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Revving ahead with KYC in the rental/shared vehicle economy

It was back in 2010 that Apple trademarked the phrase “There’s an App for That”.

Ten years down the line, virtually anything can be done through the rectangular void in your hand. An app can help you get food, a date, a manicure, and even therapy. There’s even an app to help you do literally Nothing (It has a million downloads).¹

A subset of this app market of 4.4 million applications is what makes up the rental economy of the 21st generation.² Need to rent a car? There’s an app for that. Need to rent a house? There’s an app for that. There are apps to rent furniture, water purifiers, books, and clothes.

In India, where the population growth rate seems to be faster than the transport that gets people around, the struggle to find and negotiate with taxi drivers was exponential. The very year that Apple had announced that there was an app for that, and That, and THAT, Indian ride-hailing unicorn Ola launched its service in India. Then, there was an app for calling a cab at the touch of a button. Fast-forward through the traffic and cumbersome KYC processes of the vehicle economy, and app cabs are basically teleportation. This booming ride-hailing industry is but one of the many platforms that came into existence to digitally disrupt life as we knew it.

Platformization of the economy

Platforms in the digital era can be understood as online marketplaces. They are the market makers of today. In an economy rapidly heading towards platformization, most daily functions can be performed through applications; whether that is renting a house, furnishing it, getting laundry washed, or ordering groceries. With Uber revolutionizing the way people traveled at a global level, this phenomenon has been coined the “Uberization’’ of the economy.

The Cambridge Dictionary itself has adopted it to mean

“the act of process of changing the market for a service by introducing a different way of buying or using it, especially using mobile technology.”

While this development has taken convenience to a whole new level, it comes with its own set of challenges. Before you can avail the transport services at the click of a button, or earn from being an app cab driver, the service provider goes through a thorough “Know Your Customer” or KYC process to ensure you’re a real person. With the industry fast-growing with numerous competitors mushrooming as cab aggregators, this is a mammoth task.

Scaling the hailing

Ride-hailing is, by far, the fastest growing segment of the online mobility services market. To understand just what is at stake, here is a glimpse of the size of the rental/shared vehicle economy. According to Statista, a provider of market and consumer data, the revenue from app-based ride-hailing in India is currently estimated to be $36.95 billion in 2020. This is when the user penetration of the ride-hailing segment is only at 15.0% in 2020. However, at the current trend, this is expected to grow to 20.3% in the next 3 years.³

On a similar tangent, revenue from the Car Rentals segment which is also a steadily growing trend as an online mobility option, amounts to $1.26 billion in 2020. Revenue is expected to show an annual growth rate of 7.1%, resulting in a market volume of $1.55 billion by 2023.⁴

Within the rental and the shared vehicle economy, there are a few categories. These have been enumerated with examples ahead.

Categorizing the vehicle economy

The modern day vehicle economy has two subdivisions in terms of alternatives to buying a vehicle: Rental Economy & the Shared Economy.

According to Investopedia,

“The sharing economy is a peer-to-peer (P2P) economic model defined by the act of a acquiring, providing, or sharing access to goods and services. It is usually facilitated by a community-based online platform.”

For example, with apps like Uber and Ola, a ride can be hailed from drivers driving their personal vehicles. With services like Drivezy, Turo, & Bounce, you can steer a shared vehicle owned by a company, and pay for the time you drive it. Newer companies not currently in the Indian market, like GetAround, let you rent privately owned cars by the hour or day when their owners don’t need them.

To simplify it, there are three ways to opt for benefiting from the rental/shared vehicle economy available in India:

  • Ride-hailing: A customer can either hail a ride from a car or a bike. Example: Uber, Ola, Rapido
  • Ride-sharing: A customer can hail a shared vehicle. This is what is commonly known as carpooling. It can be further classified as private and commercial. Commercial companies in the realm include Ola Share and Uber Pool. Platforms that connect private vehicle owners to fellow travellers include Bla Bla Car, QuickRide, ToGo, QuickRide, and Ridely.
  • Vehicle rental: Includes renting a car, bike, or a cycle and paying according to the distance and time covered. Example: Drivezy, Zoomcar, Revv, Bounce, & Yulu.

The recent internet bans across the country impacted the livelihood of many using these online marketplaces for work and revealed our multifaceted digital dependence.

