The Rise Of Cashless Payments Is Killing Tips And Crushing Earnings In Australia's Once-Lucrative Taxi Business

Cashless payment methods are a huge convenience for modern consumers.

They’re cleaner, faster, and you need to carry around less bulky change.

But the technology is also reducing the amount of cash in circulation and changing how Australians spend their money.

Australian taxi drivers say their earnings have fallen substantially in recent years with the slow disappearance of cash payments coming at a time of rising costs.

Some even claim it is pushing the earnings of drivers below the minimum wage and they have been lobbying payments companies for ways to incorporate tipping options into taxi payment devices.

Michael Jools, president of the Australian Taxi Drivers Association, says tips made up 5 to 10 per cent of a driver’s revenue one to two decades ago.

But the rise of electronic payments systems like EFTPOS, Cabcharge and a variety of new smartphone apps on the market today has left the old practice of rounding up in the dust.

Taxi drivers now collect an average of $400 a day, Jools says, or $10 an hour after fuel, licensing and other costs – down from about $15 an hour ten years ago.

Australian minimum wage is currently $16.37 an hour.

“When I first started driving cabs, it was a more rewarding exercise,” Jools told Business Insider Australia.

“Over the years, and particularly since EFTPOS came in, tipping has gone out the window.

“Traditionally, in all the service industries in countries where tipping is a habit, wages have been low simply because [staff] got tips.

“The effect of EFTPOS in general is to have negated the amount given [to taxi drivers] in tips. The general habit of tipping has died off … That makes a big difference.”

Jools, who has driven taxis in Sydney for 15 years, said about a tenth of passengers still tip today. A majority of those are international tourists; tipping is not generally expected in Australia.

One in five people who pay their taxi drivers in cash still tip, Jools explained, but cash only accounts for about 50 per cent of taxi payments now.

“When people pay cash, they round up to the nearest dollar. You rarely if ever get a tip in a paper transaction, because they are already paying such a hefty surcharge.”

Electronic payment systems in the US – where most drivers expect a 10 to 20 per cent tip – generally account for tipping with an additional screen that asks passengers to nominate an amount to add to the bill.

Uber, whose users book and pay for luxury cars and taxis via a smartphone app, includes a tipping function for taxis in US but not in Australia.

“Transactions through the Uber app are cashless – you simply walk out of the car at the end of your ride, which prevents traffic,” Uber Sydney general manager David Rohrsheim explained.

“When you book a taxi in the US, there is a tipping function Each user sets their default gratuity to be added at the end of the trip. The default is 20 per cent but the user may change it at will, including to 0 per cent.

“For Australian taxis, we have not turned on the automated tipping functionality.”

Jools said the Australian Taxi Driver Association had approached taxi industry giants like Cabcharge and Taxis Combined to ask for a way to incorporate tips into local fares, to no avail.

Cabcharge has been approached for comment; the company yesterday reported a 8 per cent half-year profit increase, with turnover up 5.7 per cent to $569 million in the 6 months to 31 December.

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