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I use cabs for daily commute. But I have been facing some issues recently. When I book Ola cabs in Bangalore, India, the driver asks how am I going to pay. If I say I am going to pay using Ola Money, they often deny the service and cancel the booking. I am curious why they do that? Does it make any difference if I pay using Ola Money instead of cash?

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    Have you asked them?? – Mark Mayo Apr 6 '16 at 16:06
  • @MarkMayo Yes I asked them. They just simply deny without giving any proper reason. – boroxun Apr 6 '16 at 16:08
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    Maybe OLA takes a bigger cut if the payment is through their system rather than cash? – Gagravarr Apr 6 '16 at 16:58
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    This may throw some light newindianexpress.com/cities/chennai/… – DumbCoder Apr 6 '16 at 17:42
  • Uber is available in Chennai, why not use them instead? – JonathanReez Apr 6 '16 at 19:08
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edit Thanks @DumbCoder for the link to the New Indian Express article about Chennai taxis and Ola Money. In the specific case of Ola, it seems the complaint is late payment; even though the driver is supposed to be credited within two working days of the transaction, apparently Ola has not been timely, sometimes not paying them for almost a week.

Overall, independent workers in traditionally cash-based industries often prefer cash to credit cards or alternative payments systems. Taxi drivers' resistance to credit cards, for example, is a known challenge. The delay in payment is just one among several commonly cited reasons.


Immediate payment

When a taxi driver, hair dresser, waitress, or other worker has done a service for you, giving them cash is an immediate reward. They could spend it immediately if they want to— and sometimes they need to.

In contrast, they will not have immediate access to funds transferred through a payment system or with a credit card. It is cheaper and safer for the processor to "sweep" funds from multiple transactions together rather than process them in real time, so the worker may not get paid until long after the transaction, sometimes days later. Alternatively, also as a precaution against fraud, the payment system might put the funds on hold before transferring them to the worker. Or, they might reserve the right to reverse the transfer within a certain time period, or require that a certain balance be maintained in the account. Or they might hold the funds for cash flow reasons.

For those of us in salaried jobs, who are accustomed to waiting a couple of weeks for our pay, this may not sound so terrible. But consider that the wages in these service jobs are far lower, and the workers are also paying for work expenses out of pocket— the taxi driver needs to buy fuel, the hairdresser may need to buy styling product, and so on. Waiting several days to receive payment for your work, while your rate of spending is unchanged, is burdensome.

Consider also that even if funds are transferred immediately without any holds, the worker must still get the funds out in some kind of usable form. The funds may be transferrable to a bank account, but as of 2014, 2 billion adults still lack a bank account (even in rich countries— there are around 17 million "unbanked" Americans). If you do have a bank account, you'll need to make an additional stop at an ATM or branch to withdraw cash, and possibly pay a fee— the mom-and-pop corner shop may not accept debit cards, and will be even less likely to accept other alternative payment systems.

Fees

It is very widely reported how much taxi drivers hate credit cards— I have seen complaints from both North America and Europe. Depending on local regulation, the cost of installing and maintaining the machines may be put on the driver. But equally frustrating to them is that the fares they are allowed to charge may be regulated, but they remain responsible for paying credit card processing fees, usually to the owner of the taxi, if not to the bank. In 2013 in Boston, these fees were reportedly as high as 5 or 6 percent, and although fares were raised, rental fees were raised as well.

Again, I do not know the specifics of how Ola Money is administered, but a transaction fee is a feature of other alternative payment systems like Venmo or PayPal as well.

In New York, the taxi drivers were only mollified by adjusting the default "tip" option to 20%, with a suggested tip of 30%— double or triple the traditional rate. In other jurisdictions, it is customary to apply a surcharge for non-cash transactions, but this is not the case everywhere.

Chargeback fraud

There is also a risk that the customer fraudulently reports that the transfer was unapproved, resulting in the worker not receiving the funds at all, and possibly having their account frozen during an investigation. This is not just a theoretical risk. In the U.S., chargebacks against credit cards (cases where the consumer disputes a charge, forcing the bank to refund the money) were estimated to cost businesses $11.8 billion in 2012, and some 86 percent of chargebacks are deemed fraudulent. Friendly fraud is still fraud, but worse because it is the worker— not the fraudster, the bank, or the app maker— who carries the entire burden.

Staying "off the books"

Because such jobs are part of the informal sector in many countries, working exclusively with cash makes it easier to avoid the notice of the government or other regulators. This lets the worker under-report their income, naturally, because cash can be physically spent or stockpiled. But it can also help the worker avoid, requirements to register with local authorities, or obtain a license, or adhere to zoning or labor restrictions, or other requirements, whether good or bad. I would compare it to taxi drivers in some countries refusing to turn on their meter, or pretending the meter is broken, also so they can falsify costs or mileage.

This incentive is, if anything, more powerful in industrialized economies than in industralizing ones, with their stronger regulatory regimes. It's no surprise that English has many expressions for working without official sanction, like working off the books or under the table.

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    This seems very slanted towards the US. A waiter in Western Europe also has to wait for her (monthly, not biweekly) pay check. Same thing for hairdressers and they barely get any tips. – Relaxed Apr 6 '16 at 19:01
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    @Relaxed I didn't intend for it to be slanted to the US, and would welcome any edits. I'd wager that my waitress at the roadside lunchroom in Sri Lanka was not salaried, nor the car mechanic, nor my camp porter in Tanzania. Malawi, where some transactions were done with mobile phone units, was the only place I saw where cash wasn't always preferred by workers on the line. – choster Apr 6 '16 at 19:07
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Taxi drivers dont like payment through OLA because more of their income shows up on papers and that would eventually lead to more income tax. Most taxi drivers dont even file income tax returns and paying payments through such platforms would eventually bring them into the tax net hence the resistance.

There is another reason that is hard for many people to understand and only an industry insider would know. A taxi can be run 24 hours but is mostly signed up with OLA under one name and the second guy who drives the taxi does not want to have any pending payments because money would go to the driver who is enrolled with OLA and it just causes a rift in relations.

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