You, me and P2P…Episode 2
Breaking news out of the Beehive this week. No it wasn’t the Hurricanes taking it over on Wednesday after their Super rugby success or JK turning 55. Instead the New Zealand Government announced it could ban Uber from the country over the way it vets its drivers. Uber changed its vetting process of its New Zealand drivers in April. They no longer require a passenger or “P” endorsement. The Uber vetting system costs $20 and takes 6 days where as New Zealand’s Governments licencing requirements cost $2000 and takes up to 3 months to complete. Both sides say passenger safety is their top priority. Uber say its background checks based on MOJ criminal records and NZTA driver licence records are enough. The Transport Minister Simon Bridges wants extra background checks. These include a police check, a fit-and-proper person inspection and regular checks that the driver is able to provide a transport service. This issue will run and run and I will cover any developments in future blogs. It is yet another example of an issue Uber faces in different market around the world.
In what could be a blessing in disguise, Uber has decided to bow out of the Chinese market. It has agreed a deal to hand over its branding, operations and data in exchange for 20% holding in Didi Chuxing (its Chinese domestic rival) which is valued at $35bn. Uber has spent over $2bn to try to break into the Chinese market. This deal marks a return of over $5bn. Not bad!! One of our readings this week touched on how Uber funded part of its investment in the Chinese market and the vast sums at stake. UberChina would have been valued at $7.5bn if they have broken into the Chinese market.
For the usually aggressive Uber it marks a slight change of tactics. This move could turn out to be a good move by Uber. It didn’t make the impact in the market it had hoped and was losing money. It can now concentrate on breaking into the next biggest emerging market by moving West from China over the Himalayas’ into India. It can also divert funds to its UberEATS food delivery service and self-driving cars. By not wasting time and resources in no win situations Uber has instead decided to concentrate on expansion of its services into new markets.
I was going to begin this blog post by answering the comments posted on my previous but with Uber in the headlines so much this week I had to begin with it. Now to try and follow up on the comments from my previous blog…
Catherine Doran. You raise an interesting point about traditional players in the P2P market fighting back. Although it isn’t obvious, one of the possible reasons why the New Zealand government threatened to ban Uber is the potential loss of revenue. With a $1980 difference in the way Uber wants to vet it drivers and the NZ Government wants drivers vetted. Taxi unions and regulators have been lobbying the NZ Government to do something about Uber’s entry to the market. Challenging the way Uber registers their drivers could be just the start.
The fightback against Airbnb has begun in Phoenix and other American cities. They are objecting to Airbnb hosts who are effectively corporate landlords engaged in clear commercial activity. Some of the properties have more than 2 rooms for rent and are booked for a year in advance. This isn’t really the one room or couch in the family home most people expect from Airbnb. From what I have read about the fight back against Airbnb and Uber it seems to be about getting rid of the competitor by lobbying governments and not through innovation by the traditional players.
Nagarajan Kartik. P2P lending is definitely an area to watch. As you say regulations have to catch up at some stage and this is true for most P2P Commerce businesses’. Once countries catch up with regulating how they operate they could see profits fall and traditional businesses regain lost market share. Once this happens P2P businesses will have to be innovative in raising capital. I came across an article on how P2P lending platform Faircent is raising capital in India to expand its business. This is an example of how P2P start-ups will be able to raise capital and challenge existing businesses. The problem could well be gaining market share from other start-ups.
I also read that the RBI in India has started to regulate P2P lending. They are defining them as a Non-Baking Financial Company with certain permitted activity. With 20 P2P lending companies launched in 2015, bringing the total to 30 some form of regulation is needed.
kartik_25. The graph you included in your comment shows that P2P lending is clearly on the increase. In New Zealand at the moment, the Reserve Bank is trying to cool the property market by making it harder for investors to get loans to buy property. Could P2P lending be an option to many investors and ordinary people struggling to get a mortgage? Looking at the Financial Markets Authority website it lists 5 providers available in New Zealand for people to use. With a return of 13.22% on offer you can see the attraction for investors due to the very low interest rates being offered by banks. P2P lending could help the house buyer and the investor.
In my next blog I will have a look at whether P2P businesses are likely to work better in some conditions than others. I will be looking at any updates on the Uber vs the NZ Government battle and also some more on P2P lending.
Thank you for reading. Please like and comment below, with your thoughts, questions and suggestions of what future blogs should cover.
Good night and good luck
