Kakao Mobility considers lowering commission to 3% or under

Kakao Mobility, the mobility arm of Kakao, plans to lower commission fees from 5 percent to 3 percent or below next year. This decision comes after criticism from President Yoon Suk Yeol.

Kakao Mobility CEO Ryu Geung-seon speaks to the local press on Monday before the closed-door meeting the company held with taxi unions at Gangnam District, southern Seoul. [YONHAP]

Kakao Mobility is considering lowering its commission fees from the current 5 percent to 3 percent or below by next year, after President Yoon Suk Yeol publicly criticized the company for what he sees as an “unethical business practice.”

The decision was made during a closed-door meeting on Monday that the mobility arm of tech giant Kakao held with taxi unions.

“Kakao Mobility will actively review lowering its commission fees to 3 percent or below to minimize the taxi drivers’ burden,” Kakao Mobility said in a statement. “The company will come up with a new service that minimizes commission fees by the end of this year. It will also allow currently affiliated cab operators to transition to the new system.”

Kakao Mobility said that a new service for its franchise taxi business is inevitable as 50,000 taxi drivers are currently affiliated with the existing service and it is “realistically difficult” to overhaul the business structure altogether.

Taxi drivers have consistently requested for the platform operator to lower its commission fees, which is between 3 and 5 percent.

In the current system, Kakao Mobility pays between 16 to 17 percent of the fare revenue to its franchise cab operators for the services they provide, such as the sharing of driving data. KM Solutions, a subsidiary of Kakao Mobility under which the affiliated taxi drivers are registered, receives 20 percent of the fare revenue from the drivers for providing its car dispatching platform, device maintenance and regular quality management of franchise services.

The company will also come up with a new ride dispatching system by the end of this year, in response to taxi drivers’ complaints about the platform’s dispatch algorithms favoring its own franchise taxis — connecting them to more calls while excluding them from less profitable requests, such as rides of less than one kilometer (0.6 miles).

Moreover, the company will also review simplifying its complex dispatch algorithms for transparency.

Kakao Mobility is currently under investigation by the financial regulator to determine whether the firm exaggerated its revenue by inflating its commission fees.

BY LEE JAE-LIM [lee.jaelim@joongang.co.kr]