Uber revealed that it is charging some of its customers more despite complaints from drivers who say they’re not seeing that money end up in their pockets.
Daniel Graf, Uber’s head of product, said the company is now charging what it thinks its customers are willing to pay through a new system dubbed ‘route based pricing’, Bloomberg reported.
Based on the new system, a rider travelling between wealthy neighbourhoods will be presented with a higher fare than someone heading to a poorer area, even if the time, distance and demand are the same.
But drivers argue they aren’t seeing any of that extra money. In fact, drivers have been noticing the fares that show up on their end are lower than what the riders actually pay - a discrepancy Uber has finally acknowledged.
When Uber first launched, riders were presented with an estimate at the beginning of the trip based on a combination of mileage, time and demand.
If the trip somehow took longer than expected due to traffic, for example, the rider would end up paying more once the trip ended. Uber then switched to upfront pricing last year, which locked in the fare before the trip even began, saying it provided more transparency.
While riders knew what they were paying before agreeing to book a car, Uber didn’t actually explain how it was calculating the new fares and continued paying drivers based on the old model.
A Quartz journalist once stayed behind to compare fares with her UberPool driver and discovered that while she paid $11.46, the app notified the driver that the fare was only $10.26. The missing $1.20 made up more than a ten per cent difference.
Harry Campbell, founder of The Rideshare Guy blog, popular among drivers, calculated the difference between the fares riders paid and that being reported to drivers across 165 rides.
The largest sample of 82 UberX rides showed the ride sharing app pocketed an extra $162.56. UberPool rides, however, were a huge source of financial loss. Over 49 UberPool rides, the company actually lost $108, according to The Rideshare Guy’s calculations.
Factoring in the extra $30.98 from a combined 34 rides through UberX VIP, UberXL, UberBlack and UberSUV, the company profited $85.54 across 165 rides.
Based on loose estimates, The Rideshare Guy calculated Uber could be making an additional $7.43million each month, just in New York alone. Uber said it was funneling that extra money to increase the number of trips, subsidise UberPool rides and pay drivers bonuses.
With Uber reporting a $2.8billion loss in 2016 to Bloomberg, the company is still scrambling to increase revenue - and the new pricing system could be their way of holding a competitive edge over other ride sharing apps such as Lyft.
The company will send out an updated terms of service agreement and start reporting to drivers the price their passengers paid.
Graf said: “We do want to run and operate a sustainable business.”