Uber's Rise In China May Be Counterfeit

retroworks writes: Josh Horwitz' story in Quartz reports both the apparent rapid success of Uber adaptation in China, and a queasy footnote for shareholders applauding the rapid growth. While China is a natural ride-sharing haven, it also has a tradition of gaming the western system. From the story: "Accomplices can sit in their apartments, disable location settings, and specify a pickup not far from the actual location of driver's vehicle, the report said. The driver then accepts the hail, and goes on a trip without a passenger. After the accomplice approves payment, the driver will – hopefully – pay back the fee and share a cut of the bonus. It's not the most clever get-rich scheme on the planet. But for drivers, it's better than waiting for a hail in a parking lot." Uber's spokeswoman told the Quartz writer that the company has an on-the-ground team who investigate into these various type of fraud, then uses "deep analytics, and new tools developed by our Chinese engineers in our dedicated fraud team to combat against such fraud." The Uber spokeswoman declined to elaborate on the nature of these tools.

Comments

Trying to figure out how this works...

[TWX]

How is money made, if the fake passenger pays X to Uber, the driver earns X-% from Uber, and the driver pays X-% back to the fake passenger?

Re:Trying to figure out how this works...

[jaseuk]

Free rides and bonuses, that are funded from the service charges.

Re:Trying to figure out how this works...

[towermac]

Okay, but at some point Uber has to make money, and at that point, it is then a net loss for the driver and his co-conspirator.

If that's not the case, then that is what is wrong with Uber's business model, and a problem that is easily fixed.

Re:Trying to figure out how this works...

[rhazz]

You aren't trying very hard then, since TFA clearly states that Uber is adding special bonuses and subsidies to attract drivers. They are weathering smaller profits and some losses to gain market share because there were existing players in the market.

By one account, Uber was handing drivers 300 yuan (about US$50) for every 30 trips and 400 yuan for every 40.

Seems like they need to add other metrics into their bonus system, like a minimum fare required to count towards the bonus.

Re:Trying to figure out how this works...

[ShanghaiBill]

Okay, but at some point Uber has to make money, and at that point, it is then a net loss for the driver and his co-conspirator.

At some point Uber has to make money, but that point may be off in the future somewhere. WARNING: I READ TFA. Uber is paying "new driver" bonuses. So the driver signs up for an account, does enough fake rides to earn the bonus, then still has enough to make a profit even after paying both Uber and the accomplice. Then they create another Uber account with another name, and do it again.

Re:Trying to figure out how this works...

[Lobachevsky]

I received a $30 credit from Uber when I installed the app. That's free money. However, Uber only lets me spend it on my first Uber ride. So I can't just put that $30 into my bank account. In my case, it was raining one day, and I didn't have an umbrella, so I called an uber and got a short ride home. It came to $8, which used up my $30 credit. I didn't cleverly hatch a scheme with the driver.

If I were in China, I could say, hey, dude, bill me $30, it's coming off my new user credit anyways. Then give me $10. The driver makes $20 instead of $8, and I make $10 instead of $0. The loser would be Uber. Now, if I were to make a criminal enterprise out of it, I could say, hey, why even get a $8 ride? Let's have NO rides, and just keep billing $30 to get that juicy new user credit! We'll get keyboard farms to keep creating new uber accounts and riding and get that sweet $30 snatch!

Now, in the U.S., Uber stops me from creating new accounts on my own to take that $30 repeatedly because it requires a credit card. Now, if I were savvy, I'd use a new credit card with a cousin's billing address on a wiped phone and create a new uber account. If I have 12 credit cards and 12 cousins, I could register 12 new accounts. The only overlap would be my name, but Uber has zero way of telling if two John Smiths with different credit card numbers and different billing addresses could possibly be the same person. They rely on the fact that no one cares so much about $30 to bother with wiping their phone, swapping in a new sim card, using a new card and a cousin's address. And, they're right, in the U.S. In China, people will go through a lot more hardship for less. Clickfarms in China pay something like 10 cents per hour.

Re:Trying to figure out how this works...

[ShanghaiBill]

Uber is giving out free money to get people to use the service

I have lived and worked in China. If there is any way to game a market, the Chinese will figure out how to do it. When BAT (British American Tobacco) first entered the Chinese market, they were surprised to see sales higher than expected. Sales continued to grow for several months, and they ramped up production. Then, after six months, sales plummeted to zero, and never recovered. They took huge losses on infrastructure and unsold merchandise.

It took them a long time to figure out what happened. Their sales were high because their products were being purchased by their competitors, and stored in damp warehouses, where they grew stale and moldy. Then after six months, all the accumulated rotten cigarettes were dumped onto the wholesale market, crashing the price, and destroying BAT's reputation for quality.

Re:Trying to figure out how this works...

[Minwee]

Uber effectively pays this much: $5 - 2.80 = $2.20. So driver and accomplice make $2.20/2 = $1.10 each.

FTFY

Math is hard. Let's drive cars!

So, it's credit card fraud

[Anonymous Coward]

What else is new?

Re:So, it's credit card fraud

[orasio]

Fraud is not the main thing here.
Uber is paying cab riders bonuses that make riding without passengers profitable. So, they ride without passengers and collect bonuses. Their using fake ids or other illegal is just incidental. Uber itself is probably operating illegally, and nobody cares about that.

China, the yellow scourge

[TiggertheMad]

While there might be a problem with fraud in Uber use in China, is it any worse than in any other country? There is an implicit racism in all these stories that hit the media decrying 'Chinese Fraud and Duplicity'. I am sure there is plenty, as totalitarian governments have been shown to increase dishonesty in their populations, but is it really worse than any other developing country or country lacking a government?

