How many hours on average did the American commuter spend in traffic congestion in 2019? 10? 50? 100?
If you guessed 100, well done - you’re pretty close. According to research from INRIX, American commuters lose 99 precious hours to traffic congestion annually, with hours increasing in proportion to the levels of congestion.
Is micro-mobility the answer to urban congestion?
What holds true for the American commuter also holds true for commuters in congested urban cities around the world. Lost productivity isn’t the only problem that comes with urbanization - air pollution in major global cities is increasing at an alarming rate and need a modern solution quickly.
Enter micro-mobility - the term used to describe short-distance transport for distances less than 5 miles. eScooters, mopeds, pedal bikes, electric bikes, kick scooters etc. all form the majority of vehicles powering this mode of transport as a viable, disruptive solution to urban traffic congestion. However, disruption in this sector does not come without unique challenges.
Despite problems with regulation (or lack, thereof), city-wide bans, vandalism and durability, the micro-mobility industry has seen significant growth in recent years. As with the ride-hailing predecessors the micro-mobility sector is notoriously capital intensive, but a predicted market size of $300B by the end of the decade has secured large scale investment. This has set the stage for a competitive market environment, with new and established companies snapping up both operating licenses and street space in the bid to gain market share.
Micro-mobility and COVID
While analysts may have painted a promising picture of the future of micro-mobility in the past, the unexpected COVID-19 pandemic has challenged this outlook. At the onset of the pandemic when lockdowns were first imposed, public demand for eScooters collapsed. As a result, shared mobility operators had to scale back operations with layoffs from global companies such as Lime (US & Europe) and Bird (USA, Europe and the Middle East).
However, COVID-19 has not all been negative. As city-wide lockdowns eased, micro-mobility has proven to have a place in a world of social distancing, public transport avoidance and fear of cross-infection. This has been evidenced by key trends such as a 140% increase in the sale of e-bikes in the Netherlands among others. In the medium to long term, analysts such as McKinsey expect the micro-mobility sector to make a strong post-pandemic recovery as consumer behaviour and mobility patterns change in favour of private, environmentally-friendly transportation modes. This prediction comes especially as the pandemic came just as the industry was accelerating globally. In the Middle East and Europe, for example, one such accelerating start-up, Circ, saw 1 million scooter rides completed in 4.5 months - 2 months faster than Uber with their ride sharing proposition.
The growing customer trend to migrate to digital forms of payment will also play a role in further accelerating this industry. The Financial Times reported a decrease in cash withdrawals throughout Europe during the lockdown period, with volumes not returning back to pre-COVID levels as lockdowns ease with customers adopting alternative payment methods. With research showing high adoption of micro-mobility solutions among consumers who favour digital payment solutions, this change in payment behaviour will help support the long-term customer adoption of micro-mobility services.
Revenue generation in the micro-mobility industry
eScooter sharing start-ups generate revenue by offering eScooters to commuters travelling distances below 5 miles. GPS functionality on these scooters allows commuters to find nearby available units using their mobile devices and immediately rent the vehicles using digital payment methods.
The main pricing models implemented by providers are:
● pay-per-ride plus a “surge” element, with flexible, demand-based pricing
● unlimited weekly/monthly membership models will become popular
● auto-renewing subscription pricing models
The Lime-owned scooter-sharing company JUMP, for example, charges a monthly subscription for a free, daily 10-minute ride, with extra ride minutes charged for by the minute. Circ (the Bird-acquired eScooter sharing company) on the other hand offers a subscription model which allows riders a maximum number of rider minutes, dependent on the subscription plan.
This creates a critical business challenge for micro-mobility providers of how to collect payments that across various geographical regions where the use of cash at point of sale is not possible, especially where single transaction values are frequently $5 or less. Micro-mobility start-ups have expressed concern over the lack of a localised solution that offer customers a that is quick, frictionless, ubiquitous payment experience optimised for mobile. This gap in the market has impacted negatively on micro-mobility start-ups with high cart abandonment rates, low repeat purchases, and poor conversion from single purchases to longer-term memberships – all of which are important to create a sustainable sector.
It is clear that micro-mobility start-ups will be unable to scale their locally focussed operations globally relying solely upon credit and debit cards. Successful providers will need to adopt a more advanced payment strategy, assessing regional markets to pursue viable, localised pricing and payment options which match the needs of the target market, or partnering with a payments provider who has already understood and integrated those localised payments solution through a single global payments platform.
Payment options for micro-mobility customers
Single-use/Pay-as-you-go ride credits
Mobile wallets/e-wallets offer consumers in fast-developing, underbanked countries a means to participate in the micro-mobility revolution. For example, the Latin-American micro-mobility company, Grow Mobility demonstrates the potential of local payment options with its deployment of LATAM’s most popular digital wallet Mercardo Libre. This solution may work on a larger scale for single pay-as-you-go purchases or daily tickets.
Another option for single ticket types is open banking payments, which allows customers to make secure payments directly from their banking apps. The availability of open banking to micro-mobility start-ups depends on availability of APIs and local financial laws which is currently hugely fragmented, making it difficult to deploy without the support of a payment specialist.
Low Value and Subscription Transactions
Another viable payment method is direct carrier billing (DCB) which allows customers to charge their ride credits directly to their mobile phone bill. Because mobile carriers automatically enable this payment option for their customers, it is available to over 5bn customers worldwide. Carrier billing allows micro-mobility operators to offercustomers a secure, frictionless payment experience which is especially powerful in territories with low banking and credit card penetration. This payment instrument is perfect for charging for one-off, single, low-value (< $5) rides as in a single click, payment can be authorised and deducted from the customer’s mobile phone account credit.
The Opportunity is Now
Micro-mobility is going to be a significant player in both regular commuting and occasional on-demand transportation options. As it becomes more attractive for consumers to avoid high-volume mass transportation, the personal experience and competitive pricing of micro-mobility will strongly challenge traditional automotive and rail. However, providing customers with their preferred local payment methods in their local language and currency will be vital to that process of conversion; micro-mobility sells itself on convenience and payment must be a key part of that customer proposition. This is especially true in the fastest growing, under-banked economies of the world where Alternative Payment Methods are the customer’s preference for digital transactions.
Apaya is a mobile-centric payment company that works with organisations looking to improve their customer experience and conversion rates by localising payment options and the user interface.