Solution for Ola/Uber cab driver problems

Ola and Uber started as a great solution to cab booking problem. Earlier we had to call local travel agent or physically go to a spot where cabs would be waiting and book one of them. The app based solution made it lot convenient and a lot cheaper, revolutionizing the way people travel.

But the ecosystem of cab aggregator, driver and customers is currently strained due to multiple reasons

Ola/Uber Cab driver problems:

• Cab drivers are not getting instant settlements, forcing them to prefer cash over online mode
• Cab drivers are not getting to decide the price. Fuel price is increasing daily while Ola/Uber set much lower rates. After Ola/Uber commission, driver gets a lot less.
• Cab drivers complaining about lack of transparency. They are not being told exact amount customer is paying and their share.
• If they accept all the rides as assigned by Uber/Ola at the pricing and terms selected by aggregator, it is economically loss making for them or not worth their time and effort, often forcing them to cancel the ride.
• Drivers are not employees of Ola/Uber. They have to own all the risks- fuel, maintenance, idle time etc. So they are in their rights to decide what rides works for them and what doesn't.

Customer problems

• Drivers are frequently cancelling
• Cancellation charges are levied to customer while the fault was on driver side
• Refusing to turn on AC
• Reliability has dropped significantly, risk of missing flights or meetings due to delay in getting cab
• Earlier cheap fares are gone.

Uber/Ola Problems

• Not able to win customer loyalty despite subsidizing the rides with investor money.
• If charges are too high, customers won't book, if it is too less, drivers refuse
• Drivers are teaming up, learning tricks of the trade and are finding ways to bypass or outsmart the system to protect their interests or gain more
• Can't afford to punish cab drivers based on customer complaints as drivers are essential part of the eco system and each driver takes dozens of bookings each day, can't afford to compensate the passenger as well.

Representative image of a taxi in HP

Solution to the great Indian cab crisis

A solution should be fair to all parties involved. Drivers should be able to cover their expenses and make an earning on every ride, customers should not feel they are looted or cheated or end up missing their flights or meetings, cab aggregators should be able to reduce customer and cab driver concerns, complaints and earn a profit on every transaction.

The proposed solution is not new. It is already in place between restaurant owners and food aggregators like Zomato, Swiggy. Prices are decided by restaurant owners. Almost all of them mark up prices by 25-40% for online delivery [Read more], compared to walk in price to accommodate hefty commissions charged by Swiggy and Zomato. We can have the same model for taxi booking apps as well.

Step 1: Let drivers decide their price. Just like how restaurant owners can decide the price of their dishes, let cab owners set their price- 

Example below (say for a hatchback)

• 10 INR Per km without AC
• 11 INR per km with AC
• 14 INR per km- night time charges (11 PM to 5 AM)
• 15 INR per km with AC peak time charges (8 AM to 10 AM, 6 PM to 8 PM)
• Minimum charge: 50 INR

There should be a lower and upper circuit how much cab drivers can set- like min 5 INR per km, max 20 INR per km. Ola/Uber can also set a default rate for each taxi category (hatchback, sedan, MPV etc) so that drivers can use default if they don’t want to change

Mode of payment is another issue. Because online payments are not promptly transferred to drivers they prefer cash. This issue Ola/Uber should solve by having a faster settlement cycle- like max once in 2 days.

Step 2: Let the drivers also define their range or areas they don’t want to enter. Example Bengaluru cab driver may set “I will operate only within the outer ring road and not beyond that”, OR “I don’t want to take any rides to the whitefield area”.

Step 3: When a customer books, show them 3 cab options with their pricing, rating, % rides accepted (Ex: 11 INR per km, 4*/5, 85% acceptance rate). If the destination is outside of what the driver has marked, such cabs won’t be shortlisted for selection. Let the customer select one from these three or opt to view the next set of options. Give an option to sort by price, rating, arrival time (how far the cab is from reporting location) and acceptance rate. If I am going to airport, I can select a driver who has accepted the ride 90-95% of the times. If I am not in a hurry I may hunt for the cheapest option. Cab drivers should decline within 2 minutes if they are not comfortable with destination or pricing, else it will be auto approved. Show them the destination and approx fare. If a cab driver refuses after accepting, he/she pays a penalty of 100 INR.

Build a mechanism to punish those drivers who have lots of refusals. Move them down the option list so that they get lesser bookings.

Advantages:

• Drivers have full control to set the price covering their expenses, Uber/Ola commission etc
• Less chance to make excuses and deny ride
• There will be competition among drivers- if someone sets the price too high, no customer will go to them.

Risk/drawback:

Price of a taxi ride will go up in this model. I feel it is inevitable. Taxi aggregators can’t keep perpetually subsidizing rides with investor money. Each transaction needs to be profitable or at least break even for key stakeholders. Price of fuel, insurance, maintenance, daily essentials everything is going up, so drivers find it economical not to take a ride at all, than operate at a loss. With this model they can set a price which they feel is fair. It would also increase reliability and provide a fair ecosystem for everyone. Would you get a discounted fare at the risk of the driver rejecting the ride or would you pay a fair price and get reliable service?

Drivers may gang up and all of them set the price very high. If they do it often they won’t get much business- customers will be forced to explore other alternatives such as metro,    auto or bus etc. There should be an upper ceiling to protect customer interests.

In this model it will be difficult for Uber/Ola to reduce the prices burning investor money to attract more customers. But then, it is important to have a fair ecosystem where no one feels cheated. If Uber/Ola wants to burn some money they can reduce their commission or add some bonus points into customer’s accounts.

It will be one extra step for customer to select a cab themselves based on pricing and other factors. But I think this is better than Ola/Uber randomly assigning a cab and then driver refusing to take the ride.

Again all these depends on what Ola/Uber management is thinking. May be they feel comfortable the way things are going now- it could be just a few % of customers who are inconvenienced. As long as money keeps flowing in they may not have an inclination to bring in massive changes

What do you think? Would this model work? Do you think it is a fair solution? Are you, as a customer willing to pay a fair price against a reliable service

Related: Why I don’t like Ola Money * Surge pricing by Uber/Ola My thoughts * Interstate tourist taxi fee mafia *