As the #DeleteUber count increases, Lyft has cleverly seized the opportunity to distinguish itself as a beacon of goodwill.
In its most recent attempts to gain public favor, Lyft will soon be taking a stand by pledging fixed commitments to charities when you take a seat as a Lyft passenger.
Announced in late March, Lyft will be launching the “Round Up & Donate” plan, allowing users to opt in to a charitable program that rounds up your Lyft fare to the nearest dollar and donates the remainder to charity. For example, let’s say your ride was $8.50; that would mean the cost to you would be $9, and 50 cents would be on its way to the ACLU and protecting our civil liberties.
Those who follow Term Sheet or StrictlyVC will hasten to note that sizable investments have been deployed to support round up programs either for personal investment or nonprofit support. Large tech companies like PayPal and Rakuten have invested into Newport Beach, Calif.-based Acorns.
With more than $60 million in funding, Acorns allows users to make micro investments by rounding up purchases and automatically investing the change.
Acorns chief executive Noah Kerner calls round up investing a “lightweight way to get people started [with investing]; particularly young people. Then we offer additional features to enable customers to invest more.”
Acorns raised $25 million within the first 8 months of operations with about three quarters of its users between the ages of 18 and 34.
Kerner says when you invest using spare change, “you don’t really feel it.” He recalls the old financial adage about skipping the coffee and instead investing your would-be Starbucks purchase, arguing instead that “it’s tough to fundamentally change people’s behavior. It’s easier to help them by automating things in the background.”
With a mobile economy expected to double by 2020 to more than $100 billion, companies are focusing their efforts toward a younger demographic to address these trends. While approximately 65 percent of American households give to at least one charity, nearly 85 percent of millennials donate to charity, according to the Millennial Impact report, leading some to proffer that millennials are the most generous generation.
This is a market that Leena Patidar, CEO of standalone app Coin Up, is excited about. Coin Up was one of the first mobile donation apps to go live in the Apple Store. Patidar told me that “they didn’t accept us at first. It was a big deal for Apple to approve us.” Now, her company is joined by rival Drops to democratize micro donations.
Patidar consulted with Lyft executives on their program, and supports “mainstreaming” round ups. She admits that Coin Up is designed to tailor to a younger user base, allowing customers to run their own round up program, place caps on donations and select from a list of charities. Returning to Kerner’s adage about coffee shop visits, Patidar cautions that “those lattes can get expensive; you are in control of where it goes and how much gets out.”
Patidar says her app is a tool for millennials who may not have “$500 to attend a gala” but who “want to be apart of something bigger, a movement.”
Notwithstanding the newest entrants to the app store, there are other noticeable trends for incremental giving. Responsible for the biannual publication, “America’s Charity Checkout Champions,” Megan Strand, Director of Communications of Engage for Good, is an industry expert on Point of Sale (POS) and round up giving strategies.
Strand states that this year in particular there have been a lot of “rumblings” about round up programs. Not yet released, I was able to inquire about early reports in her survey. Strand says the trend is moving toward round up donations, commenting that prompting to donate less than a dollar is a “simple ask.” Strand was surprised to discover from early feedback that organizations typically allowing for fixed-dollar donations when you checkout at the register are now adding a separate choice to round up, effectively making the this a persuasive default option.
If you think we are being nickel and dimed by big talk of small donations, Strand directs our attentions to JC Penny, which used round up donations to raise in excess of $3 million in a single year; eBay, which used fixed donation, POS-like programs to raise more than $60 million in that same year; and Bank of America, with a “Keep the Change” savings program totaling more than $3 billion since inception. Strand wonders whether more familiar, fixed POS donations might eventually give way to a round up strategy to raise greater overall amounts for nonprofits.
Not everyone is convinced about the efficacy of micro donations. Dean Karlan is a professor of economics at Yale and co-founder of Impact Matters, and has doubts about whether these round up programs actually increase donations. Citing the small average per-person savings in BofA’s “Keep the Change” program mentioned above, Karlan worries that by donating spare change, the resultant “warm fuzzy feeling” we get by spending (and donating) could actually be checking the “charity box in your head” that might deter us from greater donations later on. When I spoke with Karlan, he told me that when you make a round up donation, you might be lulled into a “false sense you are being more altruistic than you really are.”
He observed, “they are lowering the transaction cost for buying things. It’s easier to make impulsive charity now than it was 10 years ago. That could be bad because you don’t have to think about it; it is just a few clicks.” Karlan proclaims, “I believe in data,” and says the academic community is “waiting on empirical evidence for the net effect,” pointing out that Lyft is now in a great position to figure out what works. Ultimately, Karlan is reserving his enthusiasm about Lyft’s program until he knows whether this impromptu giving is in addition to or in lieu of more substantial donations.
While Strand is generally enthused about the prospect of widespread round up programs, not every program is treated equally. “I’m interested to see what Lyft does,” says Strand. “Their challenge is to communicate to users how and why they should opt in.” Strand noted, “If Lyft is going to do this, I hope they do it right and put their cause front and center,” adding, “It would be a mistake to bury this in some deep corner of their app’s settings where no one will engage with it.”
Even though remainder donations spread across millions of users can have a macro impact, as Strand points out, the users must first opt in. This is not a concern for Coin Up’s Patidar or Acorns’ Kerner.
“People opt in when they download the app,” says Kerner. But for Lyft, this is the whole ball game. In the article, Libertarian Paternalism Is Not an Oxymoron, Richard Thaler, father of behavioral economics, and his colleague Cass Sunstein explore the science underlying opting in, arguing persuasively that people are biased toward the status quo.
This is bad news for Lyft, which recently announced that they will first allow Android users to navigate within the settings to participate in the program, in other words, to opt in. Alternatively, an opt out approach would put Lyft’s money where their mouth is, so to speak.
A third option is to force a user to choose explicitly. Thaler and Sunstein conclude that these forced choices have been found to produce higher participation rates than requiring opt-ins, but lower rates than requiring opt-outs.
Critics of setting the default to the opt-out approach often argue for personal autonomy, the freedom to have unadulterated choice. However, people will often make poor choices despite acknowledging that doing so would be harmful to their interests, like choosing not to invest money early in life. Some reports estimate that just over 25 percent of U.S. adults under 30 have any money in stocks. That is exactly why Kerner subscribes to the idea of nudging people in the right direction, telling us that “young people don’t focus on investing,” and so “Acorns is a nudge.”
Kerner states that while “we have a huge amount of respect for our customers, becoming an investor early is the right thing for people to do so we guide them along that path.”
On the other hand, if millennials seemed inclined to donate to charities, why not nudge them along with a system designed to produce greater levels of participation?