The rise of ride sharing app, Uber, has been phenomenal. From a trendy niche app brandished by the west coast, bay area techset, it has penetrated our culture so pervasively that it has its own meme and even spawned a brand of jokes beginning with “It’s Uber but for” that rival age old “knock-knock-who’s-there” puns and “yo-mama-so-fat” one liners. This poster boy of the share economy is, however, more than just a passing fad and can credit its success to fixing the deficiencies of the taxi experience – unavailability, long wait times, anti-consumer practices, the hassle of cash payment and the perceived lack of security amongst other issues.
New, disruptive technology has always drawn scorn from new age luddites and demoded naysayers and, at times it would be easy to agree when one reads about the massive amount of venture capital being thrown at a company yet to turn a profit after 8 years. From a socio-economic perspective however, the benefits of Uber are much more tangible and visible.
To those who have adopted Uber as a mode of transport, the reasons to make the switch are compelling. With a service as commoditised as personal transport, it is extremely price sensitive. Coupled with the general mentality amongst people that the economy is in the doldrums, cost is a major concern for the commuter. With a simpler fare structure without all the confusing surcharges, a ride with Uber is cheaper than regular taxis, in the absence of surge pricing. As it is, Uber is the economical option for most standard trips, the exception being peak periods when surge pricing comes into effect, seguing nicely into the next point.
A common grouse of consumers is the ease and time required of finding a taxi. During certain hours each day, available taxis are few and far between due to high consumer demand. How many times have you been in a long queue with no taxis in sight thinking, “I’d gladly pay extra to get a ride immediately without having to wait”? The app solves this problem with surge pricing which, temporarily increases the fare in certain areas during peak timings. This effectively and efficiently allocates resources to where they are most needed, and ensures those with the greatest need and thus the greatest opportunity cost to get the ride that they require without shortchanging those unwilling to pay more. This opens up the free market – those willing to pay a premium gain access to limited resources.
Another oft-mentioned complaint brought up by commuters is the observed phenomenon where available taxis somehow ‘vanish’ during specific periods i.e. during changing of shifts or shortly before midnight. During the changing of shifts, it is common to see taxis display a specific location and refuse to pick up paying customers if their destination does not coincide with this location. Even more annoyingly, securing a taxi within an hour before midnight is an exercise in frustration when cabbies bide their time waiting for the midnight surcharge to kick in. Uber circumvents these issues by providing an alternative to consumers. The fact that fares for Uber rides after midnight are generally cheaper (there is no official midnight surcharge) vis-à-vis the same taxi ride makes the Uber option even more compelling.
3) SECURITY AND SERVICE STANDARDS
Technology, more specifically smart phones, have made Uber’s success possible. A rating system enables users to provide feedback which, weeds out errant drivers and motivates them to raise service standards or even prompt actions that go the extra mile. This function also provides some measure of security as you can choose a driver based on his or her reputation.
With the adoption of technology, payments are also made easier for both parties. Commuters are provided the total fare cost prior to booking an Uber ride, which eliminates the potential for errant drivers to choose less efficient travel routes. Since payment is mostly done via the app, drivers do not have to worry over unethical passengers who hit-&-run without paying. This effectively removes any payment disputes, refusals to pay, the inconvenience of cash payments, or the possibility that the passenger or driver does not have the necessary cash or change.
4) OPENING BUSINESS OPPORTUNITIES
At the heart of the share economy, or more accurately the access economy where goods and services are temporarily rented out, is efficient resource allocation. Uber capitalises on a need by moving underutilised resources to where it is needed. Their traditional business model is to provide people in need of transportation, whether with or without a regular taxi, to an individual who has a vehicle lying idle and has the capacity to meet that need. Through this, business opportunities are created. On the lowest level, a car owner can choose to monetise his/ her time and asset to earn a living or some spare cash. It also helps that driving a private hire car avoids the social stigma that is associated with driving a taxi, coupled with lower barriers as such services are not subject to the strict criteria imposed on licensed taxi drivers, such as having to satisfy a minimum 250km/day mileage accumulation or that taxis must be replaced after 8 years. In fact, Uber markets its drivers as independent business owners, and it is this sense of ownership and freedom that has attracted many to its ranks.
As a result, there are other positive knock on effects to related businesses. Older vehicles that might otherwise be scrapped find a new lease of life and are in demand by those who wish to become a driver with Uber. Used car dealers and rental services such as ETHOZCab now have an additional avenue to rent out vehicles at a competitive rate to meet the increased demand for vehicles. All this leads to greater capacity which, leads to improved availability of transportation services for the consumer. Conceived in the folds of the Silicon Valley, Uber is essentially a technology company first and foremost. Thanks to the meteoric rise of similar tech giants like Facebook and Google, the tech start-up presents an irresistible lure that spurns the hungry and talented to pursue the next big thing.
5) ECONOMIC BENEFITS
Increased competition from private hire cars has broken the near monopoly that taxi companies in most countries have operated as. This healthy competition pushes the need for innovation where no motivation existed previously and leads to lower prices for the consumer without compromising on service standards. With more C.O.Es going to Uber cars, the shift of ownership from private to semi commercial is very much possible; and those who embrace the private hire service model will be better equipped to manage high C.O.E prices, as their income from driving can partially offset the cost.
A release of Uber driver demographics early last year revealed that the main draw of signing up to be a driver was the flexibility, the ease and the perceived status of an entrepreneur as opposed to joining a taxi company. For the reasons cited above and coupled with low barriers to entry, it provides an avenue of employment to the disenfranchised, those from lower income communities or those in between jobs. In this arena where almost anyone can remain employed in some capacity with Uber, its ameliorating effects on flagging employment statistics can easily be surmised. Other effects to the economy would be a reduction in the perceived need for private transport.
There are social benefits to this development too. For one, worrying about transportation after an intoxicating night of revelry should cause less anxiety. With readily available and affordable public transport, the impetus to drink and drive is reduced. Another point worth raising is that with relatively easy employment, a person would be less likely to resort to crime out of desperation. With constant employment, a person is given hope and opportunity costs for turning to crime or engaging in mischief. It also further incentivises the individual by enabling him or her to own a personal mode of transport.
As funding keeps coming in from the likes of Google Ventures to back this ingenious little idea called Uber, coupled with the benefits it brings to 4 groups of consumer, business, government and economy, we should definitely sit up and take notice of this emerging tech giant.