How RBI helped Uber generate floating cash

I had planned for this post before the Delhi incident which consumed all available bandwidth across all available channels.  Now that there is a lull, I want to publish this post on a subject not covered in the noisy Indian media.

In an earlier attempt to cut the wings of Uber, traditional call taxi companies complained to RBI about Uber practices.  They complained to RBI on how Uber is not following the two factor authentication (2FA).   When a customer joins Uber, it stores the credit card / debit card information and uses it when the service is used.  This is indeed totally cashless and hassle free from the consumer perspective.  But then, this is violation of RBI rules.  Based on the complaint, RBI swung into action and instructed Uber to start using 2FA.

This 2FA requirement, turned out to be blessing in disguise for Uber.  Instead of hurting, RBI's 2FA mandate actually helped Uber create large bucket of floating cash, completely interest free.   How? You ask.. Read on..

Photo courtesy - ndtv.com

To circumvent the 2FA challenge, Uber came up with the concept of prepaid wallet and tied up with paytm.  In this model, Uber customer prefill the wallet with monies and use that to pay for the rides.  This not only makes Uber 2FA complaint but also gives a large bucket of interest free floating cash.

Uber says with paytm, over 600 million Indians have access to its service.  Even if a fractions of that large population are indeed Uber customers and they all put money in the prepaid wallet, it would run to several hundred millions rupees.  In one fell swoop, 2FA mandate made prepaid wallet the only payment option for customers to user Uber.

2FA does help curtail fraudulent transactions, but does have unintended consequences.  In this case, 2FA is helping the already cash rich Uber.

Will RBI think of some compromise here?  like exempting transactions less than INR 500 from 2FA requirement?  While RBI thinks about it, will Uber play fair and pay market interest to the floating cash of consumers like me?

Will you Uber?

Tags #Uber, Chennai, India, 2FA

Uber - Banning is NOT the Answer

First - What happened in Delhi is unpardonable and must be punished to the fullest extent of law in judicious manner.  Let the case not sputter along the maze of Indian judiciary with no end in sight and the justice be served quickly and efficiently.

But banning the Uber service as done by the Delhi Government is the not the answer.  Following Government of India's recommendations, some more cities seem to have joined the 'ban' bandwagon as well.  Thankfully, Chennai hasn't followed suit and I hope they don't.

Photo courtesy - uk.reuters.com

Interestingly,  Delhi chose to ban Uber for reasons unrelated to the alleged crime.  It chose to ban Uber for violating some archaic transportation laws, which if applied must put major of private cab operators out of business.

Make no mistake, Uber aggregation model is new and disruptive.  It leverages technology to the hilt and has created a business model that is threatening the existing players.  No laws or regulations exist in most places to regulate aggregators like Uber or Lyft.  In cities like New York, Paris, Chicago, they realized the need put their arms around the new emerging model and have revised their laws to regulate business model like that of Uber and Lyft.

Delhi ban on Uber appears to be mere PR stunt to deflect the systemic failure at many levels of the Government.  Unless they are plugged, the models built on top of that will continue to be shaky.  Can we trust the drivers licenses that are issued in our country ? (NDTV purchased a real license for a mere 200 bucks just outside Delhi).  Can we trust the police certificates issued?  (Mr. Yadav, accused of the Delhi crime did produce one, in what is now claimed as a 'fake' certificate).

If App operated cab operations are not safe, then what about the call taxis? what about the private travels operators who operate out of every street corner?  Some of these drivers have committed horrific crimes as well, but those services have not been banned and they shouldn't be.

When radio operated call taxis like Fast Track, Meru Cabs came, they leveraged the 'call center' technology to create a new model in India.  And, as mobile technology progressed and Apps started enveloping our lives, new business models emerged.  One such model is Uber.

We need to embrace these kinds of disruptive innovations and not block them.  Personally, Uber has made my life a little easier.  It has liberated me from the tyranny of unpredictable cab operators.  Earlier I used to pay anywhere between INR 800 - 1000 bucks for a one way ride to Airport which is just 14 kms from home.  Most often, I would end up getting the smallest car which is ready for junkyard.  With Uber, I have always gotten decent cars and the fare never exceeded INR 500.  

If an innovation helps the end consumer why stop it?  If laws and regulations have to change then lets do that and find a way to embrace new business models, not stop them in its tracks.

I will be hiring a Uber taxi when I head back to Chennai next week.

Tags: #Uber, #India #Chennai