How InDrive gets its commission in Zimbabwe’s cash-based economy

InDrive has been able to navigate Zimbabwe’s difficult cash-based economy by cleverly choosing not to be an active participant in it… Well… Sort of…

Indrive, Zimbabwe, Payments, Commission

One of the most challenging things about the Zimbabwean market is the payments industry. The frequent changes in policy and the various roadblocks make it so that it is difficult to get money in and out of the country. One of the industries that have been challenged by this is the ride-hailing business which in Zimbabwe seems to be led by InDrive.

Quantifying InDrive’s lead in the Southern African country is difficult but a couple of things show that it has made the greatest strides. The first is the most obvious, in Harare, there are no more reliable ride-hailing services than InDrive… Other services might be catching up but InDrive is almost a substitute for the term “ride-hailing” 

The second is that InDrive has been doing traditional marketing by way of billboards as early as the beginning of Q4, 2023. This suggests that the company has seen there is a limit to the number of people they can reach with digital ads and is now going on the offensive with billboards.

That being said, that mode of advertising isn’t cheap… Traditional advertising requires physical production costs and installation that could range in the thousands of dollars a month per installation. Additionally, there are few ways of tracking physical advertising which suggests, at least to us, that the cost is worth it for the business goals they have set for themselves.

What drivers are getting and at what price?

The free ride is over for drivers, InDrive has, for some time now, been collecting commissions after its market penetration strategy of 0% Commission ended. What this meant is that drivers now have to pay to be on the network…

The question “What are the drivers paying for?”. They have a car and a device to acquire customers through their mobile devices, so what exactly is the commission for?

These questions are easily answered by one word: “brokerage”. What InDrive is providing is a way to acquire customers who are looking for expedient travel on demand. It would be difficult to do that by going at it alone because the alternatives are to cultivate a customer base over time or go from bus stop to bus stop like public transport… InDrive’s value proposition is acting as a broker who connects you to a clientele and the only cost the driver incurs is the 10% commission per ride. 

What drivers are actually paying for is access to a platform that significantly decreases the degree of complexity in finding customers and managing the trips…

What drivers are to InDrive and how the company gets money out…

To this, drivers are essentially cash collection agents for InDrive in exchange for linking them to customers.  However, there is a problem. Those of you who are aware of Zimbabwe’s financial system will know two things. The country is heavily cash-based (primarily USD) and even though there are banks, various wallets and accounts, Zimbabweans want to retain value, so cash in USD, is one of the few ways of achieving that.

What this environment brings is a set of cash collection problems for InDive because their drivers are getting cash and it would require a complex operation including physical cash collection points and commission reconciliations. These problems, if Zimbabwe was a big enough market would have been resolved by inDrive having a physical presence in the country and setting up domestic bank accounts and integrations with a number of payment gateways and providers to facilitate the widest possible net of payment options.

That’s not the case and what InDrive has done to navigate these problems is pretty ingenious… They let the local financial and payment systems exist as they are and do not directly insert themselves into them.

As alluded to earlier, inDrive is essentially just a platform and the way they give access to drivers is through them paying the commissions ahead of time for any trips they are going to make.

This is done by treating the payment of commissions like an ordinary internet payment for a service to be rendered. The driver can receive money in any local format they choose, that part of the transaction is one that InDrive has decided not to involve itself with.

The commission is received and represented as credits that allow you to access customers and are deducted whenever you have a trip… As I am sure you would have already guessed, if there are no credits, you can’t access the InDrive platform as a driver.

It’s unclear, from what we understand, if InDrive is applying this in other African markets with a similar problem with payment infrastructure or not. Additionally, it is not yet clear if other ride-hailing apps that are in Zimbabwe are doing the same thing. 

What is clear, however,  is that they have masterfully manoeuvred a cash-based economy in a way that may have stifled other services.