Does Paying by Cell Phone cause a surcharge or “Tax” on your parking fee?

Parcxmarft’s John Regan is on the line again. He’s talking about how pay by cell companies make their money., Here’s his take:

I
have been reviewing pay by phone parking payments because I couldn’t figure out
how they made any money until now – the consumer gets to pay them each time they
use their phone service! For example, I am guestimating the average transaction
on-street is about $1.75? The fee for the pay by phone service is $.35 per
transaction. That is a 20 percent surcharge. Wow! In most cities the average
transaction is much less. So is this progress or a new form of parking
taxation?

I
would think that buyers’ remorse on this is going to be huge. I tried to enroll
today but couldn’t find the disclosure on the pay by cell company’s site anywhere as to how
much I am going to be paying per transaction. I must also say that giving them
my personal credit card or debit card information, name, address, cell phone
number, and car license plate details is frightening especially since they do
disclose they can give my information to any third parties as follows. It looks
like they could sell my name to anyone in the parking business or a merchant or
a service provider? So much for being concerned about our privacy!

From time to time, subject to any applicable financial privacy laws or other
laws or regulations, we may provide information about you and the Account:

To parking companies we have relationships with.

In response to any subpoena, summons, court or administrative order, or other legal process which we believe requires our compliance.

In connection with collection of indebtedness or to report losses incurred by us.

In compliance with any agreement between us and a professional, regulatory or disciplinary body.

In connection with potential sales of business to parking companies and others.

To carefully selected service providers and merchant partners who help us meet your needs by providing or offering our services (“Network of Merchant and Service Providers”).

Here is another quirk of all of this: Visa
rules state that surcharging is not allowed unless local laws support it please
see below:

Prohibitions 5.1

A Merchant must not:

• Add any surcharges to Transactions, unless
local law expressly requires that a Merchant

be permitted to impose a surcharge. Any
surcharge amount, if allowed, must be included

in
the Transaction amount and not collected separately.

This
is a deal for cities since it is free if there is no push back from Joe Public;
however this is not a good deal for consumers. It reminds me of paying a $2
service fee to foreign ATM banks out of my network on a $10 transaction. No one
does that anymore and most of the banks now grant free ATM access in their
network.

OK, Pay by cell companies, where’s your response?

I’ll push a bit back at John — I don’t know a bank in the US that doesn’t charge a fee for use for people who don’t bank with them, and one here, in Southern California (WAMU) stopped free ATM usage and instituted a charge a year ago. As for the rest — Let’s here from the Pay by Cell guys… I"ll give you top of the column billing (Although I can’t believe there is anyone on the planet, at least the parking planet, that doesn’t read this blog, I have reached out to two Pay by Cell Companies, a consultant, and a parking manager that has it in her city. Let’s see what kind of response we get. Those seem light fighting words to me.)

JVH

John Van Horn

3 Responses

John Regan says:

June 24, 2008 at 05:28

I was referring to ATMs because Joe Public now knows if he uses his card out of network he will pay a fee. The cardholders have caught on and basically dont use their cards out of network anymore or avoid it like the plague. So for example, if I have the choice of a smart card(free), credit/debit(free), or cash/coins(free), why would I use a cell phone to 1.) Eat up my cell phone minutes 2.)and pay a 20 percent surcharge on top of the parking toll? As far as I know Mint Technologies offered the same thing in Coral Gables and the program failed.
Why dont these fantastic new cell phone service companies report and transaction volumes? Instead they tell us they book one new account every minute. My guess is they lose most of them too after they get their bill and see for the first time in their lives they are paying on a per transaction basis for the use fo their phone to pay for parking.
Yes I know there are some of us who wont mind but I think that is a very small percentage of the population
of the population. Unless this business model changes I dont see how this will ever become mainstreamed and perhaps that is why they dont report and transaction volume – because they are not getting it.
JR
Thanks,
JR

Reply
John Regan says:

June 24, 2008 at 06:01

One other point: Cities are losing incrementall revenues they would have gained if they issued credit, debit, or smart cards because this cell phone model taxes the consumer on each transaction. Why would I buy extra time as consumers do with cards, when I have already paid a 20-30 percent surcharge?
With cards people buy more time or turn themselves into what I call insurance buyers. In the case of this onerous business model from the cell phone companies, they are less likely to do so since they are seeing the surcharge at time of purchase. Now the incremental revenues the city would have gotten off cards are going directly to the cell phone provider. These incremental revenues from cards always offset the cost of credit and debit, and smart cards, and leave healthy net revenues gains for the cities.
Perhaps that is why they need to send their users messages about their time runing low – just want I want to see on my phone in the middle of a meeting!
Yes these are fighting words because this is a business model that is more likely to create major push back from Joe Public about on-street parking in general – due to the surcharges – than any other technology initiative I have seen in this industry for years. It also flies in the face of everything the payments industry has stood by for five decades – the consumer cannnot pay for the freight of the transaction, or the program will not survive. No payment service has ever taken off feeing users on a per transaction basis.
JR

Reply
Thomas Janacek says:

June 24, 2008 at 23:57

First of all, let me ask this question.
Why are cell parking companies in business?
I think it is safe to assume that their “raison d’etre” is the same as any other commercial enterprise – to make money for their shareholders.
It is therefore clear that a pay by cell company needs revenues which can come from two sources
– end users (drivers)
– parking operators (cities, private operators)
or combination of both.
The argument for “driver pays” model is that it provides additional convenience for many drivers to use a cell phone to pay for parking and there certainly is merit in that argument. As Neil pointed out, pay by cell is not a mandatory service and as such those who do not like it are not forced to use it.
New Parking viewpoint is slightly different, though.
We see pay by cell in essence as any other form of parking equipment – meters, paystations, in car meters etc etc. The difference, of course, is that pay by cell is software and does not really require any on street or in car hardware to operate but its essence is the same – it is one of the options that allow parking operators to collect money from drivers who chose to park on their property.
If we accept the premise that pay by cell is just one of several ways allowing parking operator to collect money then it is logical to expect that pay by cell ought to be treated the same way as single space parking meters, paystations, etc. i.e. cost of equipment.
And this is in essence business model deployed by New Parking – we prefer to charge the operator and not the driver as we believe that it is in operator’s best interest to provide as many payment options as possible, and the more convenient and efficient the better.
Having said that, we recognize that it is the parking operator that has final say in how to run the business and so we certainly are prepared to charge user fees if operator so desires, it is just that our recommendation is not do so.
Finally, New Parking has a very strict and simple privacy policy – we will never sell or provide any personal identifiable information to anyone without authorization of the end user – except when required by law to do so.
Thomas Janacek
Founder & CEO, New Parking Inc.

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Does Paying by Cell Phone cause a surcharge or “Tax” on your parking fee?

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