Despite its detractors, the so-called gig economy that relies on freelance workers looks like it’s here to stay. And Lyft Inc., a leading ride-share provider that’s a major player in the gig economy, would like to see the payments industry evolve to meet the gig economy’s needs.
Ashwin Raj, the vice president at San Francisco-based Lyft who manages payments, on Thursday said legacy payment systems for authorizations, funds movement, and chargebacks all create inefficiencies for Lyft. The service provides 1 million rides a day to passengers who use its mobile app to book and pay for rides with Lyft’s freelance drivers.
“Payment plays a critical role on both sides of this marketplace,” Raj said at the 2018 Mobile Payments Conference in Chicago. Raj, a Visa Inc. veteran and former general manager of Amazon.com Inc.’s Amazon Pay service, noted that Lyft recently passed the $500 million mark in driver tips, and is moving into Canada.
But payment processes gig companies use were designed in an earlier era and are full of pitfalls, according to Raj. For example, Lyft uses a what Raj called “a hybrid process” to approve transactions in which the destination may not be known when the ride is ordered and could change after it starts. But even though the passenger who ordered the ride is in the same vehicle as the driver, Lyft is assessed card-not-present interchange rates. “That creates a fundament disconnect in the process,” he said.
Further complicating matters is the processing of tips, which the rider can pay through the app during the ride or later. Processing tips takes extra steps and can even result in a second transaction, according to Raj. That can add costs.
Meanwhile, drivers are paid through two plans: weekly deposits to their checking accounts through the automated clearing house, or quicker payments via Lyft’s Express Pay service. The service uses Visa Inc.’s Visa Direct or Mastercard Inc.’s Mastercard Send for near-real-time payments. But not every bank can process Express Pay payments, according to Raj. Many drivers have to wait for slower ACH deposits, and Lyft doesn’t get the confirmations it wants from such payments, according to Raj.
“We can send an ACH transaction, but there is no guarantee of delivery,” he said. “It boggles my mind that in this day and age we are dependent on a system that a lack of confirmation is considered okay, and the only confirmation you get is when the message fails.”
He added: “We need a real-time, scalable disbursement system that allows us to provide payouts to the gig-economy workers on a daily basis.”
What’s more, challenging chargebacks puts Lyft at a disadvantage, according to Raj. Under current rules, “one of the requirements for proof is an address. I don’t collect an address; I don’t need to,” he said, noting that all a Lyft driver needs to know is the pick-up and drop-off points.
Raj didn’t go into detail about Lyft’s work-arounds in disputed transactions, but he said the resolution process needs to change.
“This information gap has to be solved in a way that helps new businesses and new models that emerge, and eliminates inefficiency,” he said. “I don’t want to invest in a whole bunch of chargeback processes and systems and data. Let’s get the data that we have, let’s get the data banks have, and bring it together in an efficient manner.”