How ride sharing apps threaten mobile wallets
Uber, Lyft and Grab are more than just ride-sharing companies; their apps are also among the most popular mobile wallets that can be used at a single merchant. While other companies aim to convert cash and card users to digital alternatives, the ride-sharing market grew from the premise that digital is the only way to pay.

These apps may not seem like much of a threat as long as they stay in their lane — but increasingly, ride-sharing companies are pushing the limits of how their apps can be used for payments.

This listicle is compiled from reporting by PaymentsSource writers including John Adams, Kate Fitzgerald and David Heun. Click the links in each item to read more.
uber rider
Uber hints at big plans for digital money
Uber has applied for an e-money license in the Netherlands, a strong signal that it plans to do more with its technology than power mobile hailing and seamless fares. This builds on the company's already ambitious moves to transform its app into a pseudo-mobile wallet.

An e-money license would enable Uber to build a Venmo-style experience to allow riders to split expenses. Becoming a global P2P player will also likely require more regulatory approvals than the one it seeks in the Netherlands.

"Implementing a new business model implies new capabilities for the consumer, which will almost certainly need to use the account for more than a simple payment, so new platform capabilities will be required," said Tim Sloane, vice president of payments innovation and director of the emerging technologies advisory service at Mercator Advisory Group. "To support this, new disclosures and consents must be introduced and managed with consumers."

Uber will also have to deal with fresh issues of enrollment. The end user agreements it has in place for passengers are likely insufficient for operating a digital wallet, Sloane said.

"If Uber wants to be a P2P enabler in the U.S. it would fall under the prepaid rules of the CFPB, which would require significant consumer consent prior to receiving funds," he said.

Uber certainly has the scale it needs to build a payments platform. Uber recently passed the 75 million rider mark and provides 15 million rides per day globally, with the average rider spending $50 per month on the ride sharing app. In the U.S., it has a 77% share of the ride sharing market, and by some counts has taken a quarter of the market away from New York's yellow and green cabs.

"When considering the many companies that stockpile 'cards on file,' Uber is likely in the top 20," Sloane said. "Braintree and others have tried to utilize the stockpile to create new business and revenue streams, so why not Uber?"
Lyft sticker
Lyft's plan for faster payments
From the consumer’s perspective, the most important task for Lyft is delivering a ride, not taking funds. Thus, there are many ways to determine a rider’s eligibility to pay without charging them; because Lyft allows riders to add tips and split fares after a ride is complete, it can even be beneficial to the company to delay collection of funds.

But drivers need cash right away to cover their own costs, including gas while they are still on the road.

“There is a compelling need today to solve this. We are faced with it on a day to day basis and we have been faced with it for years,” said Ashwin Raj, Lyft’s vice president of payments, in a presentation at SourceMedia’s annual PayThink event last year.

“My driver who needs to pay for his gas to provide the next drive cannot wait for Same Day ACH. They need those funds immediately,” he said.

For them, the best option is Express Pay, Lyft’s branded version of Visa Direct and Mastercard Moneysend, which operates via debit card transactions. Express Pay “has become such a significant part of our services that the majority of our drivers are using it” to receive funds within 30 minutes, Raj said.

“It’s a good story so far, but there is a ‘but,’” he said.

Express Pay works only for drivers who enroll a debit card, rather than a prepaid card or a bank account number. There is no near-real-time option for drivers who do not have or do not want to use a debit card; for them, the best option is standard ACH.

“We can’t say to a driver, ‘You have to put in a certain instrument to get your funds,’” Raj said. “That is the problem we’re trying to solve for.”
A Grab-branded taxi
Grab's relationship with cash: It's complicated
The irony of the ride-sharing boom is that, in providing a long-overdue modernization of the way drivers accept payments, it seeks to digitize payments even though a cash option remains in the process.

Singapore-based Grab claims its GrabPay mobile payment service is growing and Grab has 95% market share in Singapore's ride-hailing industry. In buying Jakarta-based Kudo as part of its overall $700 million "Grab for Indonesia" 2020 master plan, the company seeks to bring financial inclusion to the forefront through its various mobile payment offerings.

Consumers without bank accounts or cards can use Kudo to purchase goods or services online, then make cash payments to a local Kudo agent. Kudo's network of 4,000 agents covers 500 towns and regions across Indonesia and has more than 5 million active customers. It's a similar model to Amazon Cash, as well as older offerings such as Walmart's Pay with Cash, PayPal's MyCash Card or PayNearMe.

Currently, Grab users have various mobile options to choose from including GrabTaxi or GrabCar, or simply having GrabPay on their phones with a linked card or account to make payments at participating retailers. Top-up options such as GrabPay Credits and a loyalty program called GrabRewards in which points are earned for each Grab ride also exist.
Apple pay sticker
Why don't Uber and Lyft like Apple Pay?
The biggest names in ride-sharing have long had to contend with problems such as worker disputes, customer tipping preferences, clashes with the legacy taxi industry and the development of self-driving vehicles. So why do they care so much about payments?

