Uber Will Now Charge The Fares Based On Artificial Intelligence & Machine Learning!

May 23, 2017 | 1956 Views

The ride-hailing giant is using data science to engineer a more sustainable business model, but it's cutting drivers out from some gains.

Gone are the days when Uber used to charge the fare of a trip based on the distance travelled - this is certainly so old fashioned and cliche, right?

The new way to determine fares is Artificial Intelligence and Machine Learning.

And the new form of monetization is deeply understanding your customers, and then present a fare which Uber 'thinks' you can pay.

Hence, mere distance travelled and type of car chosen won't be the deciding factor for your next Uber trip - It shall be your address, your previous trip, your clothes, your credit score and a lot more.

Welcome to the next generation of app-hailing services.

Uber Will Determine Your Worth

As per reports coming in, and based on statements by Uber executives, Uber will now use Artificial intelligence and Machine Learning to deeply 'understand' their customers, and the fares would be based on that information.

This new system of calculating fares is based on Uber's 'Route based Pricing' strategy and involves a complex set of algorithms which calculate fares based on the customer's spending habits.

Thus, for example, say there are two customers: Customer A is living in a posh location in South Delhi, while the other person is living at a low-cost residential area in East Delhi.

If both of these customers book a Uber at the same time, covering the same distance, then the customer from South Delhi would be charged more, because of his location.

Uber will also determine the 'paying capacity' of that customer based on his previous rides and accordingly, determine the fare charges.

Uber's Product Head Daniel Graf said, "Google search is very simple to do; it's very complex what's happening behind the scenes. The same thing here. Taking a trip is easy. To make this all work in a whole market, and sustainable, is really, really hard."

Logic Behind Uber's New Pricing Strategy

The reason is more profits.

As of now, one thing is clear: There is a difference between what a customer pays for the ride, and what the drivers get for that trip. And Uber's profit lies somewhere in between.

In order to maximise the profit, Uber needs to make this difference even more, and this recent pricing changes can be attributed to this fact.

There is a team of statisticians and economists who are working with Uber at their San Francisco office to execute and implement this new method of calculating fares. As of now, this has been implemented across 14 cities in the US, mainly for UberPool service.

But soon, this would be a common mode of tariff determination across the world.

Do you think this is a fair way to charge money for each ride? Do let us know by commenting right here! Read More

Source: Bloomberg