Ride-hailing solutions such as Lyft and Uber might be just as disruptive to the financial services industry as they are to taxi cabs.
Three New York credit unions that specialize in loaning money to cabbies have been placed in conservatorship (receivership) by the National Credit Union Administration (NCUA) because they’re running out of money, CNBC reported. The credit unions are underwater because they issue loans against taxi-cab medallions.
A taxicab medallion is a special license that gives its’ holder the right to operate a cab in New York City and gouge the public with high fares. Just three years ago one sold for $1.3 million, now the medallions have lost half their value because riders have figured out Uber and Lyft are cheaper.
LOMTO Federal Credit Union which serves cab drivers is the latest institution to be placed under NCUA control because of “unsafe and unsound lending practices. Caught in the squeeze are cabbies that used their medallions as piggybanks, by borrowing against them whenever they needed extra cash.
Taxicabs are Still Big Business
Another lender Melrose Credit Union is now trying to foreclose on cabbies’ houses because their Medallions’ value no longer covers the loans. Taxis are still big business in New York with 11.1 million rides on them in 2016, but use is falling fast. The number of cab rides in 2016 was 9% lower than in 2015.
That means medallions are still valuable they’re just not as valuable as they used to be. One interesting pool of customers for them in the future might be successful Uber and Lyft drivers trying to branch out to new businesses.
Expect to see many other lenders that service cabs and similar businesses go under; as Uber and Lyft keep growing and growing, and new competitors like ReachNow Ride enter the business.
CEOS Uber Needs You
Uber has been flooded with resumes for the job of Chief Executive Officer, CNBC reported. Executives are apparently lining up for a chance to take Travis Kalanick’s place and clean up his mess.
It’s easy to see why; Uber is potentially highly lucrative and anybody, that can turn it around will have a reputation as a rainmaker. If Uber’s leaders are smart they’ll bring in somebody from the auto industry or the car rental business to run it.
One obvious candidate is former Ford (NYSE: F) CEO Mark Fields who was fired last month. Fields needs a job; and he has lots of automotive experience, and familiarity with new technology. Fields would also be the perfect leader to organize a merger of Uber and an auto company. That is the logical future for Uber even if the Silicon Valley geeks would never admit it.