Uberizing financial services

Not every new entrant in the field of financial services deserves the same attention. Of course, when Uber, the ride-hailing giant, announces a new division called Uber Money, some rise their eyebrows.

Just like most new entrants in the field of financial services, Uber announces they are targeting the unbanked and the underbanked: Uber Money will, at first, target the 4 million registered Uber drivers worldwide and propose them a mobile bank account so that they can get paid immediately after each ride. One of the goals is also to boost the loyalty of drivers who may be tempted to accept rides for more than one company.

The company already completed tests in the US for a debit card with an enhanced “instant pay” service that allows drivers to receive their share of the rides on a no-fee banking account, from which they can spend money instantly.

Uber has already tested an automated US$ 100 (EUR 90) overdraft that allows drivers to refill at the end of the day to ensure they are ready for the next ride. In some locations, such as Brazil, India or Peru, Uber is even offering micro-loans to drivers.

As a global company, Uber has to take into account all the specificities of payments according to different countries. For instance, in Pakistan and Bangladesh, the majority of rides are paid in cash. Globally, cash accounts for over 40% of Uber rides.

After its 4 million drivers, Uber may be targeting its 100 million monthly active customers worldwide. Most of them use credit cards to order and pay for rides and for Uber Eats orders. While no formal announcement has yet been made, Uber might be tempted to propose its own payment system to get rid of charges incurred by credit cards.

Uber will not play on its own. Uber received a US$ 500 million (EUR 450 million) investment from Paypal announced with plans for both companies to expand their existing partnership. Moreover, the company announced that Uber Money will be interfaced with Apple Pay and Google Pay from early 2020. Uber will remain stuck with mobile payment, it is also relaunching its Uber Credit Card in partnership with Barclays, under which cardholders receive a 5% discount for spending on Uber rides, Uber Easts and Jump bikes and scooters.

Uber is not a total newcomer in the world of financial services. Following a long trend to make payments easier and more frictionless, Uber, since its beginning has been the first company to implement invisible payments on a wide scale. Uber from day 1 sorted out the complexity of paying a cab ride.

More generally, Uber, after its IPO in May this year, is under pressure to turn a profit. This may be the trigger for the company expansion in financial services. However, the payment community knows that payments are an industrial activity that is hard to make profitable. While financial analysts generally praise Uber’s ability to enter new businesses and provide new services, leading to revenue growth, they’d be happy to see profits come in as well.