Uber Isn’t Backing Out of Fintech, It’s just Outsourcing
Hi all, Julie here. One of the companies I’ve been watching closely to see the rise of non-fintechs providing financial services is Uber. I view them as a decent example of how this trend could play out in the future. Before last week, it looked like they wanted to build everything internally, hiring hundreds of engineers and taking a big investment from PayPal to help them explore new offerings and ideas. This shifted late last week.
My old teammates at Bloomberg were the first to report the news that the head of Uber Money was leaving and there were some permanent shifts occurring on the team, including shifting the employees brought over to work on it to Uber Eats instead.
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In an email to staff on Thursday, Uber Chief Executive Officer Dara Khosrowshahi said that Uber will “deprioritize” several of its finance-related projects, which have included credit cards, a digital wallet and instant payments for drivers. “I understand Peter’s decision to pursue something more aligned with his passion and initial ambitions.”
I talked to Peter for a while backstage at Money 2020 last year as they were making a grand announcement about new ways of paying drivers in real time, separating out Uber Money into its own section of the company, and a savings mode for drivers to get cash back via the Uber debit card. You could tell the entire team was excited, and the room was packed with thousands of people waiting to hear what Peter had to say.
Now, this doesn’t mean Uber is deciding not to pursue financial services, it just means that instead of spending a ton of time, money and energy building it internally, it’s going to do it through partnerships. This actually makes a lot of sense for several reasons. One is that Uber has been hit hard just like other ride sharing companies during the pandemic, so trying to find ways to cut expenses is a must for shareholders. Second, if you pick the right partnerships, you can launch great new products at a much faster pace. While some might rush to say this is a sign that all the folks saying “Everyone is going to become a financial services company” are wrong, it isn’t necessarily. Here’s Will Quist, Partner at Slow Ventures.
"I am not sure that this is a sign that consumer facing companies are abandoning the push into financial services. If anything, I think it highlights that very few companies need to hire internal teams and build their own tools and products. Instead, they can leverage others building best in class solutions"
Talking to a few other friends in the space that are very close to the Uber Money team, it sounds like this is exactly the case. Uber still wants to build a full suite of financial products, but it’s not going to be 100% built in house. Building things internally was proving to be too slow and too expensive for the company for it to be as successful as they’d hoped, so my friends say we should watch for more partnership announcements from Uber in the near future. Note that we’ve already seen a few recently: Uber and Moneygram teamed up to support drivers. Uber and Flutterwave joined forces to launch Uber Cash in Africa. Uber and Kabbage helped drivers apply for PPP loans.
Another thing you’ll notice: they were all launched after Covid, signaling that the shift in strategy happened around the same time that the pandemic hit and crushed sales for the foreseeable future.
But even though that’s part of the reason for the change, I think this would have been the smarter thing to do in the long run regardless. As one friend said: “It just takes too damn long to build an entire bank up from a scratch. Instead, Uber can piece together a full suite of products through partnerships and get to market in 3-6 months. Then it can see what its users actually want, iterate from there, and bring stuff in house if it wants.”
Green Dot is one company it's worked with before, so they could expand that relationship. But there are several other companies out there that they could partner with on anything from more consumer offerings to additional ways to help drivers, especially in international markets.
Other fintechs and non-fintechs alike should take note. Keep a close eye on those building APIs and other services that can be white-labeled behind the scenes. There’s a good chance Uber isn't the only consumer brand that might come knocking at their door in the not so distant future.