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One driver explains how he is helping to rip off Uber in China
[BEIJING] James Li was unhappy with his pay as a security guard in Shanghai, so he started driving on weekends for Uber Technologies Inc. He's almost tripled his pay - in part by scamming the company.
Mr Li, an alias since he feared retribution if his real name was made public, is taking advantage of Uber's efforts to break into the China market.
The US car-booking company is spending millions on free rides and driver bonuses, betting the cash will help train China drivers and market Uber services to customers.
Instead, people like Mr Li have figured out how to cash in on Uber's largesse without giving anyone a ride. He's part of a cottage industry that has developed so drivers can use modified smartphones and software to place fake bookings and trick Uber into paying out cash for phantom trips.
While there are no reliable estimates on how prevalent the scams are, interviews with Uber drivers, equipment vendors and reviews of postings on dedicated online forums suggest at least some of the US$1 billion that Uber has pledged to spend to expand the service in China this year is being siphoned off by fake bookings.
The scams may be counted among the number of trips Uber claims in China, a figure the company said reached almost 1 million per day in a letter this month to shareholders.
"That number is definitely exaggerated," Zhang Xu, an analyst at researcher Analysys International, said of Uber's trip bookings.
"It is well known that Uber has the problem of false bookings."
Uber has to balance between giving out incentives to build its pool of drivers and clamping down on fraud, as it chases market leader Didi Kuaidi. The company backed by Alibaba Group Holding Ltd and Tencent Holdings Ltd dominates China's car- hailing market with 78 per cent of ride bookings, versus about 11 per cent for Uber, according to Analysys.
Chief Executive Officer Travis Kalanick, who is in China to lead fundraising for its operations, said in the investor letter that the country may surpass the US as its biggest market before the end of this year.
Fraud accounts for less than 10 per cent of bookings in China, Uber said, "much lower" than competitors and similar to other markets in the initial phase of service.
Uber expects to manage fraud down to "sustainable levels below 0.5 per cent in short order," according to an e-mail response from the company.
Didi Kuaidi said it has "almost no false bookings" because it has a strong anti-fraud task force and "very powerful anti-scamming system," and also because its driver incentives are much lower than other companies. Yongche.com, another ride-sharing company, didn't respond to an e-mailed request for comment.
To create a fake trip, an Uber driver has essentially two options, according to drivers interviewed by Bloomberg, who asked not to be named discussing information that may get them barred by the company.
The first is a do-it-yourself option where the driver buys a hacked smartphone that can operate with multiple phone numbers and therefore multiple Uber accounts. Drivers use one number to act as a rider and request a lift, and then accept the trip as a driver with another phone number.
A driver like Mr Li, for example, may know that he has a legitimate fare waiting for him at the airport, but he doesn't want to make the trip there without getting paid.
He could then request a trip as a rider, let the booking show up on Uber's GPS tracking software as his car heads to the airport and then get paid by Uber for taking a "customer" on the route.
The second option involves working with other scammers over the Internet. If a driver doesn't have a hacked phone, he can go into one of several invitation-only online forums and request a fake fare from professional ride-bookers. These bookers are referred to as "nurses" because they use specially tailored software to put an "injection," or location-specific ride request near the driver.
The driver, or "patient," then makes the trip while the booker monitors remotely, confirms the journey was made and then pays Uber when the trip is complete.
The nurse gets a small fee, usually about US$1.60, and the reimbursement for the fare from the patient. The driver in turn collects the fare and a driver bonus that can be three times the fare from Uber, which thinks it's building brand awareness by giving away free rides.
The drivers interviewed by Bloomberg spoke of a cat-and- mouse game with Uber and the fear of being caught. A recent software upgrade has made it more difficult to successfully game the system, they said.
"Uber takes fraud very seriously, and deactivates drivers/users permanently once caught," Huang Xue, Uber's Beijing-based spokeswoman, said in an e-mail. The company has multiple tools to detect fraudulent behavior and a dedicated team to monitor and enhance the system, she said.
A search using the keyword "Uber" on Taobao, the online marketplace operated by Alibaba, returned offerings of smartphones that are modified so bookers can pretend to be a new user each time they place an order.
For 2,500 yuan, one can buy a modified iPhone 5C on Taobao that will show unique 15-digit identity numbers to trick Uber's software into thinking they are different phones, and hence, different users. Ready-made Uber driver and rider accounts are also for sale, according to advertisements on Taobao.
"We are aware of the potential risks of Uber accounts sold by third parties on our platform, and we review our product listings on a regular basis to remove any such items," according to an e-mailed response from Taobao.
"We are also aware of product listings for modified smartphones and are evaluating whether to include such products in our list of prohibited items."
For Mr Li, the part-timer driver, the risks of getting caught are beginning to outweigh the rewards. He earned 8,000 yuan from Uber last month, compared with the 3,000 yuan salary for his full-time job. In the past month, he said he was aware of dozens of drivers who were found to have falsified trips and barred from driving for Uber.
"It is getting harder and harder to get safe shots nowadays," Mr Li said, using the euphemism for fake bookings. "Back in the day, it was much easier because the detection measures were not as sophisticated."