Uber IPO Filing Shows a Tech Disruptor Tempered by High Insurance and Fees

(Bloomberg) -- Uber Technologies Inc.’s initial public offering chronicles how a “watershed moment” gave birth to a disruptive platform with more than 3 million drivers. But it also shows the ride-hailing startup can’t avoid pains of the staid business world: Insurance and payments.

Uber has been contending with rising costs for insurance and to accept debit and credit cards, which pay for the vast majority of bookings. In 2017, insurance costs jumped by $1.3 billion, while card-processing fees increased 62 percent to $749 million, according to Thursday’s IPO filing.

Recent filings from Uber and Lyft Inc. underscore how much money the rival ventures need for coverage tied to drivers. Both use captive insurance units based in Hawaii to help bear some of those risks. Uber said it’s socked away about $2.9 billion in reserves, compared with Lyft’s $810 million. It also warned that loss estimates can vary, exacerbated by the lack of historical data. For now, Uber’s management said it believes the amount is adequate.

One way Uber may combat rising payment-processing fees carries risks of its own. Last year, the company debuted Uber Cash, a reloadable digital wallet that lets customers store funds and use them on future rides. Such systems are popular among merchants looking to pare card fees, which otherwise pile up from each individual transaction.

On Thursday, Uber noted that trying to play a bigger role in payments may present other challenges.

“Our payment system is susceptible to illegal and improper uses, including money laundering, terrorist financing, fraudulent sales of goods or services, and payments to sanctioned parties,” Uber said in the filing. “We have invested and will need to continue to invest substantial resources to comply with applicable anti-money laundering and sanctions laws.”

To contact the reporters on this story: Katherine Chiglinsky in New York at kchiglinsky@bloomberg.net;Jenny Surane in New York at jsurane4@bloomberg.net

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, David Scheer, Dan Reichl

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