Spotlight on zero-commission models after Namma Yatri, auto union break tie-up

Spotlight on Zero Commission Models after Namma Yatri and ARDU break ties

“App by the drivers for the people. 100% direct payment to drivers,” says the Namma Yatri website.

Namma Yatri, the Ola Uber challenger, is a differentiator in Bengaluru in two things: its unique direct payment model to drivers and the "no commission" policy from either the riders or the drivers.

The app has significantly gained popularity within a year and has on-boarded more than 1.09 lakh registered drivers in Bengaluru, with more than 5,000 rides currently, according to the Namma Yatri website.

Namma Yatri was initially launched in Bengaluru, Mysuru, Tumakuru, and in Kochi under the name Yatri app for cab service. In Kolkata, it was launched as Yatri Saathi. Now, it is gearing up for a Hyderabad launch.

However, the recent partnership break-up between Namma Yatri and the Autorickshaw Drivers Union (ARDU) has sparked a debate among mobility experts as well as netizens over "zero-commission" models and its viability.

The no-commission model

Unlike ride-hailing such as Ola, Uber, and Rapido, which are platform-based apps that control all aspects such as pricing and commission, and who stays on the app and who’s kicked off and more, Namma Yatri isn’t platform-based.

It doesn’t have the same licensing as others, which is partly why a rider can only pay cash to the driver or transfer the amount over UPI.

No card-based online payments here, and Namma Yatri isn’t collecting any money to transfer to the driver later.

The timing of the app launch was perfect. A month before Namma Yatri's launch, the Karnataka transport department had issued notices to Ola, Uber, and Rapido to stop their auto services in Bengaluru and sought an explanation for complaints against exorbitant charges. Subsequently, aggregators approached the high court and obtained a stay.

Read more: How Namma Yatri works: Can it break Ola and Uber's duopoly?

While the government-fixed minimum auto fare in Bengaluru is Rs 30 for the first 2 km and Rs 15 for each additional km, aggregators were charging up to Rs 100.

Following the court's intervention, the minimum auto fare charged by aggregators in Bengaluru was reduced to Rs 35. This accelerated the adoption of Namma Yatri.

“Many auto drivers use 3-4 auto apps simultaneously. They accept rides from whichever app offering a higher rate or incentive. With over 60 percent of rides now happening through apps, we cannot outrightly oppose them even though they collect high commission from drivers. The solution to this issue is a government-backed app without any commission. All these private firms have vested interests and profit motives, making drivers the scapegoats in the end. We have been demanding the Karnataka government to come up with an app and our union will support it," C Sampath, general secretary of the Adarsh Auto Drivers' Union, told Moneycontrol.

However, running an app of this magnitude requires money and a continuous infusion of it. So far, Namma Yatri’s operations are backed by the Nandan Nilekani-led non-profit Foundation for Interoperability in Digital Economy (FIDE), and built by Juspay.

But as adoption grows, costs, like those for quality engineering, R&D, marketing and even of maps used on the app, also grow. Remember, Google Maps is free for individuals but not for businesses.

Namma Yatri did have a plan: to use open-source apps, something they eventually planned to switch over to in order to save costs.

An app like Namma Yatri still needs more capital to sustain operations and that’s when the company decided to introduce a subscription model for drivers.

Namma Yatri has been collecting a subscription fee from drivers since September 1, 2023. Drivers have two options under the plan: Rs 25 for unlimited trips per day or Rs 3.50 per ride (no charges after 10 trips).

This is one of the issues that eventually led to the drift between the drivers’ union and the app. The drivers’ union wanted lower commission that is affordable to the driver community.

Read more: Auto Rickshaw Drivers Union in Bengaluru breaks up with Namma Yatri

Tough competition

Even though Namma Yatri is acting as an app that directly connects drivers to riders, competition is tough among players which spend a lot of money on reducing cancellations and enhancing user experience for riders and drivers.

“We have been working on bringing down trip cancellations on its platform; in fact, it’s one of our top expenditures. On a daily basis, we bring about a lot of changes to the platform to enhance rider experience,” said one of the executives of a ride-hailing firm, requesting anonymity.

“We recently revamped its backend tech to introduce upfront pricing and location details to drivers to bring down ride cancellations in India and across the world…And this is why we charge a platform fee and many of our drivers are okay with it,” the person quoted above added.

Shaik Salauddin, co-founder of the Indian Federation of App-based Transport Workers, told Moneycontrol.

"Aggregators, such as Uber and Ola, currently charge drivers a commission ranging from 25-30 percent. However, drivers would be content if the commission rate is below 10 percent. Some aggregators initially launch services with the promise of zero commission but later increase it, as was the case with Ola and Uber."

Ride-hailing service firm MYn was India’s first super app, launched in 2022 by Multiverse Technologies Pvt Ltd.

Abhisyant Anasapurapu, head of operations at MYn App, told Moneycontrol: "We were the first to introduce the zero-commission model, predating Namma Yatri. Our approach involves charging the end-user (customer), with a fee of Rs 12 per ride for auto-rickshaws and Rs 24 per ride for cabs”.

“We are expanding our services and engaging in discussions with several auto-rickshaw unions. We believe that the commission model towards drivers is not sustainable, and passengers are willing to pay once they receive a guaranteed ride and quality services,” he added.

MYn App is currently operational in 22 cities, including Bengaluru, Hyderabad, Pune, and Ahmedabad. "In Bengaluru alone, we have on-boarded 45,460 auto drivers, doing an average of 25,800 rides per day. We have also streamlined the on-boarding process, allowing drivers to join us effortlessly without any commission."

Solving for sustenance

Namma Yatri is gaining a lot of prominence and has helped several drivers. In fact, in an open statement on X (formerly Twitter), Namma Yatri had said that through its platform, Bengaluru drivers have collectively earned Rs 250 crore, without paying any commission.

Recently, Namma Yatri became a part of the ONDC, or the Open Network for Digital Commerce, network — a decentralised, network-centric model where buyers and sellers can transact, irrespective of the platforms/apps they use.

According to Namma Yatri’s website, one of its monetisation plans is to “set up an open collective with representatives from both citizens and the drivers community to own pricing and policy-related decisions.”

This is the sticky wicket. Some auto drivers Moneycontrol spoke to said they were not willing to pay a subscription, while others said it depends on whether it would be cheaper than what they now pay to aggregators.

“Anything that people do or use has a cost. Even the public transport system service provided by the government has a cost…Namma Yatri is a great initiative which should be encouraged. However, it cannot survive without devising a proper monetisation plan,” an independent mobility expert told Moneycontrol.

While launching the app, Namma Yatri did have a plan for monetisation, which included efforts towards using open-source maps, outsourcing tech development and more.

“At the end of the day, it is important to address driver concerns upfront and see how they integrate with the overall sustainable mobility ecosystem that we want to create…It is very important to have drivers on board to have a successful mode,” the mobility expert quoted above added.