Correction: An earlier version of this story suggested the meter system had been in place in the District for a century. Meters have been around for more than a century, but D.C. adopted the system in 2008. This version has been corrected.
The modernization of the District’s taxi fleet enters its next phase this summer when it retires the hard-wired meters that were invented in Europe more than a century ago.
In its place, taxicabs will be required to have a digital fare payment platform aimed at streamlining the taxi experience for riders and helping drivers compete with app-based ride-hailing services.
The city’s more than 8,000 taxi drivers have until Aug. 31 to dump their traditional meters and replace them with a tablet or smartphone that will be equipped with a digital meter app, similar to those used by app-based ride-hail services such as Uber and Lyft. The tablet will be mounted in the car so a passenger can see the progress of the trip and the fare — just like a meter — but the app also will show a map of the route and estimated time of arrival.
The District is the first major U.S. city to shift its fleet to digital meters, officials said.
“We are reinventing the taxi experience, making sure that it is better for riders and drivers,” said Ernest Chrappah, director of the D.C. Department of For-Hire Vehicles, which regulates the industry. “The industry is ready.”
The city has recruited the mobile payment start-up Square to support the transition to digital meters.
City officials say the global brand brings a payment system that consumers are familiar with. Square’s technology has been a popular option for small-business owners, allowing them to complete credit card transactions without a cash register. Many small food establishments, including some of the city’s popular food trucks, use Square to accept credit card payments on mobile devices.
As part of the deal, Square agreed to charge 2.65 percent in commission to process payments, lower than the standard 2.75 percent fee it usually takes per transaction, according to city regulators. It is also much less than the credit card transaction fees cabbies pay to their payment providers, which can be as high as 4.5 percent.
The Department of For-Hire Vehicles has been testing a digital meter system it developed in-house. But the department is also reviewing proposals from other app developers. Multiple meter apps are expected to be available for use by the drivers, officials say.
“We believe the taxi market will rise to the occasion and confirm that they are not only resilient but they are innovative,” Chrappah said.
The city’s taxi rates will not change nor will the way trips are measured. But the digital system will allow taxi companies to offer rewards for frequent riders or adjust their street hail fares in response to market demand, such as offering discounts during times of low demand. The old meter system does not allow such changes. Surge-pricing will not be allowed however, officials said.
The digital meters are expected to transmit trip data such as geotagged addresses, driver information and fare amounts to the city, and will have the capability to calculate rates for shared rides.
Taxi companies and drivers have been preparing for the transition for months, but the change comes after years of struggle to keep up with competition from ride-hailing companies such as Uber, and the demands of the modern rider.
The city switched to a metered taxi fare system in 2008, from a decades-old system based on geographic zones. That change was met with resistance from drivers who complained their incomes decreased with the because of the switch. The meter system, however, has been around since its invention in Europe more than a century ago.
Among other changes to the industry in recent years are regulations requiring credit card readers in all cabs, a uniform color scheme for the fleet and improved customer service.
Companies have been investing in newer vehicles and training drivers to offer better customer service. Many taxis are already equipped with tablets, in preparation for the switch to digital.
“There has been a complete transition. We are seeing cleaner cars. We are seeing much less of the late model cars,” said Roy Spooner, general manager of D.C. Yellow Cab, which has 500 taxis. “The digital meter is just part of the evolution.”
The changes also are part of a strategy to recover some of the business the industry has lost to Uber, Lyft and other ride-hailing companies. The app-based services hit the industry hard when they arrived in the region just over five years ago and became the preferred alternative for many riders who had complained about the taxis being an antiquated system with aging fleet and poor service.
Two years ago, the taxi industry generated $4 million in surcharges for the District while the ride-hailing and limousine services generated about $1 million. So far this fiscal year, ride-hailing revenue to the city is close to $3 million and for taxis, just under $2 million.
And as consumers’ options have grown, taxicab revenue has continued to drop: City taxicabs made $19 million in fares this past March compared with nearly $22 million in March 2015, according to city data.
But city officials think the improvements of the past few years are helping the taxi industry become more competitive. Whether it’s those investments or Uber’s troubles — including accusations of sexual harassment, intellectual property theft and other incidents that have caused public relations problems for the company — the taxi industry is seeing small signs of growth.
“We see the ups and down still in the industry. We take some hits. But people are starting to make their way back to taxis,” Spooner said.
Going digital could give the taxi industry the extra boost it needs in a market where Uber and Lyft are able to charge rates significantly lower than taxicabs, officials say. The option to adjust rates also will benefit passengers who are looking to share rides and lower fares.
A digital system also will eliminate rider anxiety of getting into a cab with a broken credit card reader and give passengers the convenience of “tap and go” payment options such as Apple Pay and Android Pay, in addition to credit cards and cash. The plan is to feature estimated fare calculations, GPS route tracking and electronic receipts.
And the new system will cut expenses for drivers who invest roughly $2,400 to outfit their cabs to meet current requirements, in addition to frequent meter calibrations that cost $50 each, officials say.
The shift should not be difficult because most drivers know how to use a smartphone and download an app, and most riders are comfortable with and prefer digital platforms.
“This is one of the biggest innovations that the taxi industry will ever see.” Chrappah said. “It is going to come down to the final push. But the industry is ready.”