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Ride-hailing company Uber this week announced it will offer cash payments for Indian customers looking to hail a car, as part of a pilot program in Hyderabad.
The move marks a global first for the company. Prior to the Hyderabad pilot, Uber has steadfastly avoided accepting cash for its car services. While riders could pay for trips using bank notes on UberAuto, the company’s India-only auto-rickshaw service, it ceased to accept cash for any of its car-oriented tiers — both in Asia and elsewhere.
Uber’s distaste for cash likely stems from two reasons. First, Uber can’t easily enforce percentage-based commissions on cash transactions. Second, fumbling with one’s wallet is one of the taxi pain points that Uber hopes to circumvent in the name of user experience.
Credit card conundrum
Adhering to the credit-card only model puts Uber at a disadvantage in markets where credit card penetration is low and competition is fierce. According to the Reserve Bank of India, there are over 20 million credit cards outstanding in India as of December 2014, indicating a penetration rate of 1.5 percent of the population (assuming card owners hold only one card).
Uber’s main rival in India has been accepting cash payments from the get go. That Indian company, Ola, company recently closed a US$400-million funding round and is available in over 100 Indian cities –- Uber is only in 10. GrabTaxi in Southeast Asia and Didi Kuaidi in China have also let riders pay in cash.
Uber hasn’t been completely inflexible when it comes to payments in Asia. It accepts transactions using Alipay Wallet in China, and Paytm and India. Allowing for cash opens up the market to people that own smartphones but don’t necessarily have credit cards or third-party payment apps.
Uber and its competitors’ services are beginning to converge in Asia. GrabTaxi recently introduced cashless payment for rides with Singapore-based mobile wallet PayLah. Didi Kuaidi recently launched its first UberX-esque peer-to-peer ridesharing tier, which will compete with The People’s Uber in China. Uber’s competitors have also invested in data research. GrabTaxi plans to invest over US$100-million in R&D at its new lab in Singapore, and Didi Kuaidi is reportedly collecting trip data to build out a platform it calls Cangqiong.
This article by Josh Horwitz originally appeared on Tech in Asia, a Burn Media publishing partner.