Today we talk about the new upstart in the FinTech space- Uber Money. Also, we are talking about it because this news dominated the global headlines yesterday.
So let's get to it.
So Uber is betting big on its financial arm by laying out plans to introduce wallets, credit cards, debit cards and a whole host of other services. But before we get to that, a brief.
The stated goal here is simple. Driver-partners need access to better financial services and Uber has an obligation to provide said services.
Consider India for instance. Uber pays its drivers at the end of a pre-defined payment cycle. It usually lasts a week. But getting by an entire week when you are living on a daily paycheck can be excruciatingly hard. Think about it. These are people that are scraping the bottom of the barrel. If there was any way they could get their hands on all their hard-earned money without having to wait for the weekly payment cycle to close, that would be a godsend. And so it makes sense for Uber to expedite this process.
So... why not just credit the amount to a drivers bank account at the end of each trip?
Well, that’s the most intuitive solution but it’s an operational nightmare. It’s simply not feasible to process the large number of transactions that happen on the platform. However, there is a simple workaround. Use a wallet — like PayTM. This way Uber can credit the money directly to the wallet (call it Uber Money) and drivers can access the wallet using the Uber App.
Cash-out any time and the money should be in your bank account after maybe a day’s worth of processing. You could also theoretically allow drivers to pay bills and do other things using Uber Money.
Unfortunately, Uber isn’t the first company to think of this neat solution. Ola has had Ola Money for quite some time. Users can pay using Ola Money and drivers who’ve been paid in said Ola Money can cash out any time, although it does take a couple of days of processing. But regardless, the concept exists and is in practice already. So it’s not going to be this revolutionary new thing unless Uber does something very different with its wallet.
But why is Uber trying to be egalitarian? A loss-making corporation trying to course-correct should be looking at ways of making more money, not spend it on creating a new financial division no?
Well, that assessment is not entirely accurate. For one with Uber Money, the company will now have access to a whole new revenue source — Float income. Anytime you deposit money in an open wallet, the company can earn interest on a part of that deposit. Yes, drivers might not keep a lot of money locked up in the wallet. But customers will. And any interest you earn off of this will go directly to the bottom line i.e. profits. How much depends on other technicalities. But its money nonetheless.
Also, this project allows Uber to build a walled garden — an ecosystem where all the money floats inside the wallet and both drivers and customers transact through Uber and Uber alone. For instance they are planning to introduce debit cards for their driver partners so that they can use this money just like regular cash.
Long story short, Uber is diversifying and it’s entering the most competitive space out there — FinTech.
I guess we will just have to wait and see how Uber fares from here on in. But boy did things just get exciting out here or what?
A Steely Problem?
Also in other news, there were reports coming in that steel companies in India are in a spot of bother right now. The contention is simple. The automobile industry and the construction sector are in dire straits. These are the good folks that buy steel in bulk. So what happens when demand is tepid? Well, steel manufacturers take a hit.
The problem is also compounded by the fact that big steel companies tried to buy struggling, bankrupt manufacturers because they were available for pennies on the block. But then, buying all this asset and not being able to put it into productive use is a whole different kind of problem. It ties up cash (which could have come in handy now) and leaves you with dud plants that you can’t use (because there’s no demand).
And while the big manufacturers can wade through a downturn like this one, the smaller ones simply fold. Quite unfortunate this but it is what it is.
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Anyway, that’s it from us today. We will see you tomorrow.