Uber Money, Uber Everything?

A critical review of Uber’s move into payments

Let's talk money

Uber everything? It sure as hell looks like that with Uber's move into payments. Announcing Uber Money, the company seeks to implement new financial products and technologies within the Uber network.

While Uber's press release mostly focuses on a couple of new product features, there is more than meets the eye behind this move into financial products. “The first product features are only the beginning”, as the Head of Uber Money, Peter Hazlehurst said: “We’re continuing to expand our suite of financial products”.

Uber's move into money is important to examine. It stands for a bigger shift in which tech companies are slowly but surely overtaking more and more touch-points. I felt a strong need to write this essay because we need to critically examine the role of the big tech companies. Do we want an Uber everything, or is the question irrelevant because it will happen nonetheless? I will lay out the incentives for Uber to move into payments, examining it from a range of perspectives. To understand why Uber made this move, let me start by explaining Uber's core service offering.

Uber: A legitimate promise

No more shady taxi drivers, hassle with money, or detours to up the taximeter resulting in a fully transparent experience where you can book a taxi from the palm of your hand. At an abstract level, ride-sharing sounds like a legitimate promise. Riders can avoid car ownership and avoid inefficient cab riding; drivers can make an additional income by being flexible, all under the premise of being your own boss.

What drives Uber is trust. Uber acts as the intermediary and facilitates a trust network between the users of the platform. Through their rating system and a thorough screening of the drivers, it can guarantee that you will arrive safely at your destination. Uber acts beyond an intermediary; it's an infrastructure that allows for user interaction, new development of apps, and the servicing of both sides of the market -the drivers and the riders.

A virtuous cycle

Uber's growth and network effects come from a virtuous cycle (David Sacks, 2014). It's a classic two-sided marketplace where more cars in the network attract more riders and vice versa. With demand rising, there are more drivers needed which results in better geographic coverage. Better coverage implies both faster pickups, as well as less driver downtime. This means the platform can offer better prices to travelers. Both aspects boost demand even further, bringing us back to the beginning of the loop.

Uber acts as a middle-man to manage services relating to both supply and demand. This relationship is. to some extent, a zero-sum game. Anything Uber does to benefit its drivers comes at the expense of higher cab prices. This ultimately cuts Uber's growth model, which isn't beneficial for a venture-backed company. Experiencing company growth comes at any expense, as long as its backers, "the VC's", benefit from it the most.

Uber and their drivers, a bad marriage

Uber set out to build a tool that could democratize access to cars, but ultimately resulted in squeezing out its drivers. It generates billions from the labor of its drivers without the expense of treating them as employees. Uber calls itself a tech platform, effectively distancing itself from the standard employer-employee relationship entirely.

Uber even publicly stated that it would fix its troubled relationship with drivers. “We’ve underinvested in the driver experience,” a senior official said (Uber Press, 2017). “We are now re-examining everything we do in order to rebuild that love.”

To me, this is just baffling. A company whose very foundations are built on its number one asset - drivers - has been neglecting them outright. Why? The sad reality is that drivers are replaceable. Driving a car is a low-skilled job. There is an endless supply of unemployed people that are just trying to support themselves.

Temporary pawns

It seems like Uber "sees their drivers as temporary pawns in a long game of chess" (HN, 2017). Drivers aren't part of the long term plan.

Why do you think Uber is investing billions into self-driving vehicles? It’s labor that is their biggest expense. Uber hopes to replace their drivers with self-driving vehicles. After all, machines don't complain about a higher salary and better working conditions. Robots usually don't protest on the street. Uber has the best knowledge of urban transportation in the world. It will leverage that to remove their biggest expense: their drivers.

Until robots sprawl the streets of your city, Uber still requires to mitigate the relationship with its drivers.

A move towards profitability

Is this move for Uber a business choice? Earlier this year, the company had to lay off a huge number of employees. It was a latest attempt in achieving profitability. In the second quarter of 2019 Uber lost a jaw-dropping $5.2 billion in just four months. In the tech world, the business model usually comes later. A lot of these venture-backed companies create new social constructs and disrupt industries without ever being profitable.

