Recently, Uber announced a new program called Uber Money, with a slew of new opportunities for drivers and passengers to get rewards and earn more. Senior RSG contributor Jay Cradeur details the new Uber Money program and how it may affect drivers below.
Yesterday, I checked my Google news feed. This is a daily task as I look for topics that will be of interest to Uber and Lyft Drivers. Yesterday was the day in which Uber announced a new division called Uber Money.
There have been a bunch of articles, news stories and feedback on the project. However, how does Uber Money affect drivers? Will it benefit them? I’ll break down what you need to know below.
What Exactly Is Uber Money?
Let’s start off by looking at what Uber says about Uber Money. The head of Uber Money, Peter Hazlehurt wrote that Uber Money is “a team within Uber working on financial products and technologies that deliver additional value for the Uber community, all at Uber speed.”
That is what they call the 40,000-foot view. It is a very general description. Let’s get more into the weeds and sort out the details the best we can, given the information we can find.
I was surprised to learn that 40% of Uber passenger transactions are in cash. That means that 4 out of 10 Uber drivers are collecting cash and credit cards for rides, similar to how most taxi drivers still operate. One goal of Uber Money is to reduce that amount dramatically so that virtually all Uber transactions are done digitally through the Uber app.
Uber will also use the Uber Money team to further streamline driver payouts to four million drivers. In the United States, we all have access to immediate cash-out. Here again, it appears Uber is speaking to drivers in other countries that do not already have this feature.
Holly Glowaty, the co-founder of branded currency conference Flourish, said something very interesting: “Uber, at its core, has always been a fin-tech company. From the beginning, a frictionless payment experience has been a key piece of their value proposition…Now, Uber has acknowledged the huge opportunity they have to cut down on fees that other companies simply cannot get around.”
Big Changes To Uber’s Credit Card
Uber currently offers an Uber Credit Card in partnership with Barclay’s Bank.
According to the website onemileatatime.com, there are significant changes to the card:
“Up until now, the Uber Card has offered the following bonus categories:
- 4% back on dining, including restaurants, bars, and UberEATS
- 3% back on hotels and airfare, including vacation rentals
- 2% back on online purchases, including Uber, online shopping, video, and music streaming services
- 1% back on everything else
With the relaunch, this card will offer:
- 5% back on Uber, including UberEATS
- 3% back on dining, hotels, and airfare
- 1% back on all other purchases”
The big difference here is that now the Uber credit card rewards you for Uber rides, in addition to any of the other Uber transportation services. Before the relaunch, passengers did not get any rewards. After the relaunch, Uber is paying out a 5% reward for rides and other Uber modes of transportation.
No More Cash Rewards, Instead “Uber Cash” Rewards
Perhaps the biggest change is all rewards are offered in Uber Cash. You will not earn actual cash, but rather Uber Cash credits toward Uber rides, Uber Eats, and other Uber enterprises, such as Uber Copter helicopter trips.
According to the Wall Street Journal: “A quick check of the app on Tuesday afternoon showed that pickup from Goldman Sachs’s headquarters in lower Manhattan for a twin-engine whirlybird to whisk you away to JFK would cost about $233. At 5% cashback using an Uber card, that would be a cool $11.65 in your virtual pocket. Almost enough for the terminal beer, you will now have the time to enjoy.”
Uber’s Attempt At Profitability
While researching this article, I came across a post at Observer, mentioning the concerns of this new program.
”Robert R. Johnson, professor of finance at Creighton University’s Heider College of Business, says the announcement only reinforces Uber’s “weak” business model.
Johnson noted his skepticism is reflective of Uber’s infamous net losses, which it has incurred “since inception.” “Uber operates in the ride-hailing, personal mobility, food delivery, freight, and driverless vehicles markets and is yet to exhibit a clear path to profitability in any of them—and all of those sectors face stiff competition,” Johnson explained. “The firm has proven it can grow revenues, but has also proven adept at growing costs.”
This continues to be the issue with both Uber and Lyft. How will they ever become profitable? It is their desire to turn a profit that has driven Uber and Lyft to manipulate the pay structure for drivers, thereby paying drivers less per mile to increase revenue.
However, even with driver pay cuts, neither company is close to showing a profit. Recently, we saw Uber lose a whopping $5 billion in one single quarter. The Uber Money announcement is poised to help Uber generate more revenue, ideally while also decreasing expenses.
Impact For Drivers
If you are in a market in which you have to accept cash payment for rides, and the Uber Money team ultimately converts your market to a digital payment platform, that will be huge for you. For all of us here in the United States, this is not a concern.
The update to the Uber credit card could drive more demand toward Uber and away from Lyft. If you are a primary Uber driver, increased demand means less wait time between rides and also more surge. And if you ever use Uber Copter, it will be good to know that you are earning Uber Cash for your next ride.
Key Takeaways from the Uber Money Announcement
Good for Uber for working to make driver payouts more seamless. It’s also a good move on Uber’s part to allow more passengers to make digital payments and remove cash from the equation around the globe.
In much the same way that Apple has worked hard to create and then lock you into their own ecosystem, Uber is doing the same thing. We see this strategy when, rather than offering cashback on purchases, Uber is offering Uber Cash, or credits toward future Uber purchases. As a consumer, I am OK with this strategy. I travel and I use Uber during most of my journeys. Having a ride or two paid for because I used the Uber credit card works for me. Be safe out there.
Readers, will you use Uber Money when offered the opportunity? What do you think about this announcement?
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-Jay @ RSG