Ride-hailing companies have over the years made adjustments to their business models all in a bid to manage costs on both sides of the app, guarantee safety for all users while running their businesses efficiently and profitably. We have seen changes like additional and incremental charges for wait time and other features geared towards the protection of a key component of the business model –the drivers. This update became imperative as drivers spent time waiting for passengers after successfully making it to pick up point or location. Expectedly, this feature became an object of abuse as drivers signaled arriving at a destination before they actually arrived there. But that is not the focus of this writing.
What is My Time’s Worth?
In recent times, we have seen a persistent demand by riders to mandate cancellation fees on the various apps. In Lagos, Nigeria, drivers are seeking a N2,000 cancellation fee (about $1.25 at the current exchange rate). Even as it seems like a tall ask at the moment considering Nigeria’s macroeconomics, a justifying event for such calls was the Bolt for Bolt spat, where we discovered that while cancellation fees apply in South Africa, the case is different in Nigeria. This intercountry fight saw Nigerian and South African users of ride-hailing apps book and cancel/abandon thousands of rides in both countries, costing the drivers and companies millions of Naira and Rand, leaving genuine passengers stranded.
A quick look at what obtains shows that Lyft for example, protects its drivers with a series of cancellation fees compensations aimed at keeping the drivers active on the platform. BlaBlaCar took it a step further by compensating the driver by 50% if the passenger cancels shortly before the ride. This “shortly” is vague and not expressly clear. True that these players in these matured and organized markets have these in place, their counterparts in Africa and Nigeria in particular can only glean inspirations.
Key Success Factors for Cancellation Fees
For cancellation fee to be effective, it presupposes that every ride-hailing customer would have their debit card details saved on their app. It means every ride will be a “card” cashless trip where a passenger is directly debited at the end of a trip. According to Bolt, cancellation takes effect if the cancellation request is made after two minutes from when the driver accepted the request. This is considered the free cancellation period. This is logical as the driver is expected to have driven well into the estimated time of arrival (ETA).
Still on this, for cancellation fees to be a feature, it means the platform will dedicate ample resources to cancellation fees dispute resolution. This will entail the employment of skilled personnel with background in chargebacks, audits and verifications. As with other marketplaces, ride-hailing companies are in constant quest to appease both sides of the business especially the drivers while keeping the buyers of the services (the passengers) happy. Overly tilting to a particular side of the marketplace could lead to a churn in users in that segment, thereby, creating an imbalance that either leads to a loss of revenue or increase in time spent waiting for a ride. Correspondingly, there should be clearly spelt-out penalties for the abuse of this feature by drivers, knowing it will surely suffer some form of abuse.
To further strengthen the feature and protect it from abuse by the passengers and the drivers, ride-hailing businesses could learn from adjacent marketplaces like e-commerce and social media platforms that go to the extent of blacklisting emailing addresses (both similar and alternative) and phone numbers of errant and habitual users. This could be in the form of specially-adjusted fares for trips for a defined period of time as penalty. This helps maintain compliance to the agreed terms of use of the service/application and serve as a deterrence from abuse.
There could also be a “cancellation rating” on a driver’s or passenger’s profile. Same driver’s profile shows the average “star” rating on their profile, which provides a peep into the driver’s work ethic and user habits on the platform, while serving as data channels for the improvement of the business.
