Issue 09:06:B - June 30, 2009
Cabbies moved to plastic
According to Wikipedia, approximately 1,381 licensed cabs roam the streets of San Francisco. Yellow Cab Cooperative of San Francisco operates 500 of them, said Jim Gillespie, Assistant Manager at the company. After working 10-hour shifts, cabbies return to the co-op with cash and credit card receipts for settlement. Traditionally, cabbies have been reimbursed with cash. But that is now changing.
In January 2009, the co-op's cabbies began getting a large portion of their pay loaded on smartOne Visa Inc. Pay Cards. The payroll card solution reduces the amount of cash cabbies carry after they end their shifts. Because the cards are open-loop and Visa-branded, cabbies can withdraw cash from ATMs or make purchases anywhere Visa debit cards are accepted.
And, if lost or stolen, the cards can be replaced with no funds lost, since the deposits are insured by the Federal Deposit Insurance Corp.
The efficiency engine
The main reason the co-op implemented the program was to streamline operations. According to Gillespie, the co-op would have to withdraw tens of thousands of dollars daily from the bank and keep it on hand for when cabbies ended their shifts.
But Gillespie said the co-op – the largest taxi service in San Francisco – takes in $2 million in credit card transactions a month. Often enough to make it a burden, the co-op would run out of cash for the cabbies on a given day, he said. Thus, the co-op partnered with First National Merchant Solutions, a division of First National Bank of Omaha, with whom the cab company had an existing relationship, to develop the payroll card program.
Scott McCormack, Vice President of Prepaid Solutions at FNMS, characterized the need for a solution in technological terms. "Having to run the algorithm on the back-side of their software and then distributing cash back to those people – that was just a cumbersome process," he said. "We implemented a payroll card solution to essentially get them out of the need to go get that much cash.
"They still run that algorithm, but they do an immediate distribution of funds to the person's payroll card."
McCormack said the company settles accounts daily using the automated clearing house system. "They don't have to staff nearly as much, and they're really trying to move toward 100 percent electronic," he said. "And this is really helping them get a lot more efficient."
The payroll card program has "made it much easier for us to manage our business," Gillespie said.
A majority of the co-op's cabbies are recent or fairly recent immigrants to the United States, Gillespie noted. They come from places like the Middle East and Latin America. McCormack said a majority of cabbies nationwide are likely to be unbanked and could benefit from payroll cards.
According to Gillespie, the co-op's cabbies were initially reluctant to change how they received their wages. It was just a matter of educating the cabbies on the benefits of the cards, however, and now a majority of the drivers are using them, he added.
As the program manager, FNMS facilitates the enrollment and fulfillment processes. FNMS does its own card production, so the turn-around time between when a cabbie signs up and when he or she is mailed the payroll card is three to seven days, McCormack noted. Metavante Corp. handles the authorization function for the program, with FNMS handling everything else.
FNMS is working on additional program features to give cardholders the ability to pay bills online and make card-to-card money transfers within the United States, McCormack said.
While McCormack did not provide an estimate as to the potential size of the market for payroll cards for cabbies, he said "it can be very big." Since cab companies are operated more like franchises from city to city, McCormack said direct relationships must be set up with each company in each city.