Granted, the story will 'sell more papers' than a similar story about Uber being defrauded by teenage stoners from Kansas. China is a competing economic power with the US and EU, and as a result it seems to being demonized because Chinese people didn't have the common sense to be born with white skin. This constant barrage of stories about 'Chinese' dishonesty paints an image of them as being inscrutable and untrustworthy as a race.

Re:China, the yellow scourge

[gnasher719]

There is an implicit racism in all these stories that hit the media decrying 'Chinese Fraud and Duplicity'.

That's you looking for racism. If Uber is so desperate for growth that a driver can make money by driving his wife around the block all day, especially if he doesn't actually drive her but has a coffee with her or something that slashdot users wouldn't comprehend, then people will take advantage of that. In every country. And Uber fully deserves it.

Because in the end these drivers make a few Yuan, while Uber fraudulently makes billions of dollars by pretending to investors that they have genuine growth, when this is only due to losing money on every trip made.

Re: China, the yellow scourge

[guruevi]

It is a cultural thing. Chinese are educated by copying others and have done so for centuries. They are awesome at testing with high scores in any schooling system and field (math, physics etc) because testing is simply copying the answer. But having them apply what they've learned is (generally) not feasible.

It is culturally engrained and encouraged from birth, to them it is not immoral to do so which is reflected in their legal system (lack of copyright and patents enforcement).

Copyright and patenting is really a westerner construct and inherently unnatural, even immoral.

Re:China, the yellow scourge

[grahamsz]

I also strongly suspect they'd have exactly the same problem if they offered the same bonus structure in the US. Except the headline would be something about hacker ingenuity.

Re:China, the yellow scourge

[Minwee]

I also strongly suspect they'd have exactly the same problem if they offered the same bonus structure in the US. Except the headline would be something about hacker ingenuity.

Or whatever you want to call it.

Desperate for growth?

[gnasher719]

Do I get this right: Uber is so desperate for growth in China that they pay the driver more money than a genuine customer pays for the drive, and as a result the drivers give fake rides to fake customers, and after returning the ride fee plus some bonus to the fake customer, there is still money left over?

This reminds of a story from the former German Democratic Republic, where the prices for apples (the fruit, not the fruity computers) were so much subsidised that farmers delivered their apple harvest to the state, then bought up as many apples as they could in the stores at subsidised prices, and sold them again to the state as freshly harvested?

Wow...

[fuzzyfuzzyfungus]

And here I used to think that Uber was dead-set on being as aggressively disrespectful to local cultural practices as possible in every market except its native valley 'disruption' fetishists. I guess I was wrong, if they have in fact embraced counterfeiting in the Chinese market.

Re:run this one by me again?

[thedonger]

so the purveyors of unlicensed, unregulated public transportation services by potentially non directly employed third party contractors not required to submit to drug or background checks is complaining their service, which has been banned in spain, thailand, india and briefly germany, is being bilked for incentive payments in a country with markets for such exotiques as recycled cooking oil rendered from waste food. I guess the best solution could be to stop running an unregulated, unlicensed transit network thats been charged of raping and assaulting passengers in the past...or i guess just try another country and see if the idea of ayn rand on wheels works any better.

Regardless of your obvious bias against Uber, if said non directly employed third parties and/or passengers enter into agreements (e.g., TOS, etc.) and then purposefully violate said agreements, Uber is justified in trying to combat said violations.

Deep Analytics

[sexconker]

Bullshit: "deep analytics, and new tools developed by our Chinese engineers in our dedicated fraud team to combat against such fraud."

Truth: "We just found out about this and have no idea what we can do to stop it because our entire business model is based on customers claiming they need a ride then claiming they got a ride, and drivers claiming they received payment. We're a middleman that does nothing other than point customers to an unregulated fleet of drivers so we have no idea what is actually going on. If we were taking a cut of each ride payment this scam wouldn't exist, but we have to bleed money by incentivizing drivers with bonuses in order to maintain a public image and keep our name in the news. This allows scammers to fake the ride and fee and share the bonus. We might be able to catch a few of the worst and dumbest offenders by looking at the top bonus earners and their passengers, but that money is long gone and we won't switch to a sustainable model until the last investors left holding the bag demand it."

Re:Same here in India

[sexconker]

Amazingly simple and effective.
The investors for these companies are fucking retarded. The companies need to be taking a cut of each fare, not giving a bonus that puts them in the red for each ride, thus making this type of scam possible.

Re:Not a very smart fraud if true

[mjwx]

This isn't a very smart fraud if it's true. The odds are the wear and tear cost on the vehicle FAR exceeds the value of the bonus.

The thing is, at least in western countries, that there's currently no shortage of starry-eyed suckers who have been enamoured by the Uber propaganda so they can afford to churn and burn. As people slowly figure out that they're not making money after the costs of running the vehicle or find their insurance wont pay out after an accident Uber can afford to dump them because there are still 2 others willing to take their place.

This wont last forever, eventually enough people will figure it out so all they'll be left with are the worst of the worst. Drivers that even the dodgiest courier company refuses to employ. This of course is assuming that an Uber driver doesn't cause a pileup in a country with sane laws like Australia and the UK and Uber is sued into bankruptcy by the insurance companies and local governments.

In third world nations where taxi's are already run by gangs and mafias, the Uber problem will be solved by having Uber drivers dragged out of their cars and beaten.