AmEx Cardholders Can Use Points to Pay for Taxi Rides in New York

American Express Co. cardholders for the first time can use their rewards points at the point of sale when they pay for rides in New York City taxis that use VeriFone Systems Inc. taxi point-of-sale services, AmEx said Monday.

Cardholders can use their points in more than 7,000 New York taxis. Taxis that are part of the program display a short video explaining the service following the welcome message from the New York Taxi and Limousine Commission.

VeriFone’s taxi system includes a card reader and a display screen in the passenger compartment. To use AmEx points for payment, the consumer must swipe her AmEx card—that is enrolled in the Membership Rewards program—through the payment terminal. An on-screen prompt appears providing the option to pay with points for her fare, tips, and tolls. The total number of points also is displayed.

The conversion rate is 1:100, AmEx says. A $10 fare would cost 1,000 points. Tax and tip are included when points are used, an AmEx spokeswoman says. VeriFone says the average taxi fare is between $15 and $20.

Making its rewards points available outside of the traditional AmEx redemption options provides opportunity, flexibility, and choice for its cardholders, the spokeswoman says. “We’re focused on building first-ever technologies that evolve digital payments and drive commerce,” she says.

The AmEx decision to enable point-of-sale acceptance of its rewards points is significant, says Gil Luria, managing director for Los Angeles-based Wedbush Securities. “It’s a completely new form of currency that until now had been cashed out through the American Express Web site,” Luria says.

Meanwhile, the choice to integrate the new payment option into VeriFone’s taxi system bodes well for the payment-terminal maker.

Luria says there are many opportunities for more taxis to accept payment cards. “In the United States, I would expect penetration to grow,” he says. It has been a good business for VeriFone, which debuted its taxi service in 2008 in New York City. VeriFone does not release specific revenue figures for its taxi business, but Luria estimates it generates more than $100 million annually. San Jose, Calif.-based VeriFone says in addition to 7,000 taxis in New York City, its payment system is in 28,000 more taxis in cities like Baltimore, Chicago, Las Vegas, Miami, Philadelphia, Washington, D.C., and Fort Lauderdale, Fla. More than 6 million monthly transactions are made via VeriFone’s taxi service, it says.

In September, VeriFone said its payment service had been integrated into Hailo, a taxi-hailing smart phone app. Consumers can automatically pay their fares on trips that book through the app, VeriFone says.