It's fair to say that Uber Money has a path to revenue. Its data about drivers' cash flow will enable better lending decisions, while interest rates on loans to drivers will grow the overall trip volume. In an industry-backed by venture money, it feels good to say "business model" and "venture capital" in the same sentence.

Bettering the driver relationship

We can put questions around the incentives of Uber Money, but certain elements are beneficial to drivers. What if Uber attempts to better the driver relationship here? Let's put aside all tech pessimism for a moment and look closely at what Uber offers here.

Uber money announced a range of new services, all directly targeted at drivers: real-time earnings, an Uber debit account, a credit card, and a mobile wallet app. It's like one central hub for all Uber-related transactions.

From a user perspective, I see Uber Money as a direct investment in the driver relationship. Regardless of whether the tools are useful for everyone, they certainly provide value for many drivers.

A gamified experience

Uber Money has a feature called real-time earnings. Drivers have immediate access to their earnings after every trip instead of waiting for their weekly payments. Initially, this sounds favorable for drivers, but is it really? Instant money means the possibility of instant spending. Furthermore, you make the driving experience even more gamified. Every extra ride you take upon as a driver directly leads to extra cash.

The virtuous cycle I sketched earlier is important here. Faster pickups and less driver downtime have a positive effect on demand. Uber has a direct motivation to manipulate its drivers to take on more rides, which it undoubtedly does by gamifying the experience. When Uber drivers close their app they receive a message saying that they’re only a few dollars short of reaching a new objective. Drivers can also earn badges such as "excellent service" or "50 completed rides".

Banking the unbanked

Uber operates globally, in many countries where it is active, financial inclusion is not yet a matter of course. For example, 35% of Uber’s Mexican drivers have never had access to financial services before they came into contact with it through Uber itself.

And that is exactly what makes Uber Payments so fascinating. With the launch of the Uber Debit and Credit card, drivers can now use Uber as their sole financial touchpoint. We call this banking the unbanked.

With credit and debit cards, drivers receive cash-back on gas purchases and receive 5% back in "Uber Cash" if you spend within the platform. This includes services from Uber Rides, Uber Eats, and JUMP bikes and scooters. Managing all these transactions happens through the singular Uber wallet app.

Nearly four in ten Uber drivers in the US rely on the ride-share service for the bulk of their income (Forbes, 2019). This means from a driver’s perspective, it makes sense to run your financial services at Uber.

It is convenient.

But is it also 'convenient' from an ethical standpoint? Do we want all that data at one party? Do you want your boss to control your bank account? Probably not.

Increased surveillance

That brings me back to the main question of this essay: what is the reason Uber is moving into money? Yes, it's certainly interested in bettering the driver relationship. Yes, it is providing value for its drivers. Yes, Uber Money has a path to revenue.

But owning the money relationship is much more beneficial than just letting drivers pay with a mobile wallet.

It's not about instant payments, it's not about cashback. It's about increased surveillance. Uber is after your data, not your money (Economist, 2019)

One’s employer is now also one’s bank, and in the case of an employer with less-than-stellar records in ethics this may raise some legitimate concerns.

So what?

After reading this piece you will probably have more questions than answers. I have been critical of Uber. The company has exhibited total comfort in squeezing out its drivers, all for the mission of making a profit. I think it is important to examine the actions of a company from a range of perspectives. Don't forget that there was a world before Uber, was it much better?

I am hyper-aware that disrupting something as fundamental as car ownership will always be controversial. Venture capital itself isn't unethical, the world progresses on it. But it is the constructs in which people behave that is questionable. More power for tech companies might be inevitable. But together, we DO have a say in how that world can look like.

Business incentives will never fully align with ethics. It is in the nature of capitalism to look at numbers rather than humans. As someone working in tech, keep questioning yourself. You need to be able to look at the bigger picture. Raise questions around questionable behavior. Assess a situation, beyond business goals.

Look outside numbers, KPI's and OKR's. Think about what you create from a human standpoint. Whatever structure you create, it will create its context. A gamified experience might be beneficial for some, while horrendous to others. Think about that when you help to create it.

Uber might see its drivers as temporary pawns in a long game of chess. Until Uber figured out how to do self-driving cars, it will need to keep playing with those same bloody pawns. Designing for disruption comes at an expense. So be aware of your actions. Make progress, but do it for the right reasons.

Get an email when I publish a new essay