A new ride-hailing app XXRIDE launched on Tuesday in Dubai promising cheaper and more affordable rides for its customers.
The app which is licensed by the Dubai Roads and Transport Authority offers five categories of rides — Select, Luxury, Electric, XXXL and Family, much like UBER and CAREEM. However, all the vehicles will be luxury cars such as Lexus and Mercedes.
So, how does XXRIDE achieve lower rates for the ride? It has got to do with their business model on the process of fee collection. Akin to traditional ride-hailing apps, UBER and CAREEM charge their drivers a commission per ride taken. XXRIDE, on the other hand, collects a monthly fixed net amount of AED 202 ($55) from registered drivers who use the app. So for every ride, the drivers get to keep the full amount minus the AED 5 third-party payment systems charge.
Hence the savings from the commission is transferred in the form of cheaper fares to the riders. Ingenious? Well, not completely.
Such a system was long practiced by another point-to-point transportation mode, called taxi.
Most taxi companies around the world, practice a system where the driver pays a fixed fee to the operator and this is often termed as “Monthly Rental”. However, in most taxi modes, there is a barrier to entry in the form of a license to operate. In the United States, such a license is called a “Taxi Medallion”, also known as a CPNC (Certificate of Public Necessity and Convenience), a transferable permit allowing a taxi driver to operate. However, such medallions are usually hard to acquire as the city often controls the number of medallions released harshly to regulate supply.
Infact, the draconian medallion system was one of the major reasons for the decline of taxi availability (and hence service), which was exploited by the ride-hailing companies like UBER, who allowed drivers to drive so long as they had a car and a short orientation.
So, what XXRIDE is trying to achieve here is make the best of both worlds, by adopting an equitable fare collection system proven from years of taxi operation with the added advantage of reduced barrier to entry as compared to taxis.
The ride-hailing app TADA in Singapore practices a similar system wherein a fixed charge per ride (not a percentage of the fare), is transferred to the operator regrdless of the distance of the ride.
The ride-hailing industry is over 10 years old. Cities and operators around the globe are still trying to find a “model that works best”. However, as is the case with most business practices. A lot depends on context and geography.
XXRIDE’s move could be a gamechanger for ride-hailing apps in the region, but its path to success or otherwise, must be closely monitored.
Dr Sreyus Palliyani is a Transportation policy expert, who specializes in public transport benchmarking and best practices for policy and governance.