A New York City taxicab medallion can run more than $1 million, according the city's Taxi & Limousine Commission, up from just $450,000 in 2006 and under $200,000 in 2001. That's about equal to the cost of opening a McDonald's franchise, and represents a compounded growth rate of more than 13% a year, better than the historical rate of return from investing in the stock market.

To afford the cost of a medallion, liveries need to finance the purchase, and while many turn to traditional banks for their loans, one of the primary lending sources for the industry is Medallion Financial (NASDAQ:MFIN), the leading specialty finance company whose first quarter results showed a $22 million increase in its on-balance sheet loan portfolio from the year ago period.

Even as the taxicab cartel ensures there is a limited supply of taxis, thus virtually guaranteeing the cost of a medallion will rise, the economics for Medallion Financial seem to remain bright, particularly in this low interest rate environment.

But the sudden proliferation and popularity of ride-sharing smartphone apps like Uber, Lyft, and Sidecar that threaten to turn upside down how people hail a ride around town could also strike the entire foundation upon which the specialty financier exists -- as well as the life savings of taxicab drivers who've mortgaged everything to buy their medallion.  

Earlier this week, London ground to a halt as thousands of the city's black taxicabs protested the use of the apps, and similar protests were held across Europe in major cities including Paris, Berlin, and Madrid. Taxi drivers here in the U.S. largely haven't created similar gridlock yet (there were protests in Los Angeles however), but earlier this month Colorado became the first state to enact legislation authorizing the use of such services, and their adoption elsewhere could create a tumult for Medallion Financial.

Uber and Lyft match passengers and drivers through an app that allows for the cost of a ride to be seen before booking, and once tapping on it, can instantly know the estimated time of arrival.

You get a name, picture of the driver (so you know who's picking you up), and a contact phone number. Since the services themselves hold onto your credit card info, you don't need to carry cash and you don't have to tip the driver. There's little wonder why these services are so popular and why the taxi industry is up in arms over them.

Medallion Financial generates over three-quarters of its loan portfolio from New York, while Chicago was a distant second at 15%, and no other city account's for a double-digit percentage. 

For a city where the U.S. Census Bureau says is home to some 8.3 million, there are fewer than 13,500 taxicab medallions in existence, enshrined by law and jealously protected by the Taxi & Limousine Commission. Chicago, on the other hand, has 7,000 medallions, more than half of New York City, but its population is about a third of the size with 2.7 million residents.

New York City, though, is insulating its taxi and limousine industry from the worst effects of it by making use of such services illegal, and California recently mulled whether to require drivers to carry more insurance. They also demanded they stop operating at airports. Because Medallion Financial generates most of its revenues and profits from cities that are likely to protect its special interests, the rise of Uber and Lyft won't be of particular concern, at least not initially.

But the push of technology can't be held back and these government-created taxi monopolies will begin crumbling. Investors have been warned the ramparts are being assailed and the high cost of a medallion and the rising costs of a taxicab ride will mean individuals will continue seeking ways around the fortifications the industry has erected.

Medallion Financial might not feel any need to be worried about ride share apps at the moment, but its long-term future may no longer be so bright that it has to wear shades.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.