• An Uber State Of Financial Disruption  
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An Uber State Of Financial Disruption

Waiting for a cab can feel like waiting for the sun to shine on a cold dawn in February. But technology is changing that. If you don’t know about it already, then perhaps the next time you find yourself stuck in a slow-moving line for cabs, you should pull out your smartphone and consult your Uber app. From there, it won’t take long for the company to link you up with a nearby car, which will pick you up in a matter of minutes and take you to your desired destination promptly. The service will even cost you less than you would expect to pay for a traditional cab fare, without the wait, and your credit card (which Uber will have on record) will be billed, negating the need to hand over any cash – even the tip is handled electronically.

When you think about it, this is quite a transformational technological innovation that improves upon an existing service, adding value to both consumer and worker (i.e. passenger and driver). It has been a long time since we’ve seen such a positive evolution in the provision of the everyday urban chauffeur service, not least for the drivers themselves. Uber provides all drivers with the means to set up their mini private-hire business – billing means, the technology for location services, and so on. What is more, at busy periods, perhaps late at night when there tends to be a demand-supply imbalance, Uber better calibrates fares to entice more drivers to make themselves available.

This is one basic economic principle that Uber is using to be more responsive in providing its service, the basic model of which we can see slowly being replicated in certain areas of finance – especially when it comes to providing more appropriate credit to the consumer in exchange for services.

If we look at the model in analytical terms, Uber is a growing peer-to-peer (P2P) platform that is reducing outmoded overhead and other costs, in addition to utilizing access to broader sources of loanable funds. By passing savings on to borrowers via means of lower interest rates, P2P models also provide an attractive return to creditors.

These models focus on client acquisition, though with an equal emphasis on enduring partnerships with creditors. Put simply, both sides of the transaction – just like the passenger and driver in the Uber model – are delivered a strong sense of democratization and have a better understanding and control of their credit relationships. Financial intermediaries – such as are represented by Uber, the company itself – are using a broader set of data to improve upon traditional credit models, providing lower interest rates and incentive alignments, ensuring that all parties engage in healthier financial practices.

It is an undeniably leverageable model, and one that is likely to continue to disrupt an increasing amount of industries, just as it is doing for urban chauffeuring, and of course, finance. Technological innovations, when intelligently combined with economic principles and behavioral science, can indeed lead the way to a more empowered state of financial well being for passenger and driver/client and creditor moving forward.

 

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