Uber is looking to hire dozens of staff in New York, drawing from the city’s pool of engineers with experience in financial services, according to CNBC, citing unidentified sources. The team could, over time, expand to more than 100 workers and may focus on payments (reducing transaction costs) and providing financial services for drivers and contractors. Even more radically, the company is debating the feasibility of launching bank accounts, according to the report. Uber already operates the Uber Cash app and launched a branded credit card a few years ago.
The fintech pivot has been important part of the playbook for Asian ride-hailing companies for years. India’s Ola made fintech a priority in 2015 after spinning out its payment service, Ola Money, into a standalone app, according to Tech Crunch. Indonesia’s Go-Jek started its Go-Pay service in 2016, while Malaysia’s Grab made a major push into fintech two years ago. Ride hailing is part of Chinese super apps like Alipay and WeChat, whose parent companies are investors in the likes of Grab and Go-Jek.
“It seems like the trend is going toward the Asian model,” said Asad Hussain, an analyst at PitchBook. For Uber, which reported a $1 billion loss last quarter, bundling new services like fintech and food delivery could help the company keep up momentum as the ride-sharing business slows. “We’re expecting to see continued bundling of these services across both fintech and mobility,” Hussain added.
Tech executives have realized that fintech can be a lucrative opportunity once they’ve built a big platform. But American tech giants have been comparatively slow to pursue this strategy. While there’s been much focus in recent years on titans like Google and Facebook making a bigger play for finance (mimicking Tencent’s WeChat, the chat service that became a payments giant in China), any company with a large platform of users can conceivably go full fintech. By some measures, Starbucks has been a more popular payment app than Apple Pay and Google Pay. Walmart could make a similar play, if it wanted to.
Are US companies squandering an opportunity? They may be wary of competing against deeply entrenched financial companies, from PayPal to JPMorgan. If they go too far, they could attract the profit-sapping attention of financial regulators. Robert Le, another analyst at PitchBook, says culture is also part of the equation. “Asia is better positioned for bundled services because of the different consumer attitudes towards data collection and user privacy,” Le said. Bundling new services into an app can keep users on the platform, giving companies a chance to collect more data and cross-sell. But users may be wary of giving up so much privacy to a single company.
“In the US and Europe, companies will find bundling of products and services more onerous, as there is a greater aversion to data collection,” Le said. However, they’re likely to get away with it “if they can demonstrate that the benefits of bundling far outweigh the privacy concerns.”
Leaning into business models based on collecting personal data could be a big departure from traditional fee-based banking. If Uber, and others like it, successfully push into fintech, using it to cross-sell other services, expect pressure on traditional financial companies to grow.