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Nikita \n Garia, MINT<\/i><\/p>\n Nikita \n Garia, MINT<\/i><\/p>\n
Bangalore, \n 26 August 2014<\/i><\/p>\n
San \n Francisco-based Uber Technologies Inc. may be forced to change \n its business model, which relies on cashless transactions, after \n India\u2019s central bank on Friday issued a notification that \n will reduce the convenience associated with the taxi booking app. \n <\/p>\n
The Reserve Bank of India (RBI) on Friday said Uber and other \n companies that offer app-based purchases cannot allow customers \n to pay with their credit cards without a two-step authentication \n process. Customers have hitherto simply had to enter their credit \n card details at the time of signing up with Uber. Every ride was \n automatically charged to the card without any further verification. \n <\/p>\n
RBI has given all such businesses time till 31 October to comply \n with the regulation. In late July, the Association of Radio Taxis \n (ART) had written to the central bank that Uber was storing credit \n card details of customers in its server and deducting fares without \n the two-step authentication, which involves entering the CVV (Card \n Verification Value) number and password. <\/p>\n
Uber will now have to offer payment modes such as cash or mobile \n wallets and even consider installing credit card machines in every \n car, analysts said. <\/p>\n
\u201cUber right now has only two options in front of it. One, \n exit the country. Two, tweak its business model which is not a \n very lucrative option,\u201d said Anand Ramanathan, associate \n director at KPMG. <\/p>\n
Uber did not respond to phone calls and emails sent by Mint seeking \n comment on RBI\u2019s regulation. <\/p>\n
In an interview in May, Uber\u2019s general manager in Bangalore \n said that the company is \u201cworking on adding more options \n for customers to use Uber by staying cashless\u201d. <\/p>\n
Uber, which started its India operations in August last year, \n is present in 10 cities, which makes India second only to the \n US in terms of number of cities covered. It began operations in \n 2009 and is present in 44 countries. It allows payment only by \n credit cards in all these countries. <\/p>\n
Moving to a different model of operation will not be easy for \n Uber as it will force the company to make significant investments \n and expose it to risks that it hasn\u2019t had to take in any \n of its markets yet. <\/p>\n
\u201cThe cash model will definitely add to costs. The logistics \n of cash management is not part of the Uber model,\u201d said Devangshu \n Dutta, chief executive at Third Eyesight, a consultancy. \u201cFor \n managing cash, Uber will have to open cash collection centres \n which will create challenges at the services level.\u201d <\/b><\/p>\n
Besides cash, Uber\u2019s other options include adding a mobile \n wallet to its app. A mobile wallet can be recharged by the customer \n using a payment gateway and the user can add money via credit \n card, debit card or net banking, all of which require a one-time \n password and CVV number. <\/p>\n
\u201cThis will however work opposite to a credit card where \n user gets 45 days to make a payment. With a mobile wallet, the \n user will have to store money beforehand,\u201d said Prashanth \n Rao, director at KPMG. The users will then have to think whether \n it is a good option to keep the money blocked in Uber\u2019s wallet, \n Rao added. <\/p>\n
Uber\u2019s competitors in the Indian market largely work on \n a cash-based model. However, rival companies TaxiForSure, Meru \n Cabs and Olacabs are evaluating mobile wallets to ease transactions. \n Meru Cabs already has a card machine installed in each of its \n cars that customers can use to pay either via credit or debit \n card. Meru Cabs also has an app-based payment system that allows \n customers to enter their credit card details once. The details \n are saved but the customer has to enter the CVV number and password \n every time a transaction is made. <\/p>\n
\u201cWe will be launching our mobile wallet in the next 15 days \n for which we have partnered with a payment processing company,\u201d \n said Siddhartha Pahwa, chief executive officer of Meru Cabs. Pahwa, \n who is also the secretary of the Association of Radio Taxis, said \n that RBI\u2019s regulation now brings everyone on a level playing \n field. <\/p>\n
The global payment model of Uber works in a similar fashion across \n countries and the company is not known to change its model. <\/p>\n
RBI\u2019s move could possibly have one advantage for Uber: it \n may potentially increase its customer base. \u201cIf Uber moves \n to a cash model, it can work in its favour in the medium to long \n term. With cash, Uber can target a larger market. However, it \n is definitely a setback for now,\u201d said Ashish Jhalani, founder \n of consultancy eTailing India. <\/p>\n
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