During the Middle Ages, payday was a yearly event wherein the local landlords and their peasant workers settled up for the previous year’s work and drew up terms for the next year. As industrialization displaced feudalism, pay cycles evolved to monthly. The modern era ushered in the notion of a weekly or bi-weekly pay cycle, which remains the norm for most U.S. workers today.
For about half of the workforce, that system works out fine, Uber’s Head of Payments Peter Hazlehurst told Karen Webster in a recent conversation. Those workers earn enough each pay period to cover their expenses until the next payday. In the event of an unexpected financial hiccup, most have savings or access to a low-cost means of credit.
For the other half of the workforce – many of whom are the gig workers who drive for Uber, Hazlehurst said – the system doesn’t work quite as smoothly. The occasional financial pothole creates problems that require expensive solutions like overdraft fees and payday loans.
It quickly became apparent that Uber could no longer ignore how this situation impacts the fleet of drivers who provide services to the company’s passengers.
Today, Uber has launched Uber Money as a big step toward a solution.
“[Uber] started with weekly pay, we moved to the next-day payments using ACH, and about 18 months ago we launched instant payments with Visa and Mastercard with a limit of five instant payouts a day,” Hazlehurst noted. “Those instant payments [after] a year and a half are now 70 percent of driver payouts, so clearly the drivers want to get paid as quickly as they can.”
A good start, he noted, but still improvable.
The launch of Uber Money brings a new portfolio of financial services to Uber drivers, including real-time earnings deposited after every ride into a fee-free, Uber-branded debit product with unlimited overdraft protection. Uber Money – a single hub where all of the financial products and technologies developed by Uber will collectively be developed – intends to bring “additional value for the Uber community” by leveraging the company’s scale to create and assemble products that help drivers get a better handle on their financial situation while giving consumers a more rewarding experience.
Fixing the Flow of Funds
The automated, real-time earnings feature for drivers comes care of updates to the Uber Debit account, powered by Green Dot, as well as the integration of the new Uber Wallet into the Uber Driver apps. Instead of drivers having to ask for a real-time payment and face a cap on how many they can have per day, all payments are automatically deposited to their Uber Debit account when the job is complete. As soon as the customer pays, the driver gets paid.
These deposits will automatically sync with the forthcoming Uber Wallet, which will go live in the Uber Driver app in the next few weeks, making the account easily accessible. Drivers can more easily track their earnings, manage cash back and even pay bills, all from this one-off touchpoint. Even onboarding and account creation do not require an additional app or sign on, Hazlehurst said.
Green Dot has been Uber’s long-term debit card partner, and many things about the offering remain unchanged. It’s still a no-fee account with no fees for overdrafts up to $100.
“That feature is particularly important to our drivers,” Hazlehurst explained. “Among the 56 percent of drivers who are eligible for it, we have seen roughly 60 percent who use it, at an average of six or more times a month.”
For a driver, he said, that’s roughly $200 a month they would have paid in overdraft fees, assuming a $35 overdraft fee on a $40 gas purchase they may have made in order to provide more rides a day or two before payday.
These new offerings are voluntary, Hazlehurst noted. Drivers are not required to use their Uber Debit accounts and can continue to request immediate transfer earnings to any bank account they choose – though those transfers will still carry a 50-cent fee. But, he said, beyond making payments immediately and automatically at the end of every ride, the Uber Debit card and Uber Wallet are intended to bring even greater benefit to drivers.
The goal, Hazlehurst explained, is to make every dollar earned via Uber go further. For example, the new Uber Debit card launches with cashback on gas starting at 3 percent for all drivers, and up to 6 percent for the highest tier of Uber Pro drivers. Moreover, while gas is the first and most obvious cashback benefit for drivers, it is not the only one. Among the Wallet’s purported uses is to serve as a discovery hub for other driver-focused offers.
“Watch the space for deals, because we want to see how we can leverage our size and scale more broadly for our drivers – gas, insurance, rent, savings. We imagine going out on behalf of our [four million] drivers and securing great deals that they can’t get as individuals,” Hazlehurst noted.
A Really Rewarding Hub
Though the driver side is getting the first and most dramatic of the upgrades, the consumer-facing side of the platform has some add-ons coming as well. Uber Wallet will start in the Uber Driver app, but will migrate to Uber Eats and Uber’s main app in 2020.
As part of that upgrade, Uber will relaunch the Uber credit card, which will now offer 5 percent cashback to users in the form of Uber Cash that can be spent across the platform for rides, Uber Eats and JUMP bikes and scooters.
“This is really about moving the needle to reward our best and most loyal customers with more Uber services, because we want those who use the service the most to get the best rewards they can,” Hazlehurst said of Uber’s move away from the general cashback offering of the previous instantiation of the customer card.
Hazlehurst said that in recent years, Uber has come to really understand that their riders’ and drivers’ needs aren’t general, and neither is what they find rewarding. First and foremost, a reward must be relevant to their actual needs and improve their journey. Uber Money – and the attempt to bring all of Uber’s financial services under a single accessible umbrella – is yet another extension of that, Hazlehurst told Webster as their conversation was concluding,
Uber drivers, he noted, drive for Uber because they want flexible control of their professional lives. It stands to reason, and is borne out by the data, that they would want the same for their financial lives.
“If we can fix the pain points in waiting for pay and give people the money they’ve earned now – and better tools to control it – as far as we see it, that is a uniformly good thing,” Hazlehurst said.