Following a similar move by the Victorian government, Premier Barry O’Farrell and Transport Minister Gladys Berejiklian said they would legislate to cap the maximum card surcharge for paying for a taxi at 5 per cent, down from the typical 10 per cent.

Mr O’Farrell and Ms Berejiklian also said on Tuesday they would "encourage" but "regulate" the use of new mobile phone apps that allow taxi customers to be directly put in touch with taxis.

"I’ve heard the concerns of customers that they’ve been taken for a ride by this excessive surcharge and that’s why we’ve listened and acted," Mr O’Farrell said.

"Customers shouldn’t be unfairly penalised with excessive surcharges when it’s hard enough already for people to make ends meet," he said.

The decision to cut the surcharge, to be backed by legislation later in the year, is a blow to the Cabcharge company that dominates the industry.

In a statement to the Australian Securities Exchange, Cabcharge said it would lose about $14 million a year if the ‘‘service fee’’ were cut to 5 per cent. Cabcharge shares dropped 6.6 per cent on Tuesday morning.

In the past couple of years, apps such as GoCatch and ingogo and hire car service Uber have become an increasingly popular alternative for people trying to catch taxis but who do not want to go through a regular taxi booking service.

Ms Berejiklian said those apps would be encouraged, but also need to start offering "the full range of customer service, privacy and safety standards that apply to existing booking services provided by taxi networks.

She said: ‘‘Taxi apps are a convenient way for customers to connect directly with a driver and are currently not addressed by outdated transport laws," she said.

"We have already seen how real-time information on mobile phone apps has completely changed the customer experience on other modes of public transport, and it is time to modernise this out-dated taxi-booking process."

Andrew Campbell, one of the founders of GoCatch, was enthusiastic about the announcement.

‘‘It will be good for us, and good for the taxi catching public of NSW,’’ Mr Campbell said.

He said he was not worried by any extra regulation, saying that GoCatch already met the standards likely to be put in place. And he said GoCatch would not wait for legislation to be passed before dropping the surcharge on paying by card.

‘‘We will be doing that sooner rather than later... in the coming weeks."

The chief executive of the NSW Taxi Council, which represents established taxi booking companies, Roy Wakelin-King said he welcomed the regulation of ‘‘unauthorised’’ booking apps.

‘‘It is difficult for us to comment on the specifics without access to the detail, but we welcome the regulation of unauthorised booking apps subject to this being a level playing field for all.’’

The government also said it would increase the number of safety and maintenance checks on the industry.