The core branded product of Cabcharge is fading as two competitors –
one from the top end and one from the other end of town – mount an
assault on the company’s near 20-year dominance of the taxi payment market in Australia.
Materials published yesterday by Cabcharge in connection with its
December 2005 half-year profit show that taxi patrons have increasingly
woken up to the fact, and the convenience, of being able to pay their
fare with conventional bank-issued debit cards and credit cards.
Cabcharge said that total revenue increased by 17% to $431
million for the latest half year over the corresponding half in 2004.
Of this, revenue from fares and fees increased by 16% to $401
million. This revenue relates to the 10% surcharge on fare
payments (other than payments made in cash).
The accounts show the company paid $55 million for its 49%
stake in WestBus. Cabcharge borrowed $40 million to help fund the
investment. ComfortDelGro Corporation owns the other 51% of
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The media release said the company recorded increased growth of five
per cent in the Cabcharge account business; growth of 18%
in American Express and Diners Club cards, and growth of 37% in
bank-issued cards. The company said electronic transactions increased
by 59% overall for the half year.
These trends are not necessarily favourable for Cabcharge. On the one
hand the double digit increase in revenues reflects the distribution of
the company’s wireless Eftpos terminals across the taxi fleet on the
east coast, which increases convenience for passengers in paying fares
and also for drivers in collecting net fare revenue at the end of their
shift (drivers use company-issued ATMs at depots for this purpose).
On the other hand, unless a customer is inclined to pay with a
Cabcharge-supplied charge card on a company account – and it appears
that fewer and fewer passengers choose to do this – there’s nothing
that unique about the Cabcharge taxi payment system that drivers cannot
source from another supplier.
As a result – and for the first time – less than half of Cabcharge’s
fare-related revenue arises from customers making use of Cabcharge
accounts. The company said this proportion fell to 48.6% in the
half year. Payments on bank-issued debit cards and credit cards
accounted for 29.5% of revenue, while payments on Amex and
Diners accounted for 21.9% of revenue.
These trends, moreover, are serving to increase Cabcharge’s margin. The
company said the margin on its “service” fee increased to 9.1%– out of the total service fee of 10% – from a previous margin
In other words, Cabcharge imposes a surcharge on card users equal to
more than ten times the actual payment processing fee imposed by the
bank. A second angle here is that National Australia Bank has
effectively taken a 47% cut in the level of the merchant fee
it collects from Cabcharge.
The lower merchant fee charged by NAB appears to be the major factor in
the increase in Cabcharge’s EBITDA margin to 6.6% this half
from 6.1% a year ago, and a 22% increase in operating
These are two trends that are sure to reinforce the business plans of the company’s emerging rivals.