Uber Wants to Be Like Facebook as It Pushes Into Finance; Bad News for Drivers
Uber Money is being touted as a good thing for drivers, but in reality, it's just another power grab by the ride-hailing company. | Image: shutterstock.com
- Uber has entered the financial services industry with Uber Money.
- The new service helps drivers and couriers get their earnings after each ride.
- Uber Money is likely to drive loyalty of customers while making it difficult for drivers to quit.
Tech titans are muscling their way into the financial services industry. Facebook has recently grabbed headlines with its efforts to reshape global finance through Libra. However, the project lost steam after corporate partners bowed down to political pressure. Now, Uber (NYSE:UBER) unveils its plans to launch Uber Money.
On the surface, it appears that the ridesharing company wants to help its cash-strapped drivers to instantly access their earnings. The service will provide its over four million drivers and couriers a mobile bank account that enables them to get paid after every ride. The service will come in the form of a digital wallet and enhanced debit and credit cards.
With Uber Money, drivers and couriers will no longer have to wait for weekly payouts or use Instant Pay to access their earnings. On top of that, Uber Wallet users will be able to monitor their earnings and expenses, plus manage and transfer their money if they wish. There are also other features that sound attractive to the company’s partners, such as:
- Cash back on gas between 3% and 6% depending on Uber tier.
- No-cost $100 overdrafts.
- Partnership with BlackRock to help drivers and couriers save and invest their money.
While all of of this sound good, a company that lost over 20% of its value post initial public offering is not expanding its services out of the goodness of its heart. This is a shrewd business move to exert more control over riders and drivers.
Uber Plans to Corner Its Millions of Monthly Active Users
Although Uber’s stock has been plunging, one thing that’s going right for the company is its growing user base. This year, the ride-hailing company reached the 100 million monthly active users mark. With competition in the ride-sharing arena growing stiff from entrants such as Lyft, Uber prefers to retain and grow those numbers. One of the best ways to do that is by controlling the money.
The tech company is relaunching the Uber Credit Card in partnership with Barclays. Cardholders enjoy the privilege of a 5% rebate. This comes in the form of Uber Cash when people use the credit card to pay for the company’s services. These include Uber Rides, Uber Eats and JUMP bikes.
In addition, using Uber Credit Card comes with other benefits such as:
- 4% back on restaurants and bars, including Uber Eats.
- 3% back on airfare travel and accommodation.
- 2% back for items and services purchased online.
- 1% back on buying everything else.
With many people using credit cards to pay for the company’s services, these benefits might attract more users to get themselves an Uber Credit Card to save money and enjoy the rewards.
Uber Will Tighten Its Grip on Drivers
Uber knows that its success largely depends on the performance of its drivers. It doesn’t matter how many active users it has if drivers walk away in droves. According to a study, the ride-sharing company has a notoriously poor retention rate with only 4% of drivers staying on the job for a year . By controlling the money, the company hopes to exercise more power over their drivers.
The no-cost $100 overdraft will likely push many drivers into a debt spiral. This is especially the case in countries where $100 can pay for medical emergencies, car trouble, school fees and a few weeks’ supply of food. Sure, the $100 debt is better than payday loans but it will likely prevent drivers from seeking opportunities elsewhere. That’s if they’re focused on paying back Uber.
On top of that, the deposit-per-ride feature can give drivers a false sense of progress. With wages constantly fluctuating , it is very likely that drivers will tap into their saving accounts to pay their bills.
This is just the tip of the iceberg for Uber drivers. We expect the company to continuously expand its financial services in an effort to lock in both customers and drivers.
