Uber is presently caught amidst heaps of controversy, ranging from self-driving tech theft allegations from Alphabet’s Waymo to the ones of sexual harassment at the workplace by a former employee. Today’s clarifications from Uber, however, relate to the insistent complaints about the decrease in driver partner payouts.
This is the case when the ride-hailing giant boasts of how much drivers are earning but surprisingly the company is actually the one pocketing some extra bucks. It is the latest development to come to light when drivers discovered that the gap between fares paid by the passenger and income received by them had grown in recent days.
The problem here stems from Uber’s recently launched concept of upfront pricing, which displays the estimated fare you need to pay even before you hail a ride. It has been alleged that the said feature has allowed the ride-hailing giant to charge some of its passengers more than required for the rides they took, while the payment method for drivers remains unchanged. They are still being paid out on the traditional basis of time, distance, and mileage, reports Bloomberg.
Though Uber has today finally opened up and commented on the overcharging practices, which it has been experimenting with to add to its stream of revenues. The allegations against upfront pricing are nothing new, it’s just that Uber had been hiding behind a closed door to save itself from the troubles of explaining this new change — to both the drivers as well as the riders — which one can call as duping.
Uber has been alleged of price discrepancies in its ride-hailing options numerous times over the past year. The accusations were first brought to the forefront by a popular driver-focused blog called The Rideshare Guy. It conducted a survey and observed the grave inconsistencies in the payments being made by the passenger to Uber and that too the drivers. Their secretive overcharging practices have even led to a lawsuit alleging the company of the same, earlier in April.
Daniel Graf, Uber’s head of product sat down for an interview with Eric Newcomer from Bloomberg earlier this week and confirmed the allegations calling it the new ‘route-based pricing’ system. This has been under testing in certain cities for months and it is a system which uses machine learning algorithms to predict what the riders are willing to pay for their next pick up and then upfront prices are updated on the same basis.
The publication interprets this change as a means to also include the person’s wealth as a criterion for determining the upfront fares. It is a departure from the usual system, mentioned above, that was employed to fairly calculate fares for both the rider, as well as the driver. This has been described in the blog post as under:
For instance, someone traveling from a wealthy neighborhood to another tony spot might be asked to pay more than another person heading to a poorer part of town, even if demand, traffic, and distance are the same.
Now, in addition to the driver revenue splitting program, Uber is also collecting the difference in upfront fares to add to their revenues. This is being done to increase the company’s affinity for revenues while cutting down on its surmounting losses, which stood at over $2.8 Billion this past year (minus the off-loaded Chinese operations). It has been using the doling-money strategy to gain an upper hand over its competitors but it is hurting their own business as well.
Uber has now mentioned that it is no longer being secretive about the new pricing system and has already started making drivers aware of the same. The email notification sent to them reads that they’ll now have more transparent access to the fare breakdown available to them. It will clearly mention what the rider has paid, what the driver has received and how much Uber is pocketing in the process. An updated terms of service agreement talking about the new pricing system will become applicable from Monday, i.e May 22.
Talking about what Uber is doing the extra money it is making off the bloated payouts, it mentions that the same will be used to further the driver-rider experience of the ride-hailing service. The updated pricing system is being officially introduced in 14 markets where UberPool, the company’s carpooling service, is offered. This system will at least give Uber some cushion to dispense new offer and incentives to both its driver partners and riders.