Uber’s policy of allowing drivers to decide which ride to accept has many pitfalls
In many ways, app-based ridesharing services like Uber come full circle. They realize that aligning the interests of drivers with those of customers requires empowerment of their driver-partners, where the latter can choose which rides they want to accept and which they don’t, and when they don’t. will only accept cash payments.
Last week, Uber said it will allow a select group of driver-partners to access destination information before pressing the button accepting the trip. They can also see customers who pay online only and potentially decline the ride if the cash is what they need. This follows a decision made earlier this year in the United States, where Uber changed its algorithm to provide these benefits to attract more driver-partners. Even earlier, Uber has experimented with allowing certain drivers to decide where they wanted to exercise, but this time the dissemination of politics is wider.
This effectively means that, as usual kaali-peeli taxis and cars, the driver now has control over who to accept for a ride and who not to, even though Indian regulatory laws suggest that drivers cannot refuse any passengers, and if this happens the case can be reported to the police for action.
In India, the change was prompted by a wave of cancellations caused by drivers, leaving customers on the floor. The policy allowing drivers to cancel at no cost to them was introduced after the Covid pandemic, when they were reluctant to pick up passengers over short distances or online payments and things were difficult for the services of carpooling. But the wave of cancellations has led to numerous customer complaints, hence the decision to change the policy. The previous policy of not allowing the driver to know the destination in advance was intended to prevent discrimination against short-haul passengers or those wishing to avoid congested areas where fares may be low, but the travel times and fuel costs are high.
Indian drivers generally prefer cash payments, as it allows them to buy fuel in smaller quantities depending on the needs of the trip. Cash also makes money available to them before Uber (or Ola) reimburses them from the money collected from customers after deducting the platform’s commission.
Part of the problem is related to strict regulation, where surge prices are capped, and therefore prevent hubs and their driver-partners from raising prices for customers at shorter distances, especially to congested areas.
However, it would be a shame if Uber’s new rules for sharing destination details make it nearly impossible to get rides over shorter distances. Moreover, discriminating against online payments makes no sense, when the real problem is liquidity in the hands of the driver. It shouldn’t be a problem for a tech company like Uber to make ride payments made online instantly available to drivers via an ATM card that’s immediately loaded with the driver’s share of the fare.
Also, allowing higher fares for shorter distances or congested places makes sense, if the alternative is driver reluctance to meet this need.
Uber’s experience with sharing destination details and choosing cash or online payments is good in that it empowers drivers, but it would be bad if customers ended up being harmed or left furious on sidewalk.
The three USPs of app-based taxis are (1) guaranteed pickup from a customer-desired location; (2) transparent pricing, even after factoring in surge or congestion pricing, and (3) ease of payment. If the experiment of showing destinations and choosing cash over online works against customers, Uber will fail. You cannot expect success by ignoring what the customer wants.
Uber’s new algorithm has both advantages and disadvantages.