The year in regulations

The year 2019 has seen app-based hail a cab operators in the news for concerns over labor rights, growing monopolies, and pricing policies. There isn’t an app to summarize the developments and regulations in an industry (yet), so we’ve done it for you:

  • In March 2019, Karnataka banned Ola cabs for 6 months for running bike taxis which it deemed as violating government rules. The ban was soon lifted post Ola seeking the state’s cooperation to develop a legal framework which includes bike taxis as a segment of the emerging mobility economy.⁵
  • In a similar turn of events, bike-sharing service Rapido was banned in Tamil Nadu in July 2019. Two-wheelers are not categorized as commercial vehicles under the Motor Vehicles Act 1988. So, there is a gray area on the legality of bikes functioning under the purview of cab aggregators. The order was stayed the same month, allowing Rapido to resume services.⁶
  • In September 2019, Finance Minister Nirmala Sitharaman said the ‘millennial mindset’ of using Ola, Uber was causing the automobile industry slump in the country.⁷
  • The Central Government finalized the draft policy guidelines for carpooling services run as commercial ventures by private car owners in September 2019. It is to be heavily regulated to be a no-profit no-loss service. The KYC process will have to be mandatory for both riders and the vehicle owners. While carpooling specific apps will not be affected, Uber and Ola will have to launch a separate app to roll out carpooling on a wide scale.⁸
  • In November 2019, with odd-even 3.0 initiating, surge pricing was banned in the capital. Cab drivers went on strike with eight unions representing their concern of not being paid enough during high traffic hours and thus suffering losses.⁹

It is difficult for regulators to address labor issues in a world where the workforce is outside the firm and managed by an algorithm. Vehicle sharing and rental platforms ease a real-life interaction. So, the need to verify the identities of all participants is crucial, regulations or not. Trust is imperative in the sharing economy. Reports that implicate a sharing platform’s brand impact the trust consumers have in it. This has the potential to destroy the platform’s reputation as happened with Uber in the 2014 harassment case.

Signzy: Using AI to make KYC workflows simpler

With regulations being churned out and the economy growing, customer onboarding can become a cumbersome task. It requires tedious KYC collection and verification. Signzy, a Bangalore based company, offers Trust as a Service. It specializes in KYC automation with a unique product called RealKYC.

What does RealKYC do?
The aim of RealKYC is to identify the details of the customer from the identification document uploaded by them.

  • These details are extracted using advanced extraction services.
  • They are also verified against fraudulent/forged data using Signzy’s proprietary technology.

We help financial institutions make their digital regulatory processes simple, secure and compliant. A preliminary check of KYC can eliminate the possibility of businesses being exposed to a plethora of non-compliance risks.

Signzy’s unique product has made a significant impact in the financial sector. Over 70 financial institutions including top banks in India are a part of our clientele. The product has gained widespread appreciation in the BFSI industry and holds significant potential in other sectors too. With the advent of rental/shared companies, we have the potential to ease onboarding in the vehicle economy in the near future.

Opportunity for Video KYC

  • KYC had been a primary barrier for mobile wallet companies who were relying on Aadhaar to onboard customers.
  • After the February 2018 judgment, players like Ola Money which had a firm base of users using their wallet to pay for cab rides, had to perform the full KYC ritual to keep their accounts operational.
  • With RBI accepting Video KYC as a potential alternative for digital KYC in 2020, Signzy’s Video KYC technology has the potential to provide the solution.

Wondering why we’re calling Video KYC the future? Find out through our blog!

New technology seems daunting until it becomes an industry standard. Adopt Signzy and set the industry standard yourself!

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About Signzy

Signzy is an AI-powered RPA platform for financial services. No matter how complex your workflow or operational complexity, Signzy is able to completely automate your back-operations decision-making process into a real-time API. This is possible due to a combination of Nebula — Our no-code AI model builder and our Fintech API Marketplace of over 200+ APIs. Today we work with over 90+ FIs globally including the 4 largest banks in India and a Top 3 acquiring Bank in US. Globally we have a strong partnership with MasterCard and offices in New York and Dubai to serve our customers in the 2 geographies. Our Product team of 120+ people is building a global AI product out of Bangalore.

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Author: Prakriti

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