Cabcharge

Updated on Dec 29, 2023

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Headquarters Sydney, Australia		Founded 1976, Australia

CEO Andrew Skelton (Jun 2014–)

Cabcharge accounts

The Cabcharge account payment system was established in 1976 to provide taxi passengers a way to pay for taxi fares by non-cash means. The payment system is owned and operated by Cabcharge Australia Ltd, an ASX listed public company.

The Cabcharge system has several aspects:

Cabcharge accounts — customers can create a line of credit for use to pay for taxi fares and related charges, and involves the use of a Cabcharge credit card, e-ticket or paper voucher. The value of taxi fares paid using such instruments in Australia in 2007-08 was $455,307,773. Cabcharge levies a 10% service fee on such payments.

payment processing system — drivers can process Cabcharge instruments and other non-cash payments (e.g. credit and debit cards) manual or electronically. The manual system uses dockets and cheque-like vouchers supplied by Cabcharge, which are processed using credit card imprinters. The electronic system uses EFTPOS terminals and other equipment supplied by Cabcharge. In 2008, Cabcharge’s EFTPOS terminals were present in approximately 95% of Australia’s taxis. Cabcharge does not charge drivers, owners or networks for supplying equipment for the payment processing system, instead charging passengers a 10% service fee. Networks are paid a commission out of the service fee.

taximeters and meter updates — Cabcharge began supplying these from late 2004. Taximeters, which record the charge for each passenger’s journey, require regular updates for taxi fare changes. Updates cannot be installed by drivers or operators. A significant point of difference of Cabcharge’s meters compared to their competitors is that updates can be installed "over the air" by mobile telephony and Cabcharge’s EFTPOS systems, whereas competitors’ meter upgrades have to be physically installed, requiring taxis to be off the road for a period of time. The meters and updates are part of an integrated electronic payment and radio dispatch system with other taxi equipment supplied by Cabcharge.

Though called a service fee by Cabcharge, to the general public and government authorities it is commonly referred to as a surcharge, and has given rise to controversy, litigation and government legislative intervention.

Cabbies seek cabcharge compensation

Controversy over surcharge

Cabcharge Australia's commercial activities have been controversial at times and the company has faced regular accusations of excessive charging or profiteering and predatory and anti-competitive practices. The company was recently subject to adverse court proceedings and a major settlement arising from these behaviours.

The company used to impose a surcharge of 10% on taxi fares for the use of its payment system, but justifies the surcharge on the basis that it incurs the costs associated with transactions including card and other product production, in-taxi processing, administration, fraud protection and investigation, provision of statements and driver education. The surcharge has been controversial and has been found to be excessive and predatory, and Victoria and New South Wales have by law restricted the surcharge to 5%.

Cabcharge Australia was the subject of Federal Court proceedings in 2010 over alleged anti-competitive practices including predatory pricing activities. The company was fined heavily and forced to pay a record high $15 million settlement for these behaviours. The company is also facing accusations of profiteering for the 10% surcharge it imposes on taxi fares paid by a payment card and the matter is currently being investigated by the Reserve Bank of Australia. The surcharge has been reduced by law to 5% in Victoria following recommendations made by the Taxi Industry Inquiry and a further review of the surcharge in that State may lead to the figure being set at well below 5%. In December 2014 the surcharge was also reduced to 5% in New South Wales.

10% surcharge on taxi fares paid by card

Cabcharge provides EFTPOS terminals, free of charge or below cost, to approximately 97% of taxis in Australia. The company incurs the costs associated with transactions including card and other product production, in-taxi processing, administration, fraud protection and investigation, provision of statements and driver education. However, this situation also allows the company to exert substantial and anti-competitive control over most of the Australian taxi industry.

Criticism of 10% surcharge

Cabcharge has been criticised for the 10% surcharge it collects on taxi fares paid by credit and debit cards and for the general anti-competitive control it exerts on other industry participants through its control of electronic payments and other areas of the taxi system such as vehicle and related repairs and installation of in-vehicle equipment, insurance, vehicle leasing and training. Criticism has emanated from various sources including the chair of the Taxi Industry Inquiry, Professor Allan Fels, the former head of the Australian Competition and Consumer Commission, and leading card companies. The 10% charge is currently being reviewed by the Reserve Bank of Australia.

Criticism by Professor Allan Fels

Professor Fels recently approached the Reserve Bank of Australia to help lower the 10% surcharge. He has been reported as saying that -

Criticism by major credit operators

Representatives from major credit card operators Visa and MasterCard have also criticised the 10% fee -

Action by Victoria to reduce the surcharge to 5% and below

The Government of Victoria is reducing the Cabcharge surcharge to 5% and less through law, with legislation enacted in late June 2013 arising out of recommendations of the Taxi Industry Inquiry. The new laws also require the Essential Services Commission to review the charge at that level, which may lead to the fee being reduced significantly below 5% and more in line with Cabcharge's reasonable costs for providing a non-cash payment option in cabs. The new laws came into effect from 1 February 2014. Other States and Territories are expected to follow Victoria's lead.

Action by New South Wales to reduce the surcharge to 5%

The New South Wales Government has also reduced the fee to 5% from 12 December 2014.

Action by Western Australia to reduce the surcharge to 5%

The Government of Western Australia has also reduced the fee to 5% from 24 February 2015.

Other criticism

In an article in Victoria's Herald Sun newspaper, John Legge noted that customers in that state paid at least $350 million in taxi fares with banking cards, for which 95% of Victoria's taxis use the Cabcharge system. Legge noted that the Australian Competition and Consumer Commission penalised Cabcharge $15 million for abusing its industry dominance.

Reserve Bank action to limit card surcharges in response to the criticism

Reserve Bank (RBA) data is reported as showing that banks charge merchants an average fee of 0.81% to process Visa or MasterCard payments, while the average fee passed on from the merchant to customers is 1.9% for Visa and 1.8% for MasterCard.

The RBA considers that some companies charges are excessive and, as a result, it is drafting new rules to compel offenders to limit their charges to the costs actually incurred by merchants, and that "In the gun will be the 10% charge imposed by Cabcharge and similar companies for using credit cards to pay taxi fares..."

Findings of the Taxi Industry Inquiry

The Taxi Industry Inquiry headed by Professor Fels has made a number of major criticisms of Cabcharge and its activities in a recent report.

Winner of one of Australia's shonkiest products

The Australian consumer magazine Choice confers awards annually, the Shonky Awards, to recognise Australia's poorest or "shonkiest" products. Choice states that the competition "recognises and reprimands misleading claims, false advertising, lack of transparency, faulty goods and/or poor service."

Cabcharge was awarded a Shonky Award in 2012 for its 10% surcharge on taxi fares paid by card.