Kakao can’t charge for taxis yet

Kakao’s plan to charge users for priority use of its taxi-hailing app Kakao T, which the company expected to roll out at the end of this month, has hit a stumbling block.

Government agencies are arguing over who should regulate the service and the taxi driver union came out against Kakao’s plan.
Kim Hyun-mi, the minister of land, infrastructure and transport, told members of the National Assembly on March 13 that Kakao Mobility, Kakao’s transportation subsidiary, “never discussed the paid system for the Kakao T app with the ministry.”

Kim said in front of lawmakers that the company behind the Kakao Talk chat app came up with the plan itself.
“We will review overall related issues, taking into account the public nature of taxis,” she said.

The Seoul Metropolitan Government’s Taxi Policy Team also said it did not talk with Kakao Mobility over its plan. The taxi team did ask Kakao to come up with a measure to stop taxi drivers choosing which clients to reject.

A week before the National Assembly briefing, Kakao Mobility held a press event to unveil two new paid services it planned to add to the existing Kakao T app. The planned services will use the company’s artificial intelligence technologies to make it easier for users to call taxis for an extra charge, expected to be between 2,000 won ($1.86) and 5,000 won.

The estimated 2,000 won service will deliver taxi requests to drivers that are more likely to accept them. Another service, estimated to cost 5,000 won, will immediately connect users with drivers. The company has not yet pinned down the exact prices for the services.
In Seoul, the hailing fee for regular taxis from other companies is 1,000 won during the daytime and 2,000 won at night. Kakao T is the dominant hailing service, however, with average daily calls of 1.25 million.

The new system is meant to tackle the problems of taxi drivers cherry-picking customers by distance to the destination, a major complaint among users. This is a particular problem after midnight in bustling areas such as Gangnam Station in southern Seoul. The new plan is also a chance for Kakao Mobility to capitalize on the three-year-old service, which has been free of charge up until now.

The income from the additional charges will be divided by Kakao and drivers. The compensation for the drivers will come in the form of “points,” which can later be converted into cash. Analysts estimate the new service will give Kakao additional revenue of up to 40 billion won a year.

On Monday four unions representing different taxi driver groups announced a joint statement saying that Kakao is trying to use its monopoly status in the taxi hailing market to pursue profits. The unions brought up that the Ministry of Government Legislation already said that charging fees for hailing a taxi was “unfair” when SK Telecom tried to introduce a similar system with its T Map taxi app back in 2015. Drivers fear that charging extra fees is no better than raising taxi fees, which could reduce the number of people who take taxis.

But Kakao said on Wednesday that it would push ahead with its plans.

“We are in discussion with government authorities and are preparing for complementary measures to ease concerns raised so far,” said a Kakao spokesman.

One concern over the new service is that taxi drivers will no longer accept requests from users who do not pay extra. But Kakao said it will have a mechanism in the app to make it difficult for drivers to do so, its spokesman said.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]