Ride Sharing Services: Payment Systems
In my last blog, I have discussed about the RSS economic and financial considerations for the society and firms. This week, I would like to explore more about the financial aspect of RSS specifically around the payment systems. Online purchase of consumer goods or services has been an increasing trend not only in New Zealand but also around the globe.
Technology provides the capability of buying and selling products and services via the Internet and other online channels. More companies are now interested in maximizing the use of technology to improve business efficiency and to increase revenue. It is now becoming an important part of the business performance that adds significant value to the company.
In the case of RSS companies, all transactions (i.e. bookings and payments) are managed using an online mobile application. Companies like Uber, Lyft, and Taxi Magic manage fare payments online using customer’s credit cards details. There are no other payment channels on offer (i.e. telephone or over the counter transactions), and this is currently a limitation for RSS companies. It restricts companies like Lyft or Uber from reaching out to a wider demographic and potential customers.
Is this something RSS companies need to address? If RSS companies consider offering other payment channels to its customers, how will they replicate the advanced online features (available in their online application) to other channels? From my perspective, it will be challenging for RSS companies to maintain the same quality of user experience. Why? Here are my thoughts:
RSS online application helps the company and the customers to have a one-stop shop where they can book, pay and monitor services. The online application is used to:
- book rides
- manage payments
- track actual location of customers
- provide estimated time of arrival of their drivers
- provide real-time feedback to the service
In the US 63% of millennial age group (18–29 years old) does not own a credit card either by choice or due to life’s circumstances. RSS may not be an option for them as there are limitations on booking and paying services for RSS rides like Uber, Lyft and Taxi Magic.
In the 2014 report of World Bank, it shows the world average number of people with Internet access is 40.7 per 100 people. Not all people have internet access and may not consider doing business with RSS companies.
RSS companies may have a good business opportunity if they can think of ways how to make their services accessible to none credit card holders and people with no Internet access.
By introducing other payment channels (like over the counter, bank to bank transfers or via telephone), RSS companies may be forced to think of ways how they can still offer the same or similar functionality as what online application have (i.e. tracking of location, mapping of trips and real-time feedback).
This could mean development and maintenance of new technology platforms (which may require additional cost) to provide a separate tool to access information on the actual location of drivers, capture feedback, and real-time trip information.
Is it worth exploring other payment systems for RSS? Are RSS companies better off with the status quo on managing payments or will there be a significant added value (revenue) if they offer other payment channels? This dilemma is true for all RSS companies.
In China, Didi (a local RSS company) is offering other options to manage payments using Alipay (offers mobile money transfers). However, Didi still needs to create a platform on how to provide other features of its online application (i.e. real-time location updates) to customers who are paying via Alipay.
Uber has also started offering “cash payment” option for riders who does not have a credit card. The passenger can pay the exact amount (no haggling required) to the driver at the end of the trip. However, this type of payment method also offers far less convenience and fewer features compared to using the RSS online applications.
Offering new payment channels to consumers gives RSS companies a competitive edge as they are making their services accessible to more people. However, providing other payment channels to customers could mean extra work for RSS organisations in terms of compliance with local regulations and policies. There is a question of “What are the RSS legal and compliance implications when setting up a new payment system?”
In the case of Alipay in China, they need to follow certain local bank policies when completing transactions. There are legal considerations specifically around paying the right tax dues for each transaction made between RSS companies and customers. Another legal implication would be the RSS driver’s obligation to pay tax in relation to its income (generated by providing RSS service). This is something that I want to explore more in detail in my next blog where I will be unpacking RSS legal and political considerations. It will include the topics about tax implications in operating RSS, cross-border issues and compliance to licensing requirements. Watch this space!
For now, I would like to ask all my readers on what they think about RSS exploring other payment channels for customers? Is it worth it? Why or why not?
