I am embarrassed.
The other day I wrote about a promotion running in Singapore taxis, offering a 1% cash rebate when you use your POSB MasterCard credit card to pay for the cab fare. I wondered whether the person that designed the promotion was aware that customers get hit with a 10% surcharge when they pay with plastic in Singapore cabs.
Now, why am I embarrassed? Vanity often causes me to run around without my glasses on. I should have seen the very fine print at the bottom of the promotion that says, “10% administration fee applies” (click on the picture above, taken with a higher quality camera and with my glasses on).
The person that designed the 1% cash rebate promotion was indeed aware that cardholders have to pay a 10% surcharge. That’s beyond just weird.
Here is a MasterCard promotion also running in cabs: “Win Windows Vista Home Premium – charge this taxi fare to MasterCard”, and in very fine print, “10% administrative fee and prevailing GST apply”.
Right next to the MasterCard sweepstakes promotion, you can see another one by NETS, the local debit card payment brand: “Win $10,000 worth of free rides!”, and, in tiny letters, “30 cent admin fee applies”.
So much wasted effort to get customers to use their cards in taxi cabs. In an informal survey (conducted by myself) all cab drivers surveyed say that very few people pay with plastic, with most days absolutely nobody using a card. Who uses a card? Usually people from out of town, between the city and the airport. Why do you think more people don’t use a credit or debit card? The administrative fee la! So if there were no administrative fee, more people would use a card? Of course, la! Lots more people! And you, as a taxi driver, what do you prefer, cash or plastic? Cash is better. The cab company gets the adminsitrative fee, I don't. And I have to wait one or two days to get paid when a credit card is used. I get my money immediately with cash.
There is clearly a structural problem here. No promotion is going to fix these problems. Yet banks and payment brands clearly want to promote card usage, otherwise they wouldn't be putting the effort into these promotions.
Not only are the promotions a wasted effort, I would venture to say that they actually damage the brands of the companies running them. Get a 1% cash rebate when you have to pay a 10% surcharge? How could such a promotion be good for that bank’s brand image?
Our industry still operates under the notion that if you get customers to want to use their card, they will force acceptance by merchants. These promotions continue under that same premise. They don’t take into account the powerful impact of merchant steering. Banks and payment brands need to learn to operate differently today.
I can’t leave out a jab at mobile payments here. When you’re trying to quickly get out of a taxi, fumbling with cash is a real problem, more so even than in a fast food restaurant or coffee shop. You’re struggling with your stuff, paying attention not to leave something behind, like your glasses (if you are not as vain as some people I know), your umbrella or your mobile phone. Wouldn’t tapping the mobile phone against a reader be a more convenient way to get out of the cab? Paying with plastic is already a big step forward in convenience, compared to cash, but we know that the surcharge kills the desire to use a card. People prefer inconvenience over a surcharge. I honestly don’t believe that mobile phones would be used to pay in a cab if there is a surcharge. The industry has to address that problem head on.
Readers of my blog have heard this over and over, but I will say it again. The only solution is to make cards (or mobile payments, or whatever) much more useful and valuable for merchants than other payment methods. Otherwise customers will increasingly encounter surcharges, and will increasingly revert back to using cash for small, everyday purchases.