SINGAPORE: For the past months, bicycle-sharing operators have been ramping up preparations to meet new licensing requirements, leaving no stone unturned as they beefed up their geo-tracking software and deployed teams to prowl the streets, among other things.
The licensing scheme, which started on Saturday (Jul 7), comes with strict conditions on fleet size and responsible parking by users. Applications have closed and the Land Transport Authority (LTA) is studying the operators’ submissions. Two-year licences are expected to be awarded by the fourth quarter of the year.
Operators and analysts say the scheme will likely shrink the pool of users and hit the firms’ profitability, given the greater compliance costs among other things.
While the financial hit will be painful, operators acknowledge that the regulations will improve the state of affairs. Ultimately, the new rules will result in a much better space, in contrast to the mess today, firms and analysts say.
But getting there will be painstaking. Behind closed doors, much negotiation and bargaining are taking place.
Testifying to the onerous nature of the new regime, it has already claimed three casualties even before it is in full swing — with oBike being the highest profile among them.
oBike, along with GBikes and ShareBikeSG, called it quits with two of the firms citing difficulties meeting the licensing requirements.
READ: How oBike, Grab-Uber merger were managed shows we haven't gotten disruption right, a commentary
At least four operators — China-based ofo and Mobike, as well as home-grown firms SG Bike and Anywheel — have submitted their applications. But as observers pointed out, it is anyone’s guess how many will remain in business going forward. The coming months could make or break the nascent bicycle-sharing industry, which many see as having a pivotal role in achieving Singapore’s car-lite vision.
As the licensing scheme kicks in, bicycle-sharing operators tells us their preparations and the challenges they face, and share what users can expect in the new landscape.
KEEPING UP WITH THE RULES
In March, Parliament passed new laws requiring operators offering dockless shared bicycles, personal mobility devices and power-assisted bikes to be regulated under a new licensing regime.
Under the licensing requirements, operators have to ensure cyclists practise responsible parking. This includes requiring them to scan a unique quick-response (QR) code at designated parking spots as proof of proper parking before they can end their trip. Users who park indiscriminately could be fined by operators or charged continuously until they return the bicycles to a parking space.
Those who flout the rules thrice yearly will be barred from all bicycle-sharing services for up to a year.
In seeking to meet the requirements, operators said that they face several challenges amid a constant back-and-forth with the authorities.
For example, the LTA had earlier required the operators to provide the exact location of all their bicycles in 30-minute intervals. But this would translate into high costs for the operators. In the end, a compromise was reached: ofo, for example, will provide data that reflects changes only for bicycles that have moved.
Other issues which remain up in the air include the penalty for indiscriminate parking.
Some operators are also putting a lid on the number of bicycles in circulation — holding back parts of their fleet — to keep the problem of indiscriminate parking from spiralling out of control.
While the nuts and bolts are still being ironed out, one thing is clear: Operators have to pour in funds, to the tune of millions for some, to comply with the licensing rules.
The higher business costs will place a drag on bottomlines, especially for smaller operators devoid of deep pockets, in a sector that already yields low margins and little in the way of profits.
The regime, for instance, requires operators to fork out a S$60 fee for every bicycle deployed, comprising a licensing fee and a security deposit.
SG Bike, one of the smallest players here with 1,500 bicycles, said the fee was “painful” from a business point of view, though it was necessary to set operators thinking about how their bikes can be maintained and utilised better.
“Now there’s a price tag on the bike … it forces you to rethink your strategy,” its chief operating officer Sean Tay said.
Even the bigger boys are not spared. ofo, which runs a 75,000-strong fleet, cited the S$60 fee as an area in which the regime has gone “a little bit too far”, saying it makes it tougher to turn a profit.
Mr Christopher Hilton, ofo’s head of policy and communications for South-east Asia, said the firm was concerned that a “Government … committed to a car-lite society is making an environmentally friendly and efficient mode of transport more expensive”.
It will be more difficult to keep rides affordable, he added, though the operator is not looking to raise its fees for the moment.
The bicycle-sharing firms said the biggest improvements to be made were in their back-end software, to link their systems to the LTA’s network of QR codes that will sprawl across parking spaces islandwide. They will also be required to carry out a second layer of checks — via Global Positioning System coordinates — to verify that users are, indeed, at or near a parking spot with a QR code.
Operators also have to share data with one another so that errant users can be banned. How and where such data will be hosted are still unclear, sparking concern in the industry that firms could gain access to one another’s customers.
Some firms said they would also have to enlarge their teams to meet the stricter rules. For instance, Anywheel, which has 4,000 bicycles, said it has added four operations staff members and another four to its information-technology team.
DETERMINING THE PENALTIES
As the authorities sift through the licence applications, exactly how users will be penalised for indiscriminate parking remains up in the air, operators said.
