Is Ubers up-front pricing charging customers more but withholding income from drivers?

(Harry) #1

Upfront fares are not a new feature to Uber drivers; they are aware of this transaction. However, Uber sometimes charges up-to double the actual fare amount and does not compensate the driver accordingly, they keep the difference and only pay the driver what the income model covers in mileage and minutes.

Upfront Quotes

To get an idea of what an upfront quote is, let’s take a look at how Uber operates. Uber uses drivers to pick up fares that are registered customers of Uber. A customer contacts Uber when they want to be picked up for a ride, and a driver, one out of many, will accept the call and drive to pick up the passenger The passenger will then pay the driver for the time and distance it took to reach their destination. So far so good. However Uber introduced a pre-quote requirement since many customers did not put in destinations, which caused a lot of issues with drivers not being able to plan their routes and destinations properly. Once Uber initiated this requirement they added a pre-quote price based on the pickup point and the drop of point, and many times this quote was much more than the actual drive. Rather than charge the passenger according to what the ride costs, Uber charged them for the up-front quote.

Now, if Uber were to pay the driver part of the difference, then it would be acceptable to all (apart from the passenger) however, Uber does not give the driver any addition, and this infuriates both the driver and the passenger.

Let us look at some examples of how Uber works this pricing discrepancy:

Example #1:
A passenger took a ride with a pre-quote charge of $19.20; the actual ride cost on the meter $12.65 which is a $6.55 difference that Uber kept. Let’s analyze the figures:

The gross driver income was $12.65

Ubers 20% commission is $3.16

Ubers booking fee is $1.55

Add onto that the difference between the driver’s income and the additional items: You get $17.36 which means that Uber took the extra $1.84 for no reason. You might think $1.84 isn’t much, but multiply that by many rides and drivers, and you see how much more a driver could get and how rich Uber is getting by sending out millions of pre-quote rides daily.

Example no #2.

A passenger was given an $18.08 pre-quite from Uber, the driver and the passenger knew each other, so they compared prices at the end of the drive, here is what they found out:

The ride cost $12.42

The driver received $9.31 after Ubers 25% deduction. If we take $1808 and take off the Uber booking fee of $1.65, we get $16.43 which is a large difference from the $12.42 that the driver received, a total of $4.01 difference.

Example #3:

A crazy difference in price recorded in San Diego. A passenger was pre-quoted for a ride $52.66. The driver received a gross income of $35.73 which is a hefty $19 less than the fare the passenger paid.

Example #4:

A ride recorded in Colorado Springs showed a passenger had paid a whopping $44.31 for a ride pre-quote, and the actual ride should have cost $18.68, which is $26 difference. There were no surge prices, and the passenger had driven the same route before, for around $20, was angry and confused at the major discrepancies. The driver was dismayed too since he wasn’t included either in the extra money or in the ability to correct the error for the passenger.

What is wrong with Ubers Algorithm?

It seems that the algorithm that calculates the rides uses a wrong calculation method. Either it doesn’t account for navigational routes and uses any long route that it can find, or it takes into account lousy driving and a long time for rides to be completed. No matter the problem, the algorithm doesn’t work. Which is even more confusing since all that needs to be done is input the fare into a Waze map and based on the mileage and time calculated, generate a price, which will most probably be very close to the real thing.

An analysis on one driver alone, performed in New York by Harry Cambell, “therideshareguy” showed that Uber overcharged on 165 trips and took a whopping $85 from the driver’s passengers. UberX overcharged even more, with a great $162 for just 82 rides. This overcharging might make Uber’s income growth, but the driver was shortchanged by Uber. On the other hand, Uber lost on pool chare trips, which was confirmed. So it shows that Ubers pristine image is not so clean. Their pre-quote algorithm team has failed to perform a very basic task.

Ubers response

Uber did respond to the findings stating that the pre-quote discrepancies from overcharging and undercharging broke even for both passengers, drivers, and Uber. However, we find it weird to make such a statement when considering what is commonly known in the gambling world as weighted averages. When an online gaming site sets its winnings algorithm to 70:30, that means that for every $100, the gamblers will receive back $70 and the casino $30. This means that if a thousand gamblers come online, some will win, most will lose, but the house will always win 30% of the income. This sounds very similar to the Uber statement, where the compared drivers and passengers to Uber, but in fact, based on the above finding, Uber is the house, the drivers and passengers are the gamblers.

Our suggestion: Keep it simple, take a standard wage or google maps result and use that as the base for calculating the price, there are both miles (distance) and time which is used as the reference point. It cannot be far wrong since the drivers use Waze or google maps themselves.

Another Nigerian Sting: This time Uber customers are the victims