California Greenlights Flywheel’s Smartphone Tech for Taxis

December 22, 2015, 5:00 PM UTC
Courtesy of Flywheel

Amid the ride-hailing craze that’s seemingly taken over everywhere, one company is still focused on old school taxis.

Flywheel, a San Francisco company founded in 2009, is best known for equipping taxis with mobile apps used for picking up ride requests, similar to Uber and Lyft, and taking a cut from most of those fares.

On Tuesday, Flywheel said its new system, TaxiOS, received approval from the California Division of Measurement Standards. The company hopes its all-in-one software will replace everything in a taxi—from the meter to the credit card reader and GPS—with just a smartphone.

The California agency’s approval means that its system has been deemed accurate and reliable per its standards, and that Flywheel can now sell it to taxi companies in the state.

So far, Flywheel is only the second ride-hailing company to receive this type of approval, following Uber’s in August. When reached for comment, a Lyft spokeswoman told Fortune that “we are actively engaged in the approval process,” though it has no estimated timeline to share at this moment.

On the outside, Flywheel touts several benefits that its TaxiOS system can provide to taxi companies. Flywheel says that, like its original app for hailing taxis, TaxiOS brings Uber-style convenience to taxi customers, including hailing a car and paying through the app. And like the existing app, prices will never be higher than standard taxi fares, unlike Uber and Lyft which hike prices in times of high demand, it says. Additionally, TaxiOS could mean lower prices if a cab company wants to run a promotion in times of low demand, for example. It would also allow taxi companies to split shifts in a more flexible manner (currently, drivers typically drive day or night shifts), or even provide services like carpooling to compete with Uber and Lyft.

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Flywheel has also been piloting another increasingly popular service with TaxiOS in San Francisco in recent months: local delivery. Though the company declined to name the e-commerce companies that have been testing out the service, Flywheel has indeed been working on making this a possible additional revenue stream for both itself and taxi companies.

But TaxiOS is also a key to something else: A chance at conquering New York City—the largest taxi market in the U.S.

Remember Hailo?

Flywheel’s original service is already available in several cities, including San Francisco, Seattle, Los Angeles, San Diego, Sacramento, and Portland. But it’s been putting off going to New York until it felt it could take on Uber and Lyft, which is where TaxiOS comes in.

New York City legalized so-called “e-hails” (using a smartphone to request a taxi or ride) more than two years ago, but the Taxi and Limousine Commission only recently opened submissions for vendors to propose new technology to replace existing meters, payment processors and GPS systems. Flywheel says it has already submitted its application to participate in the upcoming pilot program with TaxiOS and is awaiting to hear back.

But that’s still no guarantee for success.

In early 2013, a U.K.-based company named Hailo set foot in New York City, armed with existing success in London, a team of developers and coffers filled with millions of dollars from New York City VC firm Union Square Ventures. Hailo was determined to duke it out with Uber (Lyft wasn’t much of a threat there at the time). As my colleague Erin Griffith wrote a year ago, Hailo’s plan was largely to let its rival take on the higher end of the market (black cars, etc.) while it ran in the other direction to convince taxi drivers to adopt its mobile app.

But things didn’t go according to plan, and in October 2014 the company announced it was retreating from North America. Sticking around would have required “astronomical marketing spend,” it said.

Not to mention that by now, Uber is said to be in the midst of raising yet another $1 billion or two in funding, reportedly at a valuation of at least $62.5 billion. Meanwhile Lyft is rumored to be raising its own $1 billion in new funding. To date, Flywheel has raised less than $35 million in total.

Flywheel also already has two competitors in New York City: Arro and Way2Ride, whose respective parent companies, Creative Mobile Technologies and Verifone, currently provide payment processors and backseat screens in most cabs.

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Still, there is some hope for Flywheel if it makes it to New York City. For one, Uber and Lyft’s presence have grown since Hailo left, which should make it much easier for Flywheel to convince taxis that signing up could help them survive.

On the regulatory and political side, things are also in its favor. With the Taxi and Limousine Commission actively seeking to modernize taxi technology, Flywheel won’t need to figure out a way to work with the myriad of existing taxi setups—TaxiOS can replace it all. A Flywheel spokesman emphasized this point to Fortune when asked why the company isn’t worried by Hailo’s experience in New York or Arro and Way2Ride’s presence.

And Flywheel is likely to gain more sympathy from New York City Mayor Bill de Blasio, who last summer attempted to halt Uber and Lyft’s growth by putting a cap on the number of new cars they could add per year. The city eventually dropped its plan temporarily, but the message is clear: It’s not a fan of those services.

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