While operators are required under the licensing framework to charge users continuously for bicycles parked outside the designated areas, ofo pointed out that many of its customers are on monthly subscription passes and "there is no ability" to charge them a continuous fee.
Instead, errant users will face a S$10 fine from the firm, said ofo’s Mr Hilton. The fine will be imposed on users who park on public land “at an area other than one with a QR code”.
At the start of the regime, the LTA has suggested putting in place a “wide” radius around parking spots, so as to allow a broader berth in determining if bikes are parked properly, Mr Hilton said. This is to ensure that those who make an effort to park properly are not fined.
SG Bike’s marketing director Benjamin Oh said its users will face a continuous charge if they park indiscriminately or if the location of a bike does not tally with the parking spot where the QR code was scanned. Users will be given an unspecified “grace period” before they are levied the penalty.
Some operators were concerned that the penalties could drive users from bicycle-sharing services, stressing that the convenience of parking areas was key.
Users may find it challenging if the parking spots are very far apart, said Mr Oh. He added:
At this point, unfortunately, we have no idea where (the parking spots) are, so we have to wait for the LTA’s cue.
As of March, there were 174,000 designated bicycle-parking spots in spaces such as MRT stations, parks and housing estates. The Government plans to add another 50,000 by 2020.
Other factors include how much leeway the system will give users who forget or are unaware of the rules.
Calling it a “big shift”, Mr Oh said much needs to be done to educate users who are “so used to just parking and leaving” on the extra steps they have to take.
Echoing the concerns, Mr Hilton said a S$10 fine was a “serious impediment” to ofo’s users who pay about S$6 for a 30-day pass, for instance. “We are concerned it will drive users away.”
The authorities have not given operators significant direction on how the penalties should be meted out, said Mr Hilton, who stressed that equal enforcement was key among firms.
If we’re being stringent in trying to follow the rules and another operator isn’t, then consumers might move to one of our competitors.
Still, Mobike’s head of international operations Mark Lin said the penalties are to “everyone’s advantage”.
The collective ban will ensure users take greater responsibility when using shared bikes.
“The requirements made by the Singapore Government are actually quite reasonable and conducive to building a responsible sharing community … so whoever is not responsible should not stay in this community,” he said.
THE COST OF COMPLIANCE, AND OTHER CONCERNS
For a majority of the operators, the higher business costs involved were uppermost on their minds.
As part of the new licensing regime, the LTA requires operators to provide data on the locations of their bicycles islandwide in 30-minute intervals, for instance.
Presently, ofo churns this data every three hours via its bicycles’ smart locks.
The firm is concerned that business could be hit as more frequent snapshots would mean the three-year lifespan of its bikes’ batteries could be shortened significantly. This, in turn, means more frequent battery changes, said Mr Hilton.
So, it found common ground with the LTA. Instead of feeding real-time data from each bicycle in its fleet, it would reflect changes only for bicycles that have moved every 30 minutes.
This allows ofo to maintain its plans for its technology, added Mr Hilton.
For the firms, the changes in the pipeline are largely in software and user experience to comply with the rules.
ofo, for instance, is adding an option for manual verification should a QR code be broken, such as allowing users to take a photo of where a bike has been parked.
The Chinese firm, which applied to run an 80,000-strong fleet, said that the S$60 licensing fee per bicycle alone will set it back by S$4.8 million. The fee, which comes on top of engineering and manpower costs, “pushes out our ability to capitalise and become profitable”, Mr Hilton said.
Anywheel, which applied for a licence to run a fleet of 30,000 bicycles, said the fee was “still reasonable”, as the firm expected it to be higher. Its chief executive Htay Aung acknowledged, however, that no other market would levy such a fee, which will hit operators with larger proposed fleets harder.
Still, SG Bike’s Mr Tay said that the fee will force operators to ensure their bicycles do not sit idle on the streets. He added:
Singapore will benefit in the long run from not having random bikes … left out there.
There is also the concern that firms could tap into one another’s customer data for commercial benefit, as they exchange information on errant users.
Mr Hilton said his company has suggested that the LTA host the database, but this would mean costs incurred by the Government. It would be ideal if only data on users who park indiscriminately or are banned is shared among operators, he said.
Mobike’s Mr Lin said his firm was confident that the LTA would be able to protect user privacy, and that it would have given thought to how user information would be exchanged.
The LTA did not respond to queries on the operators’ concerns over costs, the measures that will be in place to protect user data, and how the penalties will be meted out to commuters.
While industry players and experts had previously said the fallout from oBike’s exit would not have a direct impact on the industry — apart from denting public confidence — transport economist Walter Theseira of the Singapore University of Social Sciences (SUSS) reiterated that it could deter users from committing deposits and other forms of pre-payment.
It may also hit confidence in storing payment methods with the bicycle-sharing mobile applications, Dr Theseira added.
Experts pointed out that by not collecting deposits, firms lose a means to finance the business and secure payment for damages and penalties from errant users.
