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Views: Why Rapido is moving to subscription model

The existing commission-based model, which companies like Uber and Ola have used for a long time and still stick to, has received criticism from drivers for various reasons.

Rapido announced on February 14 a new subscription model for auto drivers on its app, allowing them to pay a fixed fee per day for unlimited rides rather than a certain percentage of each ride as commission.

The move to a subscription model is interesting. The existing commission-based model, which companies like Uber and Ola have used for a long time and still stick to, has received criticism from drivers for various reasons. If you talk to any auto or cab driver booked through these apps, they would complain that the app is taking a good chunk of their money. The exact percentage of commission varies from driver to driver, and the driver only sees the amount they will receive, not the amount paid by the customer. This lack of transparency usually frustrates the drivers, and some even think they are being cheated by the company. To appease drivers, some apps like inDrive and Uber are experimenting with flexible pricing, where customers can choose to pay a higher price for a better chance of acceptance, but this still doesn’t address the transparency problem, only that drivers are more likely to accept seeing a higher amount. The subscription model appears to be another attempt to address driver concerns. For what it’s worth, there is a lot more transparency with subscriptions because the driver knows their cost upfront and knows that they are receiving the entire amount the customer is paying. They can quite easily verify this by asking the rider what the app showed and tallying it with what they receive from the app. If the economics of this work out for the ride-hailing app, it should be a win-win situation.

This is not the first app to adopt a subscription model. Auto-hailing app Namma Yatri, built on the ONDC network, also follows a subscription fee model. Namma Yatri charges auto drivers ₹25 per day for unlimited rides or ₹3.5 per trip. Rapido itself had earlier adopted this model for its newly launched cab-hailing service in some cities.

“We are changing the business model into a SaaS (software as service business) model where we are giving our product as a service and asking the driver to just pay an access fee of as low as Rs 9 to use the product. And they can use it as much as they want. So now whether a driver does 5 or 10 rides, whether they earn Rs 100 or Rs 1,000, they just need to pay a simple access fee,” Rapido co-founder Pavan Guntunpalli remarked, Autocar Professional reported. The exact subscription fee varies from city to city, but it ranges from Rs 9 to 29, the magazine reported.

Rapido is also well-known for its bike-hailing services. However, the company is planning to stick to the commission model for this segment. “Since there are a lot of part-time drivers in the two-wheeler service who do two or three rides a day, our understanding is that having a subscription or access fee might be detrimental,” Guntunpalli told Autocar.

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