Light regulatory touch could leave consumers at mercy of transport sector disruptors: Analysts

SINGAPORE — It is becoming an all-too-familiar tale: For the second time in several months, after Uber's messy exit from the Singapore market, thousands of users here have been left high and dry. Following the sudden closure of oBike's operations in Singapore, many consumers have little or no recourse to get their deposits back.

Industry observers told TODAY that while the authorities have the power to step in earlier, they are also struggling to keep up with disruption in the transport sector yet giving it room to flourish. They have to balance between encouraging market innovation and protecting users, who reap the benefits of new technologies but are also at the mercy of such ventures when things go south.

On Tuesday (June 26), TODAY reported that debt-ridden bicycle-sharing operator oBike has gone into liquidation. The day before, it had announced unexpectedly that it is stopping operations in Singapore with immediate effect, saying it had difficulties complying with new rules under a licensing scheme to tackle indiscriminate parking.

oBike riders have since been scrambling to recover the mandatory deposits they placed with the operator, which claimed it had more than a million users here.

Economist Song Seng Wun of CIMB Private Banking said that Singapore is at a relatively early stage in the sharing economy, operating as a "big sandbox" where technology-based businesses can get their ideas going.

While risks are "part and parcel" for consumers who benefit from the convenience of these technologies, Mr Song noted that Singapore's authorities will likely continue regulating with a "light touch", so that businesses and residents are given a shot at entrepreneurship.

"We always say that Singaporeans have no spirit of entrepreneurship. You have to encourage that by allowing risk-taking," he said. "But because many of these things are taking place in a very fluid environment, it's very hard to regulate when we don't have books to follow."

Still, urban transport expert Park Byung Joon from the Singapore University of Social Sciences pointed out that the warning signs were already there, of oBike pulling out of Melbourne, Australia earlier this month, for example. Its "sudden exit might have made people suspicious or wonder whether oBike was short of cash", he said.

Asked whether the Government should have acted swiftly to clamp down on oBike after news of its pull-out from Melbourne, Dr Park said that it is difficult for the authorities to have oversight of every move companies make.

"When (the bike-sharing operators) first started, we didn't know how far they would succeed… They were (expanding very quickly)… In a sense, the best the Government can do is just to play catch-up", Dr Park added.

WHAT WENT WRONG FOR OBIKE

The lack of a sustainable and stable business model likely led to oBike's failure here, the analysts commented.

Professor Lee Der-Horng, a transport researcher at the National University of Singapore (NUS), said that dishing out discounts aggressively and ramping up their bicycle fleets for the convenience of users did not "really translate into revenue" for the operators.

Eventually, the lack of financial sustainability left oBike little or no choice but to bow out.

However, this is not unique to Singapore, Prof Lee said.

Other dockless bike-sharing operators in China have similarly not been able to turn a decent profit, owing to rampant misuse and irresponsible users, he added. This is in contrast to the conventional docked YouBike system in Taiwan, which was more financially stable.

Agreeing, Dr Park said: "This is not a sustainable model from the beginning, that you're (operating) below cost… Not unless you have a deep-enough reserve of cash to (stem) the loss to stay on until you are in a much better position in the market."

Prof Lee also said that there was a lack of "value-added services" driven by big data from bike-sharing firms such as oBike, which had initially floated innovative partnerships with logistics and food delivery companies.

"Mostly, they just (treated) the bikes as a tool, rather than a (real) marriage between the data of bike-sharing companies and delivery companies… It's still very vague."

BETTER CONSUMER PROTECTION NEEDED

Mr Song from CIMB acknowledged that the authorities should look at how consumers could be better protected against the risk of such businesses leaving abruptly. For instance, deposits placed by users could be covered by insurance, but this would drive up costs.

"Are (consumers) willing to pay for a deposit insurance scheme?… Sometimes it's up to the consumers themselves. It's not a social-welfare business," Mr Song said.

Dr Park suggested that the rules could be set such that consumers get at least a portion of collected deposits when companies go bust or are being liquidated. Or else, their deposits could be placed in a separate external financial trust with certain conditions attached.

Drawing a comparison to the ride-hailing industry in Singapore — where a few major players eventually dominate and the smaller ones are weeded out — Dr Park said that ride-sharing companies have to take a long, hard look at how to ensure they remain financially sustainable in the long run. "We will have to see how the market is going to react."

Assistant Professor Terence Fan, a transport specialist with the Singapore Management University, said: "We're all quite new to this sharing industry, so I think the Government is adopting a wait-and-see approach on how they can best step in."

Moving on, he proposed that there be more timely consultation between the ride-sharing players and the authorities.