New Grab fee structure incentivising pick-ups of farther passengers 'insufficient', could hurt takings, say some drivers - TODAY

SINGAPORE — A new variable commission structure introduced by Grab to encourage drivers to pick up passengers located farther away from them may not be a sufficient incentive, several drivers told TODAY.

Based on the details available so far, choosing to pick up passengers closer to them would still make more monetary sense, they said, adding that there was still a lack of clarity on how the new variable charge is computed.

The drivers were giving their reactions to the ride-hailing platform's recent announcement that it will introduce a new driver fare structure to take into account, in a “fairer” manner, the costs incurred to pick up passengers, which will kick in from Nov 14.

In essence, Grab will charge a lower commission for drivers who travel farther to reach their passengers. Conversely, a relatively higher fee will be charged against drivers who only have to travel a short distance to pick up their passengers.

The new fare structure will apply to all transport services except for GrabShare, Hire, Standard Taxi, GrabHitch and GrabCoach services.

It will replace the existing fixed commission rate of 20.18 per cent of the passenger fare, including Goods and Services Tax.

The company has not formally announced the range of the new variable fee, but TODAY understands that during the new driver fare structure pilots conducted earlier this year, the Grab service fee was observed to range between -10 per cent and 25 per cent of the passenger fare.

A negative commission means that the driver's earning is higher than the fare paid by passengers, and the difference will be paid for by Grab.

An online tutorial for drivers regarding the new fare structure, which was seen by TODAY, indicated the same range.

The trial runs with 300 drivers also found that the new fare structure had a “neutral to positive impact” on the earnings of 98 per cent of them, as compared to the old fare structure, the company said.

On its website, Grab said that it observed an up to seven percentage point improvement in driver acceptance rate for trips involving pick-up points located further than 3km away from the driver, based on pilot runs earlier this year involving 300 drivers.

TRIP FARE IS THE ULTIMATE DETERMINANT

For now, drivers are awarded a S$3 bonus for any passenger located 3km away or farther from them. Drivers told TODAY that generally, the farthest they have to travel to pick up a passenger is up to about 5km.

Drivers said that while Grab may charge them a smaller commission for picking up faraway passengers — or even give drivers up to 10 per cent of the fare — the effort needed to pick up such passengers might still not be worthwhile.

After crunching the numbers, the drivers noted that the final trip fare is still the largest determinant for them to accept ride requests.

This is because the monetary compensation for the time spent by drivers to reach farther away pick-up locations differ from case to case, given that the new variable charge is still pegged to fares.

For example, Mr Lim Wei Jun, a private-hire driver who has used several platforms including Grab since 2015, said that it is typical for drivers to be travelling for eight minutes to pick up a passenger located far away.

For a relatively short trip with a S$10 fare, there is "no point" spending eight minutes to save S$2 from not being charged the typical 20 per cent commission, for instance, the 35-year-old added.

“But if a customer is paying a S$50 fare to a high demand area, even if you spend 10 minutes travelling to him, you also won't cancel.”

Another common point raised by the drivers was that when they are matched with distant passengers, these passengers tended to cancel while the drivers are already enroute. This factor was not taken into account by the private-hire platform, drivers said.

Mr Sukh Sagar Yadav, who has been driving for Grab for about three years, said that he is reluctant to pick up faraway passengers because it is common for commuters to cancel their booking on the basis that the driver is taking a long time to arrive.

“They see that the driver will take eight, 10 minutes to arrive, then they try to book with other apps and compare,” the 68-year-old said. “When they find a much nearer driver a few minutes later, they will cancel. By then, we are on the way, maybe on the expressway already.”

PREFER NEARBY TRIPS TO MEET TIERED INCENTIVES

Some drivers also voiced their concerns that the changes lead to higher fees for those who aim to achieve Grab's other incentives, which are structured around fulfilling a certain number of trips over a period of time.

A 60-year-old driver who wanted to be known only as Jack, said that to maintain one's "driver tier", drivers have to meet daily and monthly incentive targets, as well as to hit a number of trips each quarter.

Higher-tier drivers get benefits such as priority job allocations and better fuel discount than other drivers, which can be significant.

Therefore, the existing structure incentivises drivers who want to complete each trip quickly, as opposed to taking more time to pick up passengers who are farther away for rides of longer distances, the Grab driver of about five years added.

However, based on the variable fee charged during the pilots, these drivers could ultimately incur a higher Grab fee because the company might charge more than the flat 20.18 per cent commission currently for nearby passengers.

Speaking to TODAY, several drivers said that the bulk of their daily trips typically involve nearby pick-ups.

A 60-year-old driver who wanted to be known only as Tan KY, said: “I make about 20 plus trips a day. It may vary, but normally on weekdays, I get one or two farther pick-ups.”

A blog post on Grab's website dated Aug 14 said that the company does not always assign the nearest driver to passengers.

Instead, more than 40 factors are weighed to get the "best match" between available drivers and passengers, including estimated time of arrival and the driver's preference based on the types of bookings they tend to accept and decline.

Drivers told TODAY that what adds to the uncertainty surrounding the new fare structure is the lack of clarity and details about how the actual variable charge will be implemented, as well as what distance would be considered near or far.

A private-hire driver of multiple platforms who wanted to be known only as Mr Raj said that the present S$3 bonus that Grab gives to drivers for completing pick-ups located 3km or more clearly spells out how they can earn such perks.

This is similar to that offered by rival platform Gojek, the 49-year-old added.

OTHER INDUSTRY PLAYERS REACT

The revision to Grab’s driver commission came at the heel of Gojek lowering its driver commission from 15 per cent to 10 per cent.

Asked for its comments, Gojek told TODAY that the firm constantly make adjustments based on feedback from their driver-partners.

"Most recently, we also improved our algorithms to reduce far pick-ups, which has led to a 15 per cent reduction in average pick-up distance in October as compared to September, benefitting both driver-partners and customers," it added.

Another ride hailing platform, Tada, does not charge any commission for its drivers. Instead, it levies a platform fee of S$0.55 or S$0.75, depending on the fare.

Asked how it ensures that drivers are compensated for the effort taken to pick up a passenger, Tada said that ensuring fair compensation is a crucial aspect of its business, and that it is committed in ensuring that drivers retain a significant portion of their earnings.

This entails striking "a fair balance between the platform’s sustainability and driver compensation”, it added.

“Drivers can see the fare of an incoming job and their distance from the pick-up, before deciding whether to accept the job. Drivers are not penalised if they do not accept the jobs surfaced to them.”

Tada also said that it conducts regular reviews of its fare structure.

Ryde, a ride-hailing platform that charges a S$0.50 platform fee and 10 per cent commission, declined to comment when contacted.

TODAY has reached out to Grab for comment.

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