With so much for Uber and Lyft to worry about, a ready-made solution like Apple Pay might seem like an answer to their prayers. In fact, Apple Pay and rival mobile wallets fall very short of delivering what the two ride-sharing heavyweights need.

“There’s been a strategic error on the part of … the ‘Pays’ — whether it’s Android or Samsung or Apple — in some ways, in marketing the physical point of sale ‘Gee whiz, tap your phone’ aspect of the wallet, when in reality that’s not the thing that’s broken,” said Brian Crist, chief payments counsel for Uber Technologies, at SourceMedia’s annual PayThink conference last year.

This is more than just a gripe that Crist wants resolved; Uber and Lyft had both indicated that they could take matters into their own hands to address the shortcomings of the current crop of mobile wallets.

The various wallets don’t advertise their interoperability with other payment methods, even though merchants and issuers know they play nice with one another — how is a consumer to know Visa Checkout accepts non-Visa cards, Crist asks. This issue could easily mislead consumers into thinking they can’t complete a purchase without going to a different merchant, he said.

“In creating this brand differentiation, they’re actually obscuring the fact that there are standards underpinning this stuff,” Crist said. “That’s why the existing incumbents that have your card on file like Amazon still kill it in the mobile space.”

The situation is similar at Lyft, which views the payment as a point of friction even though it happens far below the surface of the user interaction.

There are three points of friction to requesting a Lyft ride for the first time, according to Ashwin Raj, Lyft’s vice president of payments, who also spoke at PayThink. Those pain points are downloading the app, setting up an account and adding a payment card.

On the mobile device, adding a payment card is tedious enough that if the user has other options, he or she may opt for an alternative rather than update the card and request a Lyft, he said.

“It becomes a point of friction, not only on the first time,” because eventually the card on file might expire or get canceled, Raj said. And the user will only be prompted to update the card when requesting a ride. “You’re not sitting there on a Sunday evening thinking, ‘I’m going to update my Lyft card,’ ” he said.

Apple Pay would seem to solve that problem by using the card on file with Apple, but the trade-off is in shifting the customer relationship to Apple, thus depriving Lyft of other data that it can use to determine the rider’s ability to pay.

“We don’t have a direct relationship at that point with that customer who’s signing on using Apple Pay,” Raj said. “All we know is a token, at that point. That is less preferable.”
Uber app
Uber's hidden online banking features
Many companies in financial services say they want to be the next Uber. But the reverse may also be true, as illustrated by the November launch of a cobrand card that can be managed from within the Uber app.

Barclaycard and Uber’s new Visa card uses its digital advantage in a few ways: Consumers can apply—and get approved—in minutes by signing up directly within the Uber app, a process sped up by having basic customer information already on file. Once approved, customers can shop immediately with a digital version of the card, earning rewards and tracking them in real time via the Uber app.

Customers may earn rewards at a rate of 4% of spending on restaurants and UberEATS; 3% on travel; 2% for online purchases (including Uber) and 1% on everything else, and an introductory bonus includes $100 in points after spending $500 on the card during the first 90 days.

Other benefits point to the card’s potential appeal to a digital-savvy consumer, with no foreign transaction fees; a one-time $50 credit for online subscription services like Netflix when spending $5,000 annually and mobile phone insurance of up to $600 for damage and theft when the card is used to pay the monthly mobile phone bill.

“We’ve put features in this card that directly relate to Uber users’ everyday lifestyles, which includes real-time visibility into rewards as they’re earning—and using them,” said Denny Nealon, head of U.S. partnerships for Barclaycard in an interview coinciding with the card's announcement.
More than rides — Grab now offers loans, insurance
In a move that Grab says transforms it into a more complete financial services provider, the March launch of Grab Financial will provide customers payment, rewards and loyalty services as well as insurance and financing to consumers, micro merchants and small businesses.

Grab Financial stems from two new partnerships for the company. Credit Saison, a Japanese consumer financing company, will work with Grab to provide loans to its customers. Property and casualty insurance company Chubb will offer policies to Grab customers and drivers. Using the Grab app, drivers will be able to choose from various policies to protect their vehicles and families from the loss of income.

Since late last year, Grab has expanded its services beyond the ride-share program, concentrating on making GrabPay a common mobile payment method at marketplaces, restaurants and small shops in Singapore.
Uber signage and mobile phone user
Uber's new strategy for trucker payments
Uber's consumer credit card isn't its only financial product. Uber Freight, the ride-hailing giant’s load-sharing app for the trucking industry, is collaborating with the fleet-card giant Fleetcor on a payment card that offers drivers discounts for gas, engine maintenance and tires.

The Uber Freight Fuel Card provides companies that use Uber Freight to connect trucks with loads to haul with a card and app to manage and control trucking-related expenses on the road.

Available as a Mastercard credit or debit card, the new Uber payment card leverages technology and expertise from Comdata, a Fleetcor division with deep processing and management expertise in fleet card programs.

Uber already offers a Partner Fuel Card via Mastercard and Fleetcor, providing drivers with discounts of up to 15 cents a gallon at most gas stations. Each week the card balance is automatically deducted from participating Uber drivers’ earnings.