When my immediate family used hacks (pre-smartphone), it was typically to haul a month's worth of groceries from the local supermarket to home. The guys who were hacking stood around the supermarket exit, were regulars, and older. The rates charged were less than a regular taxi.

We never flagged down hacks on the street for general transportation, namely to avoid any negative issues. But the reason why others do it is because personal transport is unavailable (the riders don't have cars, and neither does family nor friends), and faster than taking the bus. Negotiations are done by "feel." (The driver and rider have their own ideas of what should be charged to get to a destination, so they talk a bit until a rate is agreed upon.) The rates were typically lower than taxis.

About 30% of people who live in the city don't have a car, according to the 2015 Census count. Most of that number are renters. It was purely a cash economy when I grew up. I imagine that this has changed a little depending on how technically savvy a driver and rider is, and whether the rider has a bank account (there are many people who don't).