I don’t often take cabs in Boston, but I did tonight, and en route the driver told me this story, which completely stunned me:
People used to run out of cabs without paying all the time. After ATMs showed up, that hasn’t really happened anymore. So, I have to believe all those people weren’t really dishonest; they just didn’t have the money.
Amazing! Easy access to cash solved an apparently unrelated problem of people shirking their cab payments. This is a Freakonomics moment, for sure.
He speculated further that many of the former shirkers had spent their money at bars, perhaps inadvertently, leaving them with no way home but to risk angering a cab driver.
Of course, the next logical question is how the newly mandated credit card machines in cabs will change the equation. This driver had three concerns. First, the processor takes a 6% cut. Second, it takes weeks to get the money (which is problematic when the driver has to pay cash for the cab and cash for gas). Third, people often leave before the payment clears, sometimes leaving the driver empty-handed.
This bothers me. Whereas market forces can correct the strictly financial problems — by changing rates, or forcing cab companies to negotiate more flexible terms with drivers — the social implications of a technology causing people to unintentionally abandon their debts are less easily remedied.
The evidence is anecdotal to be sure. I guess corroboration would be an increase in people paying with $20 bills as ride-and-run’s declined.
There’s an intriguing side story to this: Secure (I hope) wireless credit card transactions and the network coverage to support them. And simultaneously an increase in the number of transactions that assume the card has not been stolen or counterfeited. Banks or businesses or cabs are willing to accept the risk that the charge is fraudulent and can’t be paid in exchange for a quicker or more convenient sale.
About twenty years ago the amount of actual currency in circulation dropped when grocery stores began taking credit cards for payment. It turns out a lot of people would cash (literally) their pay check to buy food. The decline in cash carrying has led to a big decline in face-to-face robberies. People just don’t have money to steal, and their credit cards are only good for a few hours before the bank’s computer system blocks it.
For the cab driver the mandated credit card machine may make his job safer as he’ll have less cash on hand. But I think the credit card’s days in that environment are numbered. In 5-10 years, we’ll be paying for things like cab rides, fast food, gasoline via our cell phone. Just sit in the cab, stand near the register or beside the pump. Similar technology is in use today (tap card, Mobil has an RFID, EZPass of course). But the cell phone is the ubiquitous device everyone carries everywhere. Can you pay me now?