Last week, residents of New York City were provided a new option for getting around with the launch of Drivers Cooperative, a driver-owned rideshare service.
The company is not the first rideshare service to take on the big two of Lyft (NASDAQ: LYFT) and Uber (NYSE: UBER), and it likely won’t be the last. The Drivers Cooperative promises to take a smaller commission from fares than either Lyft or Uber, offer lower rates for riders and ensure drivers make more money.
In 2019, another rideshare service, Juno, was operating in the city until it suddenly shut down. Owned by Gett, the service discontinued even as the parent company, which was backed by Volkswagen, was making noise about a potential initial public offering.
Regardless of whether the Drivers Cooperative makes it or not, or whether Lyft and Uber solve their current driver shortage issues, rideshare and delivery drivers continue to face cash flow concerns as rides come and go, pandemics slow demand and the companies alter pricing and commission models.
“Our broader vision is to provide resources to enable gig economy workers to achieve greater stability in their earnings,” Kobina Ansah, CEO of COVERR, told Modern Shipper.
COVERR is a business financing provider for gig economy workers. The company reviews a driver’s recent revenue performance and tries to predict future performance to determine how much of an advance on those earnings it is willing to make to the driver. Ansah said it is not a loan, but rather a simple advance with a one-time transaction fee based on the advance. COVERR then recovers the money over a period of time. No interest is charged. Most contracts are concluded within six weeks, Ansah said.
The founder said the idea is to help gig workers better manage their cash flow in a volatile industry. The idea for COVERR was born out of a realization that drivers needed to smooth out cash flow. Ansah said some drivers were taking out car loans to work in rideshare, but then a sudden decline in revenue would put them in arrears.
“I realized that maybe the pain point was not the money to buy a car, but access to capital to smooth out these expenses,” Ansah said. “What we learned is this [segment] is not able to access capital because they find themselves between a traditional business and that of a person with a personal [credit history].”
How much COVERR is willing to advance varies based on a number of factors, including the earnings potential in the months ahead.
The broader issue for drivers, though, is something that those working for the Drivers Cooperative will likely learn – a race to the bottom to gain customers.
“Uber and Lyft are taking 25% … and oftentimes the anger is directed at those companies, and not to say they are angels, but they are not the only part of the equation. The other part is the consumers,” Ansah said. “These platforms have to price competitively and … therefore that pushes the total price of the ride lower.”
Ansah related a story from New York when riders started to switch away from Uber to Lyft after stories emerged on how much of a commission Uber was taking.
“Many consumers decided they would cancel Uber and transition to Lyft and this lasted for a few weeks but eventually their price sensitivity [kicked in] and they went right back,” he said.
Ansah doesn’t know whether the Drivers Cooperative will succeed, noting the difficulty upstarts have in developing the logistics capabilities necessary to compete with Lyft and Uber as well as the costly marketing effort that would be necessary. But he does want those drivers to know that COVERR is there to help them bridge that financial uncertainty that all gig economy workers face.