, said Mr. Mohrer. “We’re thinking more about outer-boroughs, off-peak times, parts of the city that don’t always get a lot of coverage. Late night when it might not be safe.”

In Chicago, Uber has experienced a spillover effect into its premium offerings. “It has does great things for our black car service too,” explained Mr. Mohrer. “It just brings a lot of people under the Uber tent at a more accessible price point.”

Free-for-All

Currently, the only way riders can utilize the taxi option is to access the free offer–one ride per person, up to $25, until midnight on Tuesday, September 11th.

We’ve already heard reports from riders about some difficulty redeeming the offer. Uber only has 105 cab drivers pre-registered with the app. “We’re working really hard this week to add as many drivers as we can,” said Mr. Mohrer.

To that end, Uber has brought in staffers from other cities and Mr. Mohrer said he expected to add about 500 drivers this week.  “We know it’s hard to get everyone in a car this week but we’re going to do our best,” he added.

One source mentioned that Uber is offering taxi drivers a $50 bonus if they pick up at least two Uber fares today, as per the unverified screen shot (above) of messages Uber sent its taxi drivers obtained by Betabeat. Mr. Kalanick wouldn’t offer any specifics except to note that incentives are often packaged and aren’t typically contingent on one thing.

In the meantime, Uber is hoping a week will buy enough time for the app to be up-and-running. “We’re confident that in that time frame, the TLC will come to some kind of resolution,” noted Mr. Mohrer.

The Hold Up Is Over Payments

A New York Times article out last night said Uber’s taxi service was potentially in violation of a number of city regulations, including prohibitions on prearranged rides in yellow taxis and restrictions on cabbies for refusing a fare. But both Mr. Kalanick and Mr. Mohrer, who were present in yesterday’s meeting with the TLC dismissed those concerns, pointing only to objections regarding using Uber’s app as a payment system.

“They’re concerned about credit card processing and whether we’re even allowed to do it,” Mr. Kalanick admitted.

In terms of ignoring street fares, Mr. Mohrer said, it won’t be any more of an issue than when you get passed up for the person across the street. “By the end of the week, the maximum distance is going to be less than half a mile. Our electronic hail is never gonna be more than a few blocks away. It was just the payments,” he said.

Uber initially met with the TLC about this launch a few weeks ago, at which point the startup was instructed to take a look at the existing contract governing medallion drivers. Uber thought they met the existing terms, but last week they were once again called in by the TLC, which had concerns about whether it interfered with an exclusivity clause with Verifone, a payments conglomerate with a $3.8 billion market cap.

“It’s also our understanding that those contracts run out in February [2013] and it hasn’t been communicated to us that those contracts are going to be renewed,” said Mr. Mohrer. Both the TLC and Verifone declined to comment.

Back in March, the TLC put out an RFP for a smartphone app that will let riders pay for taxis from their phone. After looking through the lengthy RFP, it’s clear that any proposal will face integration issues governed by the TLC’s contract with Verifone.

A British company called Hailo, an Israel company called Get Taxi, and another company called Taxi Magic are all competing for the same RFP.

“We really don’t think that’s a great way to do this,” said Mr. Mohrer. “You can’t really RFP your way to innovation. You need to let free enterprise do its thing.

The British Invasion

Why the rush to market, if Uber still has to lock down its payments service and could benefit from onboarding more drivers? As we reported yesterday, Hailo’s impending entry into New York City may have been a deciding factor.

Reports about Hailo’s launch suggested the TLC wasn’t waiting around to decide the RFP. “Hearing that a potential competitor was launching in New York, one of our most important cities, indicated to us that the TLC was open to have these things move forward now,” said Mr. Mohrer, who noted that adding a yellow cab service had always been a part of Uber’s long-term plan.

Yesterday, Betabeat received confirmation from Hailo that it had 2,500 drivers pre-registered for its service, which seemed to pale in comparison to Uber’s scant 105 drivers.

Mr. Mohrer questioned Hailo’s numbers. “What they mean by ‘pre-registered drivers’ is an email address. When we say we’re working with a driver, the relationship is a little more committed than that,” he said. “They’ve been trained on our system to have one of our devices, they have a real relationship with us.

In response to questions from Betabeat, a representative from Hailo said the company had 1o drivers currently evangelizing the service to other drivers in New York City. Through those relationships, the representative said Hailo had obtained verified driver information, including email addresses, phone numbers, and medallion status, although that did not represent a commitment to use the app.

Follow Nitasha Tiku on Twitter or via RSS. ntiku@observer.com