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Deep Dive: The underlying trends behind firms like Uber and Lyft launching debit cards

  • Uber and Lyft are hiring financial services teams and launching new products.
  • On Deep Dive, Tearsheet reporter Sara Toth Stub joins us to talk about these trends.
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Deep Dive: The underlying trends behind firms like Uber and Lyft launching debit cards

Tearsheet’s Sara Toth Stub published (exclusively for Outlier members) this week on the growing trend of on-demand transportation companies introducing financial products. Ride hailing firms like Lyft and Uber have rolled out debit cards for drivers and it probably won’t be long until some sort of loyalty cards are introduced for consumers, too.

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The following excerpts were edited for clarity.

Why are ride-hailing companies issuing debit cards and other financial services?

An Uber spokesperson told Sara that the move to issue debit cards is to make drivers’ lives easier. That’s the main goal — with these cards, drivers can get discounts at some gas stations. Uber has a cash back program so drivers can earn money when they use their cards and spend at Walmart. The card ties it all together. Lyft has made similar public comments about offering more to drivers.

As we know, it’s a competitive space and companies are always working to get new drivers and retain existing ones. Anything these companies can do to offer special perks must help with their marketing and human resources.

What’s in it for the companies?

Analysts say there are several advantages for the ride hailing companies to launch debit cards. One of the main benefits is that companies can gather spending data on their communities, according to Pitchbook analyst Robert Le. So, they can see where their drivers are buying gas and when. This is valuable data and can help the companies decide to launch new products and partnerships.

For companies, it’s also another revenue stream, especially if people are pre-loading them with money. That’s money that the company can tap into as cash flow.

What consumers could get out of Uber and Lyft debit cards

Consumers could receive rewards for loyalty if they were to receive debit cards from their favorite on-demand transportation companies. This isn’t a trend contained to the on-demand transportation sector. We’re seeing a lot of non-financial companies like Amazon, Starbucks, and Walmart offering their own debit cards. To get customers to sign up, they typically offer cash-back deals or discounts. Building loyalty is also there.

Ride-hailing and fintech overseas

This trend is ubiquitous in Asia where many on-demand transportation companies offer financial services that go beyond debit cards. They’re offering insurance policies and loans. There’s a lot of growth there. As we see in China, the WePay and Alipay payment ecosystems grew out of non-financial companies. These payment systems eventually grew so big that they outgrew the companies they started in.

In Singapore, Grab is spinning out Grab Financial into a separate company because it’s so successful and became such a large part of Grab. These companies want to become superapps — where they expand beyond their initial functionality into other services.

What’s powering the move to financial services

What’s happening in the US is that it’s a long and complicated bureaucratic process to get a national banking license. Uber isn’t getting a banking license. What companies like this often do is typically partner with banks.

In Uber’s case, the company recently partnered with giant Spanish bank BBVA to launch a new debit card in Mexico. BBVA will handle money and deposits. A lot of this is possible because of fintechs offering banking as a service. We see a lot of companies like Green Dot and Marqeta working in the background to coordinate payments and make sure the money goes where it’s supposed to go.

Banking as a service has helped companies like Uber and Facebook launch financial products. They don’t have to recreate the wheel. They are simply partnering with a BaaS company that customizes their programs and sets up a system in the background that can handle all these payments.

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