Thursday , January 23, 2020

Its IPO Document Shows the Massive Extent of Uber’s Card Business

Uber Technologies Inc. doesn’t say a lot about its payment strategy in the registration statement it issued Thursday ahead of its highly anticipated initial public offering of stock, but the filing does reveal the ride-share leader is an enormous generator of payment card volume and card-acceptance fees.

The statement says 87% of Uber’s $49.8 billion in gross bookings last year were on credit or debit cards. That translates into $43.5 billion in card volume. Uber defines gross bookings as the total dollar value, including taxes, tolls and fees, of its ride-sharing, dockless bike and scooter rentals, Uber Eats restaurant deliveries, and freight services. Gross bookings rose 45% last year from 2017’s $34.4 billion, which in turn were 79% higher than 2016’s $19.2 billion. Uber customers usually book their services through Uber’s mobile app.

San Francisco-based Uber says it paid $749 million in credit card processing fees in 2017, up 62% from $461 million in 2016. The filing, however, does not state how much Uber paid in 2018 to accept cards. But if card-acceptance costs grew only 33%, well below the gross-bookings growth rate, they would have hit $1 billion.

The filing doesn’t name the company’s payment processors, but Uber spreads its business among several. The company accepts PayPal Holdings Inc.’s Venmo peer-to-peer payment service. It’s also known that Uber became a client of e-commerce merchant processor Braintree, now part of PayPal, in 2011. The online merchant processors Stripe and Adyen also count Uber as a client.

In a section of the filing about payment technologies, Uber says “because we integrated payments into our technology stack, we can continuously innovate to meet the needs of platform users.” It notes drivers can be paid weekly or immediately through its Instant Pay service, which enables them to cash out their earnings up to five times a day in some markets. (That service is provided by Green Dot Corp.’s Green Dot Bank.)

The filing further says the Uber Cash service, which debuted last September, is a closed-loop digital wallet for payment of ride-sharing, bike or scooter rentals, and Uber Eats charges, and it can store credits and rewards. The document also notes that Uber accepts cash in some markets.

Online-payments researcher Thad Peterson, a senior analyst at Boston-based Aite Group LLC, points out that Uber explicitly states payments are incorporated into its “technology stack” and are not just an add-on. “While this might be obvious given the seamless integration of payments into the customer journey, it’s notable as an example of the strategic value of payments within their platform and worthy of emulation by other organizations, regardless of vertical,” Peterson tells Digital Transactions News.

Plus, Uber Cash places Uber “ahead of the curve on supporting individuals who either are unable to use a payment card or choose not to use a payment card,” Peterson says. “This positions them well as the public and political concern around cashless payment models increases.”

Uber reported it had 1.5 billion trips on its platform in 2018’s fourth quarter and that it had 3.9 million registered drivers. Drivers have earned $78.2 billion since 2015, plus $1.2 billion in tips since Uber added in-app tipping in July 2017.

Uber did not state how much it expects to raise from the IPO, or when it will happen. Should the IPO go through as planned, Uber will join rival Lyft Inc. as a publicly traded ride-share provider.

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