Lyft (LYFT 1.67%) and Mastercard (MA +0.28%) are teaming up for Lyft Direct Debit, a highly specialized payment card aimed squarely at Lyft's drivers.
Co-branding agreements between Mastercard and its partners are not unusual in the card world. What makes this one different is that it's tailored specifically for workers in the gig economy. This rollout has significant repercussions for the two companies and their future relationship to gig workers. Here's why.
Image source: Lyft.
The direct approach
The Lyft Direct Debit card is the latest in the ridesharing company's set of tools for drivers to manage their financial lives. It's issued by Oklahoma-based lender Stride Bank, which is also the entity behind the Lyft Direct bank account that undergirds the card. The card's money feature is its instant access to earnings. So, if a driver takes a fare and earns $3 as her share of the ride, she can tap those three bills immediately.
Other features of the card include 1% cash back for groceries, 2% back on gas, and 4% on restaurants and other dining options. The card and linked account incur no low-balance or maintenance fees, and Lyft says the plastic can be used at more than 20,000 no-fee ATMs throughout this country. Initially, it's available only in eight U.S. cities (Atlanta, Denver, Houston, Las Vegas, Los Angeles, San Diego, Tampa, and Washington, D.C.).
The card is a smart move on Lyft's part. After all, driving for a ridesharing service isn't exactly a lucrative activity, Besides, Lyft is also in cutthroat competition with Uber, the other giant on the ridesharing scene. So, it has to offer as many perks as it can for drivers to keep those pink Lyft signs on their dashboards.
If it can do this with a card/bank account combination that includes goodies like instantly available funds and no-fee ATMs, so much the better. Any help with the finances is welcome for ridesharing drivers.
For Mastercard, the Lyft Direct Debit card is a smart way to get its hooks not only into the roughly 2 million Lyft drivers on the road. It also helps establish Mastercard as a trusted partner in the broader gig economy. If it's the brand behind a successful card used regularly by Lyft drivers, why not connect with it for cards used in other contemporary gig offerings like massage-at-home services or food delivery?
The gig economy is already considerable. It's also not only here to stay but here to grow.
Earlier this year, Mastercard, in collaboration with Kaiser Associates, released a study on the subject. It found that the gross volume of the gig economy should more than double between 2018 and 2023, from $204 billion to over $455 billion. Mastercard stands to gain handsomely if it can build a reputation as the favored payment card brand of companies and workers in this rapidly expanding segment.
Planting their stakes
For now, I don't think the Lyft Direct Debit card is a stock-price mover for either Lyft or Mastercard. Rather, for both companies, the rollout of this plastic indicates smart, long-term thinking that will pay off over time. Their shareholders should be encouraged by this.
If Lyft can't necessarily pay its drivers a high wage, it can at least help them eliminate annoying bank fees and give them easy and quick access to their money. And Mastercard is getting a leg up in the gig economy by being the card brand behind one of the most popular gigs on the scene.
This economy, which will continue to widen, develop and change, is in its early days. We'll see how Lyft and Mastercard adjust to the changes. The Lyft Direct Debit card is a promising initial sign that they'll do so successfully.
