The rise of Uber throughout society in the last ten years is certainly one of the biggest stories in technology and finance circles. No doubt competitors and other parts of the ecosystem are noticing as well, because many companies and entities can be potential partners but also victims of Uber’s growth.
When hailing an Uber, how many people stop to think about how Uber actually works? How does Uber work? Uber is essentially merely an app on a phone and the middleman in a financial transaction. The rider pays Uber a fee for the ride, and Uber pays the driver for executing the trip. Uber pockets the difference.
Uber’s app utilizes other technology such as Google maps, payment infrastructure, and user interface technology while presenting the driver with opportunities to attach to and the rider with the ability to efficiently “hail a cab”. Both driver and rider have real time maps to track what is happening and the ability to rate each other.
Think about what is really happening. Someone is tapping an app and making a payment to the app. The owner of the app collects those funds and then disburses a portion of them to a “worker” that is not an employee. Uber is a middleman.
The drivers are responsible for the maintenance and upkeep of the vehicle and for putting in the actual time and effort. The app handles the rest.
This is not to say that Uber the corporation doesn’t do anything other than make sure the app is running. There is a ton of political risk involved and endless legal battles with jurisdictions and other competing entities.
A new California law being proposed and passed by the State Senate states that Uber’s drivers would be classified as employees and not as independent contractors. This would put a major dent in Uber’s business model, as independent contractors are not nearly as costly to maintain as employees are given all of the requirements of the law.
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