Associate Professor Lawrence Loh of the National University of Singapore (NUS) Business School said operators are in a “catch-22 situation — damned if you do, damned if you don’t”.
“If you impose deposits, you lose customers. If you don’t, you get to deal with errant customers,” said Assoc Prof Loh, who is director of the school’s Centre for Governance, Institutions and Organisations.
oBike’s departure from the Singapore market on June 25 caught scores of users off-guard. Many are scrambling to recover the deposits — up to S$49 — that they placed with the firm, which is in liquidation.
Just four days after oBike’s exit, Mobike announced it was scrapping the S$49 deposit for Singapore users — it later did away with deposits for its China users as well.
Mr Lin, Mobike’s international operations head, said the decision was not linked to oBike’s exit. The firm had been mulling over removing the requirement for some time as it felt its users were now “quite responsible” and there was no need for a deposit, which was meant to deter irresponsible behaviour.
Mobike’s move means all bicycle-sharing operators here offer deposit-free services presently.
Mr Lin said doing away with customer deposits was not a concern for his firm, which has a “healthy business model”. “The deposit-free policy was a move designed to establish a no-threshold, zero-burden and zero-condition deposit-free standard for the bike-sharing sector in Singapore,” he said.
Under the new licensing regime, operators will have to collect users’ details, including their National Registration Identification Card numbers and full names. Mr Aung said firms can send recalcitrant users letters and messages to request payment for penalties.
As for Mobike, Mr Lin said errant commuters will not be able to use its bikes if their balance dips into the red, until they fork out the fines.
HOW THE NEW BIKE-SHARING LANDSCAPE COULD LOOK
Going forward, most operators are confident the licensing scheme would create a more conducive environment for firms and users.
Mobike’s Mr Lin said the regime would encourage a responsible sharing community and hold operators accountable for the bicycles they deploy.
Agreeing, Mr Hilton said a regulated space will allow operators and users to understand their responsibilities, ensuring bicycle-sharing can be sustainable in Singapore.
Still, Mr Tay from SG Bike believes it would be “very, very hard” to change user behaviour initially. In the longer term, the success of the rules will hinge on the effort invested by users, firms and the authorities, he said.
“The LTA needs to also actively take a lead on this. If they just come up with a licence, (but say the operators) go and run it (and we’ll just) poke you from the back, then perhaps instead of it being conducive, everything will just collapse,” he said.
“But if that can be solved, then I think in the long run, this will be great (for Singapore).”
Dr Theseira believes the new rules will likely make bicycle-sharing less convenient, driving away users who perceive the designated parking spots to be inconvenient. He also expects the pool of users to shrink over time owing to concerns over payment.
Mr Lin disagreed, saying that the pool could in fact grow as the bicycle-sharing community becomes more responsible and sheds its association with public misuse.
NEXT ‘6 TO 12 MONTHS’ CRUCIAL
As the industry braces for the stricter rules on the horizon, some observers have questioned the commercial viability of the dockless bicycle-sharing business.
Urban transport analyst Park Byung-joon, who is also with the SUSS, said the next six to 12 months will be keenly watched, as the global bike-sharing market confronts challenges.
Given the low fees collected and high maintenance expenses, companies cannot turn huge profits and thus need to grab a large market share to sustain their business.
Consequently, the market can support only “one or two” players, added Assoc Prof Park.
If dockless bicycle-sharing is found to be financially unsustainable, Assoc Prof Park and Dr Theseira believe the industry will move towards a government-supported docked bicycle-sharing model, which has flourished in some European cities.
Last year, the LTA shelved plans to start a docked bicycle-sharing scheme with about 2,300 bicycles, after private firms began offering dockless services in the same year.
The plan was to launch the service last year covering areas such as the Jurong Lake District, Tampines and Marina Bay — about 230 docking stations had been planned. But the entrance of the private players had obviated the need for a government-run system, the LTA had explained.
Assoc Prof Park said: “With the docked system, we have more control over places and numbers, and also we know exactly how to get back to the person who caused a problem.”
For the time being, however, dockless bicycle-sharing operators are seeking other ways to cash in.
ofo is exploring the possibility of diversifying its products to include other equipment such as electric scooters and electric bicycles, although the company declined to give more details.
Anywheel is also looking at adding power-assisted bicycles and e-scooters to its fleet. In the longer run, it could even start a private-hire car-hailing service similar to Grab’s when it has a sufficiently large customer base, said Mr Aung.
Some firms also intend to make their prices more competitive. Anywheel will roll out a monthly subscription programme next year with “competitive prices” for unlimited rides. SG Bike will also roll out a similar programme soon, said Mr Tay.
Ultimately, observers and firms believe the new regime would benefit all. “In the long term, an orderly bike-sharing scene is in the interests of all, including the operators,” said Assoc Prof Loh.