When owls launched in 2021, it was a car rental service for shared car drivers. But after its founders realized that many car-sharing drivers do not have access to credit, particularly in Latin America, the Buenos Aires-based company switched to fintech and offered drivers financial services through a behavioral scoring engine based entirely on one’s driving history.
Lending cars with shared cars is a busy market. Both Uber and Lyft host marketplaces where approved rental car companies can display their wares; Uber has controlled a short-term credit program that offers up to $500 to drivers. One of the largest car pool companies in China, Didi, started lending to drivers in 2019Enders such as Giggle Finance have long had extensive lines of credit for the purchase, maintenance and servicing of automobiles.
But Costanzo argues that Owls (pronounced “wheels”), one of the Battlefield 200 at australiabusinessblog.com Disrupt, stands out in its ability to provide a “360-degree” view of drivers in the mobility gig economy. “By being integrated with all mobility applications available in Latin America, we have a holistic view of the driver’s work, allowing us to determine a credit offer more adapted to reality,” he told australiabusinessblog.com in an interview.
To use Uils, drivers download an app, fill out an application, and connect the app to the ridesharing platforms they drive for via an API (e.g. Uber). Uils analyze their history using a machine learning model to determine whether they qualify for a “micro” or consumer loan, taking into account several factors.
Interest rates range from 0% for the micro loans (for a $1 to $2 weekly subscription) to 145% for the consumer loans. That’s quite a broad range – and sounds sky-high – but Costanzo says it reflects the equally high inflation in Argentina, the country where Uils was first launched.
“The app has a built-in bank account where drivers collect their revenue from mobility apps,” explains Costanzo. “They receive loans on that same account and pay their installments every week. We have a collection process that runs every 15 seconds, so as soon as the mobility app sends the money, we collect the outstanding installments before the driver notices… The rental loans are a lease, so technically we can get the car back as soon as the driver arrives. defaults, therefore there is a tendency towards 0% default.”
It’s a relatively new idea in the lending field, although services that track driver behavior to offer discounts and benefits have been around for some time. For example, Zendrive collects data on driving habits and rewards drivers for making safe decisions. Root Insurance calculates auto insurance premiums based on driving patterns and Avinew rewards customers for using autonomous safety features.
But there are clear implications for oversight – and bias -. It’s unlikely that any driver would be comfortable with the idea of sharing driving history with Uils, especially given that the company uses that data to build a risk profile of them. And when it comes to algorithms, there is always the possibility that errors in the model could lead to some drivers being treated unfairly or badly. Think traffic in a driver’s compartment forcing them to make frequent, sudden stops that could be considered reckless under normal circumstances.
There is another risk to consider: the challenge of repaying loans in a downtrend, especially with interest rates rising and inflation affecting the price of fuel. April Fools opinion poll of The Rideshare Guy, a ridesharing blog and forum, found that nearly half of rideshare employees stopped or reduced their ride that month due to spikes in gas prices.
For his part, Uils says it requires customers to reauthorize connections between the app and the ride-sharing platforms every month so that the tracking doesn’t continue indefinitely. (Company is doing however, require customers to verify their identity to receive loans.) Uils keeps close to the details of its algorithm, except that 70% of users who applied for loans through the platform have received them. The company also doesn’t say exactly how many of those users haven’t made any payments.
“The scoring engine has over 200 data points for each driver. We have variables like their work schedule, how many trips per day, how many apps they use, how many cars they’ve used, among other things,” Costanzo said. “After processing the driving history, we get a score from one to 1,000. Based on our current loan policy, that score will let us know the maximum that a driver can receive as a loan.
After that, Uils has the second tier which is based on income. Depending on how much money the driver earns, they can allocate up to 30% towards the loan repayment.
But aside from the opacity, Uils’ terms and approach may be less onerous than, say, those around Lyft or Uber rentals — which some drivers say making a profit is nearly impossible. A study from 2019 part found that Lyft paid drivers who participated in the Express Drive rental program less per mile than drivers who used cars leased through dealerships. The program also imposed restrictions on drivers, forbidding them to monetize using their vehicles to work for other services.
Costanzo emphasizes once again that these are directors who do not have access to traditional credit, which makes their financial situation particularly precarious.
“The biggest competitive advantage is that we apply a matching fund strategy around the installment amount,” said Costanzo. “Drivers will pay the same amount as he pays to rent the car in the informal market, which provides a hassle-free solution. In addition, we are the only fintech in Latin America to offer large consumer and rental loans without consulting credit bureaus or asking for a credit card or other guarantees.”
Uils is currently raising its second round of funding — $1 million in total — through a Simple Futures Equity Agreement (SAFE), which gives the investors the right to buy shares in the company at a future date. It values the startup at $7.5 million post-money; founder and CEO Tomás Costanzo says the new capital will be used for general “growth and development,” including expanding Uils’ workforce.
“We raised $275,000 in our pre-seed round and used those funds to build and launch our product – a mobile wallet and scoring engine – over 12 months,” he said. “Now we expect this round to help us achieve an additional 24-month runway to develop our scoring engine, develop new features and expand in Latin America – specifically Mexico, Chile and Colombia. “
In the coming months, Uils plans to launch insurance coverage and a buy now, pay later (BNPL) solution – angling to capture a bigger chunk of the ridesharing fintech market. If the trajectory of the US BNPL industry is any indication, regulatory oversight could come. But for now, Uils can take advantage of the relative lack of direct competition.
“Delivering a solid value proposition and reducing risk through alternative data models will become a requirement to be different in a highly competitive market,” said Costanzo. “High growth models have been replaced by retention models…Current conditions will favor efficiency over growth.”