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From the consumer’s perspective, the most important task for Lyft is delivering a ride, not taking funds. Thus, there are many ways to determine a rider’s eligibility to pay without charging them; because Lyft allows riders to add tips and split fares after a ride is complete, it can even be beneficial to the company to delay collection of funds.
But drivers need cash right away to cover their own costs, including gas while they are still on the road.
“There is a compelling need today to solve this. We are faced with it on a day to day basis and we have been faced with it for years,” said Ashwin Raj, Lyft’s vice president of payments, in a presentation at SourceMedia’s annual PayThink event, taking place this week in Phoenix.
“My driver who needs to pay for his gas to provide the next drive cannot wait for Same Day ACH. They need those funds immediately,” he said.
For them, the best option is Express Pay, Lyft’s branded version of Visa Direct and Mastercard Moneysend, which operates via debit card transactions. Express Pay “has become such a significant part of our services that the majority of our drivers are using it” to receive funds within 30 minutes, Raj said.
“It’s a good story so far, but there is a ‘but,’” he said.
Express Pay works only for drivers who enroll a debit card, rather than a prepaid card or a bank account number. There is no near-real-time option for drivers who do not have or do not want to use a debit card; for them, the best option is standard ACH.
“We can’t say to a driver, ‘You have to put in a certain instrument to get your funds,’” Raj said. “That is the problem we’re trying to solve for.”
Same-day and real-time payment products are often catered to basic P-to-P or B-to-C functions, such as paying a babysitter right away or providing an instant rebate. Such tools fall short of what Lyft needs, Raj said.
“There is a need today for an economic form of disbursement at scale,” he said. “It’s not a few hundred thousand P-to-P transactions … the current solutions that are out there and the options that the banks are providing don’t suit our needs.”
The payments industry has, of course, been developing multiple solutions to this problem, but in many cases these products can be seen as solutions in search of a problem to solve. That said, they are finding those problems.
The common selling point for faster payment options is that they are not just about speed. Other factors such as ubiquity and improved messaging are part of the package, and clearly these elements would serve Lyft’s needs as well.
If a rider’s card is rejected, “I get a message back saying ‘do not honor’ ... and that’s all,” Raj said. “There needs to be a better information description and flow back, and we are not saying the bank is making the wrong decision ... what we are saying is give us the right information back so we can act on it.”
After Nacha, the electronic payments association, enabled Same Day ACH credits a year ago, use cases for the service started popping up immediately. And in many cases, they were hard to predict.
The very day that Same Day ACH credits went live, “we actually did have a client call that Friday morning and said, ‘Oh my gosh, we forgot to send our payroll, is there anything — ANYTHING — you can do?’” said Laura Lee Orcutt, head of product and treasury management for Wells Fargo, at the PayThink event. “If [that client] had called us yesterday, we really didn’t have an option.”
Another example is employee expense reimbursement. One company was able to solve its problem of employees forgetting to file their expenses by promising to send reimbursement the same day, Orcutt said.
Faster payment options are best sold on their use cases, and they won’t be a fit for every client or every scenario, said Jan Estep, president and CEO of Nacha, at PayThink.
“How do you start that conversation with your customers? It’s not, ‘Do you want to use Same Day ACH?’” Estep said.
Indeed, Raj is not sold on the concept of faster payments for the sake of speed alone. “The term ‘faster’ means it’s faster than what’s out there right now,” he said. “I don’t want faster. I want fastest.”
And speed doesn’t help if it requires too much of a trade off, he noted. For example, on the rider’s end, Apple Pay would seem to remove a lot of the friction of enrollment, since it would not require the user to punch in a card number after requesting a ride.
But Apple Pay’s approach to security gets in the way of Lyft’s need to perform its own analysis on the transaction.
“We don’t have a direct relationship at that point with that customer who’s signing on using Apple Pay,” Raj said. “All we know is a token, at that point. That is less preferable.”
Identity is more valuable than payment information, especially going forward when Lyft builds out a fleet of autonomous cars, he said.
“When autonomous vehicles roll around, how the heck do you identify the customer getting into that car?” Raj said. “Identity is becoming a critical piece of global commerce. We have pushed payments until it is almost invisible, but still the identity of the customer is the critical piece.”
Autonomous vehicles will have to use a built-in payments mechanism to buy their own fuel, but they may also be asked to pick up coffee or food on the way to pick up a rider. In that scenario, the car would need access to two different wallets — its own, and the rider’s — and it would need to choose the right one for each task.
In that case, the speed of the payment is perhaps the least important factor.
Nacha acknowledges that Same Day ACH won’t be a fit for every client’s every need, but the system is meant to be complementary; it can solve specific problems by working alongside other payment options.
“[Raj] said he doesn’t want faster, he wants fastest. And I do think a little bit that fast is in the eye of the beholder,” Estep said. “Depending on which lever you push, you really help satisfy needs of various different users.”
