Uber’s longtime pricing model, which hinges on time of day and the distance of a ride, among other factors, might be primed for a big change. In an effort to improve its ailing financial situation and become profitable in the highly competitive ride-share market, Uber is phasing in a system called “route-based pricing.” Under the scheme, riders will be charged what the company’s computer algorithms think they’re willing to pay, in a sharp divergence from the model customers are used to, according to Bloomberg.
Citing the company's Head of Product, Daniel Graf, Uber is using machine-learning to predict what customers are comfortable paying, largely based off the specific route and time of day of a given ride. Hypothetically, as Bloomberg writes, this means people traveling between ritzy neighborhoods might be charged a higher rate than someone journeying from a middle-income area to a poorer part of town. Route based pricing is currently being tested in the 14 cities where the company’s carpool service is available.
The move comes after Uber’s incorporation of upfront pricing, which informs users of a ride’s price range before they enter a car, contingent upon a variety of factors. The new payment model better favors drivers, however, as the company says it’s going to start informing them of the rates its charging. Drivers in many cities have put pressure on the company to incorporate a tipping function within the app, similar to the one that it’s main competitor, Lyft, employs.
Concerning the percentage of rider fare the company pockets, Uber is still leaving drivers in the dark, reports Bloomberg. That differs, however, from a statement provided by an Uber spokesperson to Thrillist:
“We price routes differently based on our understanding of riders’ choices so we can serve more people in more places at fares they can afford. Riders will always know the cost of a trip before requesting a ride, and drivers will earn consistently for the work they perform with full transparency into what a rider pays and what Uber makes on every trip.”
Critics of route-based pricing mainly cite socioeconomic concerns -- namely that drivers will be more compelled to prioritize wealthier neighborhoods under the model. Studies have already determined that rider discrimination exists, and as MIT professor Chris Knittel explained to Bloomberg, the new system could potentially exacerbate the issue: “Society is more willing to accept wealthy people paying higher fares. But if the repercussion of lower fares in lower-income places is longer wait times, that’s probably what they want to keep an eye on.”
There’s no word on when the new system might roll out nationwide, but for a company saddled with an overwhelming load of negative press over the last year, it’s certainly in need of better optics. Whether or not the new pricing system will help, remains to be seen.