Of taxis, ride-hailing apps and detours

The “war” between traditional taxis and their ride-hailing app competitors such as Uber, Yango and Bolt seems to coming to an end. At least, that is what I expected with the recent launch of the GoRide app, here in Ghana.

From what I read, the GoRide app is supposed to rope all traditional taxis onto a single digital platform, much like their competitors.

One of the advantages I thought this would bring to the market is an increase in the options that are available to passengers. On far too many occasions, commuters have had to struggle to get from Point A to Point B simply because the available rides were too far away from the passenger’s location or there were no rides available. With the GoRide app, passengers could hail the nearest taxi and they were good to go.

However, recent conversations I have had with some colleagues tell me that it seems all is not going as planned. It seems the attempts being made to bridge the gap between traditional taxis and their more digitally compliant competitors are not going according to plan. Many traditional taxi drivers do not seem too eager to join the digital bandwagon. Many do not seem to see the need.

The bringing of traditional taxis into the digital space is something that could solve another big problem. Traditionally, it was easier for taxi drivers to get away with so many terrible behaviours.

For instance, if you left your phone in a taxi you hailed by the roadside, your chances of getting your property back safe and sound were next to zero. You had to rely on the moral uprightness of the driver. There were regular reports of taxi drivers verbally, or even physically, abusing passengers and getting away with it.

These are not the kind of reports you would normally get from passengers who resort to the use of ride-hailing apps. The fact that the driver’s details had been captured in the database made the driver less likely to misbehave.

Knowing that the passenger’s rating of the experience could negatively affect the future of one’s employment meant that drivers employed by these digital platforms had to comport themselves.

In some jurisdictions, studies have found that almost 75% of all trips for ride-hailing apps are rated by passengers. In those same communities, the reporting rate for traditional taxis is 1 out of thousands of trips.

In short, traditional taxis could get away with so much. The concept of moral hazard—where individuals were more prone to act recklessly, knowing that they could get away with their actions—was more prevalent among traditional taxi drivers.

Fortunately, there was a working paper published in September 2018 by the Cambridge, Massachusetts-based National Bureau of Economic Research that sought to find out if that assertion was true. The results of the study that led to the publication have also been subsequently published in the August 2021 edition of the Management Science journal. The title of the said study was “Do Digital Platforms Reduce Moral Hazard? The Case of Uber and Taxis”.

One of the advantages of digital platforms is that they enhance transparency. For instance, the passenger and the driver could both see the distance and the cost of the trip. It was not up to the driver to conjure a figure out of thin air.

Without digital platforms, traditional taxi drivers would normally come up with arbitrary fares. It is known for a fact that many of the fights involving taxi drivers and their passengers were often around the issue of fares.

Directly related to the issue of the price of fares is the route from Point A to Point B—and this is where many drivers show their street-smartness. In the case of traditional taxi drivers, because there is no technology to give the best route to the passenger’s destination, the driver is at liberty to use whatever route he or she deems fit. In many cases, drivers will use routes and detours that favoured them but were unfavourable to the passengers.

The issue of routes was the main focus of the above-referred study. The researchers used detours as a measure of the moral hazard of drivers. They defined detours as “the extra distance a driver adds to the fastest route.” The study was of the view that when all other factors held constant, it would be expected that Uber drivers would be less likely to use detours to add to the cost than traditional taxi drivers.

The results of the study were quite interesting. For starters, taxi drivers were found to detour about 7% more than their Uber colleagues from the pickup points to the airports. This is to increase the number of miles on the meter to make more money from the passenger.

Interestingly, the study found that although taxi drivers detoured, they did so even more when the passenger was not from the community. In other words, foreigners get cheated more than locals. This is not a surprising finding, as far as I am concerned. It is just the way things are.

It was also found that the longer the distance between the pickup point and the destination, the greater the likelihood of detouring. Shorter distances, especially within heavy traffic areas, did not provide enough incentives for drivers to detour so they mostly stayed along the shortest trip to the destination.

Another interesting finding was that when there was not much money to be made along a certain long-distance route, drivers tended to speed a lot more. This is to drop the passenger quickly to be available for the next available opportunities. In communities or countries where the laws are not strict, this could result in over-speeding.

Interestingly, Uber drivers were also found to engage in detouring. Occasionally, there are those times when there are more passengers requesting rides in a particular locality or along a particular route.

To encourage more drivers to go and serve those customers along the route, Uber increases its price per distance. This is what is referred to as Surge Pricing. The above study found that drivers on the Uber platform are more likely to detour on airport routes with high surge pricing.

In other words, when there is extra money to be made, drivers—regardless of whether they are driving a traditional taxi or using a ride-hailing app—will try and take advantage of the situation. I guess it is just human nature at play.

When these opportunistic situations arise, it seems drivers forget that detouring leads to longer travelling times which in effect means their chances of getting more rides that day are reduced. Those employing digital platforms also seem to forget that they put their reputation on the line by intentionally prolonging the journey. A passenger’s ratings could lead to trouble for the driver.

With the coming of the GoRide app, one would have expected that the Ghana Private Road Transport Union (GPRTU), under whose ambit many of the traditional taxi drivers fall, would take this as an opportunity to bring some sanity into the sector. At the launch of the app, it was said that taxi drivers would earn higher commissions than drivers with foreign-owned ride-hailing apps.

That is all and good. But the truth is that the launch of the apps and its ability to compete, and compete well, against its foreign competitors is a customer service and customer experience issue. Taxi drivers and their owners must understand that the app is just a new technology that is meant to make things easier for all involved.

If GoRide is going to become the app of choice for the commuting Ghanaian population, it will take a 360° shift in mindset from drivers. The moral hazards must be reduced to a minimum, if not curtailed completely.

Drivers must understand that they cannot get away with things as they used to. The customer of today has now been empowered with information—information in the palm of the individual’s hand, in the form of something called an app.